International arbitration is an increasingly popular method for the resolution of intellectual property (“IP”) disputes. This does not come as a surprise, considering the increasing importance of intellectual property to economic prosperity, international trade and commercial profits in today’s globalized and digitalized world.
Traditionally, IP disputes were mainly heard by national courts. This is because IP rights were historically linked to public policy and the exclusive jurisdiction of State courts, which led to a common misconception that IP disputes were not “arbitrable” and could only be resolved by national courts. The reality is, however, that today, most jurisdictions recognize IP disputes as arbitrable, with certain exceptions and limitations, like any other dispute where the parties can dispose of their private rights freely.
What Are IP Disputes?
IP disputes are disputes that arise in relation to IP rights. Most jurisdictions provide for several different categories of IP rights, most commonly:
- patents
- trademarks
- trade secrets
- domain names
- copyright
The Convention Establishing the World Intellectual Property Organization of 14 July 1967 (as amended in 1979), Article 2(viii) defines “intellectual property rights” as rights relating to:
– literary, artistic and scientific works,
– performances of performing artists, phonograms, and broadcasts,
– inventions in all fields of human endeavor,
– scientific discoveries,
– industrial designs,
– trademarks, service marks, and commercial names and designations,
– protection against unfair competition, and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.
In practice, most IP disputes arise from infringements, validity and ownership of IP rights, or a breach of contract.[1] Infringement and breach of contract claims are considered arbitrable in most jurisdictions. There are only a few jurisdictions, such as South Africa, that prohibit arbitrating intellectual property disputes entirely.[2]
Most IP disputes are inherently international in nature. Accordingly, international arbitration, as a private and confidential dispute resolution method, offers a number of significant advantages for resolution of IP disputes, especially in cases with cross-border elements, involving the application of foreign laws or parties from multiple jurisdictions. The problem that frequently arises, however, is that certain IP-related issues are usually governed and granted by individual States, and different national legal systems treat the issues of arbitrability differently, which is one of the most controversial questions in IP arbitration.
Why Use International Arbitration to Resolve IP Disputes?
International arbitration has a number of inherently unique features which make it a more suitable alternative for resolution of IP disputes in comparison to court litigation. Frequently-cited benefits of international arbitration specifically in relation to IP disputes include:[3]
- International Element – IP disputes frequently contain certain cross-border elements, for instance, involving parties from different jurisdictions and/or multiple substantive laws. For instance, a global patent litigation may involve cases in multiple courts in several different countries, which might lead to a risk of conflicting results and potentially inconsistent decisions. This problem can easily be resolved by submitting an international dispute to arbitration.
- Expertise and Technical Knowledge of Arbitrators – because IP disputes are technical in nature, adjudicators should preferably have technical knowledge and expertise in the given field. One of the major benefits of international arbitration is that the parties have the freedom and flexibility to choose an arbitrator with specific knowledge of the field, who does not need to be a former judge or lawyer. Certain international arbitration institutions also provide for a specifically-designated panels of arbitrators specialized in IP disputes (see, e.g., WIPO Neutrals, HKIAC Panel of Arbitrators for Intellectual Property Disputes, CPR Panels of Distinguished Neutrals and SIAC’s Panel of Arbitrators for Intellectual Property Disputes).
- Consolidation of Proceedings – international arbitration also offers the possibility of consolidation of multiple, parallel IP proceedings in a single forum. This has increasingly become best practice in the IP context, especially regarding IP licensing programmes and so-called “SEP/FRAND disputes” (Standard-Essential Patents for licences offered on Fair, Reasonable and Non-Discriminatory terms).[4] Options for the consolidation of multiple proceedings helps to reduce the risk of potentially inconsistent and contradictory decisions and may reduce the cost of resolving disputes.
- Speed and Efficiency of Arbitral Proceedings – typically, international arbitration is considered faster in comparison to court litigation, although this might not always be the case.[5] Another benefit is that many arbitration institutions offer parties the choice of expedited and emergency arbitration rules and procedures, which can be beneficial in the IP context.
