Monthly Archives: May 2014

Alternate Dispute Resolution in Intellectual Property Rights

Ashwini Arun*

Despite the growing number of disputes involving intellectual property rights, little attention has been paid to their resolution outside courts. The high stakes and the need for a definite and legally enforceable decision have probably kept these matters away from attempts to resolve them through alternate methods of dispute resolution.

However, parties have gradually begun to acknowledge the advantages that ADR has, over expensive and drawn-out battles in court. They also recognise that resorting to arbitration or mediation is more suitable to the very nature of the contentious issues in IPR disputes.

The use of ADR to resolve intellectual property conflicts is a subject that “lies at the intersection of two rapidly growing branches of law.”[i]

The vast majority of intellectual property cases, especially cases involving copyright, patent and trademark infringement claims involve exorbitant costs of litigation, irrespective of the actual time required to either settle or for a judgement to be rendered. The majority of these costs arise from the necessity for expert testimony, especially in patent infringement cases. While copyright and trademark cases are less technical, these costs are not entirely done away with, due to the need to present market-driven data when trademarks are infringed, due to the high dependence on consumer perceptions. Not only do these trials drain the cash flows of the litigating company, they also become accounting liabilities due to ever-present possibility of an appeal being filed. Additionally, information, technical and commercial, that both parties may prefer to keep secret becomes publicly available. The confidentiality clauses in agreements for arbitration or mediation greatly aid the parties in protecting such information. Arbitration also grants greater flexibility in allowing parties and the arbitrators to arrive at an acceptable schedule for hearings, as opposed to having hearings squeezed into an already burdened court docket.

Another pertinent issue is the lack of expertise of judges determining the outcome of these disputes. They may often not possess the requisite knowledge of the industry in question or the manufacturing processes and products which have allegedly infringed existing patents. The legal issues and the technical nuances of software programs or the cloning of organisms may not be evident to judges unless they have a technical background. This problem is cured to some extent by allowing the parties to choose their arbitrators by agreement. The presence of qualified, skilled and experienced adjudicators increases the confidence of the parties in the forum as well as the process on the whole. It also reduces the time and money that would otherwise be spent in explaining these in court.

While arbitration is adjudicatory and results in a binding award that is enforceable across jurisdictions, mediation is a process for facilitating a compromise between the parties, such that a mutually acceptable business solution can be reached. Mediation is more effective in determining the issues that are disputed and laying out proposed solutions, than it is in the resolving the substantive questions that arise. It also allows the parties to adopt business solutions which may not find favour in a court.

In the international arena, arbitration has achieved considerable success in investment and commercial disputes. While the unfamiliarity of foreign nationals with the municipal laws and court systems, and having no assurance of the consistency of the decisions, have played a part in this, IP disputes require other factors to be taken into account. Not only are IP rights granted differently in every country (although within the framework of the TRIPS Agreement), there are possibilities of similar issues being raised simultaneously in multiple jurisdictions. This stems not only from the division of product assembly lines across economies, but also from the laws restricting or permitting trade of the disputed products.

The adoption of a single dispute resolution process assures consistent results, along with making the enforcement easier and less expensive. The parties can also include a clause in the agreement disallowing the filing of simultaneous claims on the same issue in multiple courts, especially if the dispute is not limited to one country. With the enactment of modern arbitration statutes in most countries, based on the UNCITRAL Model Law, and the reliable award-enforcement rules of the New York Convention, these awards are enforceable in all member nations.

One obvious disadvantage of ADR mechanisms is the absence of provisions for immediate relief whenever essential. For instance, in cases where temporary injunctions have to be issued, parties may have to pray for this before the court if the arbitral panel has not yet been constituted. The validity of such a move by either party will also have to be agreed upon beforehand.

Parties may also prefer disputes to be conclusively settled in court for strategic reasons, including the need to clear doubts in the minds of consumers over the authenticity of products. Allegations of infringement or improper compensation for the licenses obtained may adversely affect the market for a company’s products and stocks. They may consider a traditional judicial pronouncement superior, in order to ensure that their goodwill is not tarnished. An IP holder may also intend the favourable judgement to act as a deterrent for future infringement or litigation against it.

Resolution by ADR requires a consensus between the concerned parties to keep the matter out of the courts. This is more convenient when there are continuing business relations between them, and disputes that are relatively fewer and can be kept away from the public eye. The ongoing disputes between Apple and Samsung over alleged patent infringement are an instance of such a preference for traditional courts. However, when the parties involved are not rivals within an industry, they may consider staying away from adversarial proceedings in court, in order to maintain the possibility of future collaboration.

In an effort to resolve more IP disputes through alternate methods, the World Intellectual Property Organization (“WIPO”) established an Arbitration and Mediation Centre in Geneva, Switzerland in October of 1994. This provides extensive and comprehensive services, in arbitration as well as mediation, through the creation of flexible rules allowing parties to use the most suitable method. Besides traditional arbitration, it also offers expedited arbitration, which includes sole arbitrators (rather than a tribunal of several arbitrators), shorter timetables, and condensed hearings to help facilitate faster and less costly settlements.[ii] By 2009, the WIPO Centre had administered over 80 mediations and 110 arbitrations. The 2014 Rules have dealt with a number of problems, and allow parties to call upon an emergency relief procedure prior to the establishment of the Tribunal, and to seek such relief before a judicial authority.

It appears that, we might do well to heed Lincoln’s advice to lawyers – “”Discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often the real loser – in fees, expenses, and waste of time.”

 

* Student, VIII Semester, B.P.Sc (Hons.), LL.B (Hons.), National Law University, Jodhpur

[i] Bryan Niblett, Arbitrating the Creative, 50 DISP. RESOL. J. 64, 64 (1995)

[ii] The Services of the WIPO Arbitration Center: International Center for the Resolution of Intellectual

Property Disputes 8, World Intellectual Property Organization (WIPO) Doc. 445(E) (1995)

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