Arbitrating Intellectual Property Disputes

Arbitrating Intellectual Property Disputes

November 14, 2019

In recent times, disputes over intellectual property rights have been transcending national borders quite frequently. Arbitration is capable of offering a streamlined and efficient mechanism for resolving such disputes vis-à-vis litigation in multiple national courts. The importance of intellectual property rights in global economy is growing by leaps and bounds. The increasing reliance on technology in the supply of goods and services, and the rise of high tech industries, has raised a greater demand for patent protection. The need to secure and promote a market image across linguistic and cultural boundaries has significantly enhanced the importance of trademarks, and new methods for transmitting, receiving and storing text, sound, videos, images and other content which have broadened the application of copyrights laws.

Owing to the commercial nature of intellectual property (IP) disputes, they often have international dimensions as IP holders protect their properties and also license them in multiple jurisdictions. The ambit of this article is to explore how the mechanism of arbitration has been applied to conflict management/dispute resolution of intellectual property rights and to gauge its effectiveness quotient for the future.

Arbitrability of IPR’S

Disputes over intellectual property rights can arise from a variety of sources, including cross-border licenses and cross-licenses, technology transfer agreements, joint research and development project, distributorship arrangements, non-disclosure agreements, branding determinations, adaption of domain names, and product design decisions. Resolving such disputes in courts is protracted, expensive and complex, due to intangibleness of the properties in dispute, nuances of the technology, as well as requiring domain knowledge in settling issues.

Given the foregoing problems, it is worth analyzing the use of arbitration for the resolution of resolving IP Disputes. Arbitration offers a number of advantages over litigation in national courts, which are as follows:

  1. A single forum: The parties can agree to resolve their multi-jurisdictional disputes in a single arbitral forum. They can avoid litigation in multiple countries, with its attendant delay, expense and opportunity for inconsistent results. Inclusion of a well drafted arbitration clause or submission agreement leads to no jurisdictional issues because the agreement to arbitrate constitutes submission to the jurisdiction of the arbitrator.
  2. Party Autonomy: Arbitration offers the parties various opportunities to exercise greater control over the conduct of the dispute-resolving mechanism. The parties can choose the applicable law, as well as the location and language of the proceedings. They can select ad hoc or institutional arbitration. They can tailor the procedural rules, including those relating to discovery, to meet their specific needs.
  3. Neutrality: Arbitration can be neutral to the law, language and judicial system of the parties, and thus avoid any home court advantage. Arbitrators in an international arbitration must be impartial, even when the agreement to arbitrate allows each party to designate an arbitrator. Partiality is one of the few grounds on which a court can refuse to enforce an arbitral award.
  4. Expertise: The parties can select arbitrators who have special expertise in the legal, technical and/or business fields relevant to the resolution of their disputes. The parties may specify the criteria for serving as an arbitrator. Moreover, before selecting the arbitrators, the parties can satisfy themselves that the arbitrators have availability of time to resolve the dispute in an expeditious manner.
  5. Flexibility: Arbitrators have various remedial powers. In addition to damages and injunctions, arbitrators can fashion non-traditional remedies. An arbitrator having the requisite expertise could dispense prolonged discovery process and decide the case expeditiously, thereby eliminating costs significantly.
  6. Confidentiality: Arbitration can usually provide greater confidentiality than litigation in court. The parties can take preventive steps for protecting confidential information, such as trade secrets and sensitive business information. Institutional arbitration rules vary considerably where confidentiality is expressly addressed and, if so, to what extent. However, the parties may provide, in the agreement, to arbitrate for a greater degree of confidentiality than may be available in a court, which would balance the parties’ desires for confidentiality.
  7. Finality: Arbitration as a mechanism ensures finality of the dispute because of limited scope of appeal as arbitral awards are not normally subject to appeal in court.
  8. Preservation of Business Relationships: Businessmen often view arbitration as an informal, less antagonistic and civil way of resolving a dispute vis-à-vis litigation. Moreover, because of the greater degree of confidentiality of disputes in arbitration, there is less temptation to grandstand. Where there is an ongoing business relationship between the parties, it may be easier to preserve the same, when disputes are resolved through arbitration rather than litigation. In light of the foregoing advantages, there seems to be a growing trend in the use of arbitration to resolve IP disputes.

Conclusion

There is no blanket bar on arbitrability of IP disputes. The only sphere of IP Disputes which are non-arbitrable are disputes which are purely born out of the statutes. However, IP disputes are not merely statutory i.e., can also be in a contractual form. In some cases, the IP rights may form a part of a larger commercial transaction, such as mergers, acquisitions, distribution agreements. In other cases, an entire contract may be about an IP right, e.g., License Agreements, joint research and development strategies. Arbitrability is determined on the basis of nature of claims raised. This position of arbitrability will ensure a balance between inventor/author and general public, with inventors /authors retaining the right to arbitrate contractual rights and courts retaining jurisdiction over claims that affect the general public. Such a balance is desirable for effective functioning of the IP regime as well.

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