- Urgency and Provisional Measures – another major advantage of international arbitration is the possibility of tribunals granting provisional measures or injunctive relief, which is provided for in most arbitration rules, but not available before State courts in certain jurisdictions. Provisional measures or injunctive relief can be critical in certain IP disputes, for instance, to prevent a breach of a non-disclosure agreement, to preserve a trade secret, to enjoin patent infringement, or to remove infringing goods from the market.[6]
- Procedural Flexibility and Use of Latest Technologies – a further advantage of arbitration is that the parties may tailor the dispute to their own needs – agreeing on procedural deadlines, procedural steps, discovery/document production, etc. This is especially important during times of crisis, since the parties may, for instance, agree to move the venue of the hearings to another location or choose to hold hearings remotely, virtually or via teleconference.
- Finality – the parties have very limited appeals options in international arbitration, which is another major advantage in comparison to court litigation.
- Confidentiality – typically, arbitration proceedings and awards are confidential in nature, which is of particular importance for IP disputes considering the often sensitive nature of issues in question.
- Enforcement – the simplified procedure for the recognition and enforcement of foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which can readily be enforced in 168 States,[7] is one of the main advantages of international arbitration. A problem which might arise, however, is that an arbitration award concerning a specific IP right may not be enforceable everywhere in the world, if the jurisdiction in question does not consider that IP right as arbitrable.
The Arbitrability of IP Disputes
The arbitrability of IP disputes is one of the most controversial issues in IP arbitration. “Arbitrability”, or as certain commentators refer to it “objective arbitrability”,[8] determines whether a particular issue in dispute is capable of resolution by arbitration or whether that issue is reserved for determination by national courts or another forum under the relevant jurisdictional law. This is typically determined either by the law of the seat or by the law of the jurisdiction where the award is likely to be enforced.
Today, IP disputes are generally arbitrable in most jurisdictions, even though the scope and precise limitations of the “arbitrability” of certain IP rights are still a subject of debate. Parties providing for an arbitration clause in their contracts should therefore be careful in making sure the IP rights in question are arbitrable under the applicable law, as well as the law of the State where an arbitral award may need to be enforced.
Common Law Jurisdictions and the Arbitrability of IP Disputes
In most common law jurisdictions, IP disputes are generally considered to be arbitrable, with certain limitations:
United Kingdom – in the United Kingdom, there is no statutory definition of the arbitrability of disputes in the Arbitration Act 1996. The UK Patents Act 1977 allows for arbitration in very limited circumstances.[9] Arbitrability of IP disputes has also been recognized judicially. Trademark and copyright related disputes are fully arbitrable in the UK.[10]
Unites States – Federal statutes in the United States explicitly provide that parties can agree to arbitrate patent disputes, either by including an arbitration provision in a contract between them that involves a patent, or by agreeing to submit an already existing dispute to arbitration.[11] There is no federal statute explicitly providing for arbitration of copyright disputes, however, even though U.S. courts have held that copyrights are generally arbitrable.[12] In the U.S., there is no federal statute providing for binding arbitration of trademark disputes either.[13]
Canada –in Canada, there is no similar statute as in the U.S. providing for the arbitrability of patent disputes, even though an arbitral award that concerns a patent can be enforced in Canada.[14] When it comes to the arbitrability of copyright disputes, the Supreme Court of Canada ruled, “The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding”,[15] which is a significant development confirming Canada’s pro-arbitration policy in relation to IP disputes.[16]
Australia – in Australia, there is no specific statute providing for the arbitrability of IP disputes. Australian courts start from a general premise that IP disputes are arbitrable. For instance, the Supreme Court of New South Wales addressed the issue of arbitrability of patent disputes in Larkden Pty Limited -v- Lloyd Energy Systems Pty Limited,[17] confirming that arbitrators can resolve IP disputes, however, cannot issue determinations declaring IP rights of the parties.[18]
Singapore – in Singapore, there have been certain interesting developments in relation to IP disputes recently. In 2019, Singapore passed the Intellectual Property (Dispute Resolution) Act, which amended the Singapore Arbitration Act and International Arbitration Act and now specifically allows for arbitration of IP disputes, regardless of whether an IP right is a central or incidental issue. This is a significant development, strengthening the position of Singapore as a dispute resolution venue for IP disputes.
Hong Kong – as part of its ongoing efforts to become a leading centre for international arbitration, in 2017, Hong Kong issued an Arbitration (Amendment) Ordinance 2017, which clarifies that disputes over IP rights may be arbitrated and that it is not contrary to public policy to enforce arbitral awards involving IP rights.
Civil Law Jurisdictions and the Arbitrability of IP Disputes
In civil law jurisdictions, IP disputes between private parties are, to a large extent, considered arbitrable. This is particularly the case in IP arbitrations involving contractual claims and obligations.
Certain IP-related issues such as, for instance, patent validity, are still largely brought before national courts and considered non-arbitrable, mainly because a patent is a right that is granted by a State to a patent holder and is considered to be limited to a specific subject matter, territory and time.[19]
The arbitrability of IP disputes in civil law countries largely depends on the jurisdiction in question. Three main tendencies may be distinguished, however: [20]
- Jurisdictions that expressly allow full arbitrability of IP disputes, including patent violations, for instance, Switzerland and Belgium on one side, and jurisdictions which expressly prohibit it, such as South Africa, on the other side;[21]
- Jurisdictions that accept inter partes awards or incidental decisions on patent validity, which, however, do not have a universal, res judicata effect;
- Jurisdictions where there is no express law on the matter, so arbitrability is a matter of a debate.
Switzerland is well known for its liberal arbitration stance, as IP disputes have traditionally been considered arbitrable. This is on the basis of Section 177(1) of Swiss International Private Law, which provides for a very broad definition of “arbitrability”.[22] Swiss courts have regularly interpreted this article to cover any claims with a “pecuniary value for the parties”, confirming that this included IP-related disputes.[23] Arbitral awards on patent validity are recognized and enforced by the Swiss Federal Institute on Intellectual Property, provided that they have been declared enforceable by a Swiss court.[24]
France, on the other side, has adopted a more restrictive approach to the arbitrability of IP disputes. In 2008, however, the Paris Court of Appeal accepted the arbitrability of patent validity, as long as it was raised as an incidental issue in arbitration proceedings.[25] Following this decision, France passed Law No. 2011-525 in 2011, amending the Intellectual Property Act,[26] now expressly allowing arbitration of IP disputes.
What Types of IP Disputes are Usually Resolved by Arbitration?
In practice, IP-related disputes typically include disputes over a failed licensing agreement or disputes in which the scope of permitted uses becomes contested.[27] They may also include disputes where the parties are collaborating in a joint technological development, for instance. Most common types of IP-related disputes include:
- Patent disputes – statistics suggest that 29% of all disputes at the WIPO relate to patents.[28] Patent disputes can be arbitrated under two scenarios: first, when there is an explicit arbitration clause provided in the contract, for instance, when a patent dispute arises from a patent license agreement. Parties might also wish to arbitrate a patent dispute containing patent infringement and patent validity dispute, which is possible if the parties conclude a submission agreement after a dispute has arisen. The danger with patent validity issues is that most national jurisdictions still provide for the exclusive jurisdiction of national courts or patent offices. Accordingly, the parties should be careful as the arbitrability of patent-related issues may be excluded in certain jurisdictions.
- Trademark disputes represent another major source of IP disputes. According to WIPO statistics, 21% of disputes dealt with by the WIPO Arbitration Center are trademark disputes.[29] Trademark disputes typically arise from trademark assignments, licensing, franchising and distribution agreements.[30]
- Copyright disputes are recognized as arbitrable in the vast majority of jurisdictions, both under civil and common law. Copyright disputes typically include all copyright-related contractual infringements and copyright-related contractual arrangements, such as, for instance, software licensing. According to WIPO statistics, 16% of disputes registered at the WIPO Arbitration and Mediation Center are copyright disputes.[31]
The WIPO Arbitration and Mediation Centre
The World Intellectual Property Organization (“WIPO“) offers specialized procedures at the WIPO Arbitration and Mediation Center focused on technology and IP disputes. The WIPO Arbitration and Mediation Center was established in 1994 in Geneva, with the idea of offering an option for the resolution of international commercial disputes between private parties specifically tailored to IP disputes. WIPO has its own set of procedural rules, the WIPO Arbitration Rules, the WIPO Expedited Arbitration Rules, and the WIPO Mediation Rules, the most recent version effective as of 1 January 2020.
Most IP disputes at the WIPO arise as a result of contract clauses containing an arbitration agreement submitting the dispute to the WIPO. The WIPO also provides for a model clause, which the parties may readily include in their IP-related contracts:[32]
Any dispute, controversy or claim arising under, out of or relating to this contract and any subsequent amendments of this contract, including, without limitation, its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims, shall be referred to and finally determined by arbitration in accordance with the WIPO Arbitration Rules. The arbitral tribunal shall consist of [a sole arbitrator][three arbitrators]. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute, controversy or claim shall be decided in accordance with the law of [specify jurisdiction].
In the alternative, parties may also decide to submit a dispute to arbitration after a dispute has arisen. This can be done by signing a so-called “submission agreement” also known as the “compromis”, providing for a dispute to be settled in accordance with the WIPO Arbitration Rules. An example of one such submission agreement is provided by the WIPO:[33]
We, the undersigned parties, hereby agree that the following dispute shall be referred to and finally determined by arbitration in accordance with the WIPO Arbitration Rules:
[brief description of the dispute]
The arbitral tribunal shall consist of [a sole arbitrator][three arbitrators]. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute shall be decided in accordance with the law of [specify jurisdiction].
Conclusion
The number of IP related disputes at the WIPO, but also other reputable international arbitration institutions, is continuously on the rise. This evident shift from litigation to arbitration of IP disputes is logical and expected – as IP-related disputes are inherently international in nature, accordingly, arbitration is considered a more suitable and efficient dispute resolution method than litigation. The trend is expected to continue, with the number of IP disputes increasing given the importance of intellectual property to the global economy.
[1] T. Legler, “Arbitration of Intellectual Property Disputes” (ASA Bull. 2/2019, p. 291).
[2] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 26.
[3] GAR, The Guide to IP Arbitration, Law Business Research 2021, Introduction; see also WIPO alternative dispute resolution – saving time and money in IP disputes, available at: https://www.wipo.int/wipo_magazine/en/2016/si/article_0010.html
[4] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 11. “SEP” stands for “standard essential patents” and “FRAND” for fair, reasonable and non-discriminatory rates.
[5] GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 8-11.
[6] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 60.
[7] See Contracting States, New York Convention, available at: https://www.newyorkconvention.org/countries
[8] See M. A. Smith, M. Cousté, T. Hield, R. Jarvis, M. Kochupillai, B. Leon, J.C. Rasser, M. Sakamoto, A. Shaughnessy, J. Branch, “Arbitration of Patent Infringement and Validity Issues Worldwide”, Harvard Journal of Law & Technology (Vol. 1, 19, No. 2, p. 305).
[9] UK Patents Act 1977, Section 52-(5).
[10] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.
[11] 35 U.S.C. Section 294(a).
[12] Packeteer, Inc. v. Valencia Systems Inc., 2007 WL 707501, 82 U.S.P.Q.2d 1216; Boss Worldwide LLC v. Crabill WL 124805 (S.D.N.Y 2020).
[13] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.
[14] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.
[15] Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 SCR 178; see also GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 30.
[16] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 30.
[17] Larkden Pty Limited v. Lloyd Energy Systems Pty Limited [2011] NSWSC 268.
[18] GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 31-32.
[19] GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 34-35.
[20] GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 34-35.
[21] D. M. Vicente, “Arbitrability of Intellectual Property Disputes: A Comparative Survey”, Arbitration International (2015), pp. 155, 157.
[22] See Swiss International Private Law (English translation), available at: https://www.trans-lex.org/602000.
[23] GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 35-36.
[24] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 36.
[25] Court of Appeal of Paris, Ganz v. Societe Nationale es Chemins de Fer Tunisiens (SNCFT), 29 March 1991, Rev. Arb 1991, p. 478.
[26] Article L 615-17 of the Intellectual Property Act, as amended by Law No. 2011-525.
[27] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 65.
[28] WIPO Caseload Summary WIPO Arbitration, Mediation, Expert Determination Cases and Good Offices Requests, available at: https://www.wipo.int/amc/en/center/caseload.html
[29] WIPO Caseload Summary WIPO Arbitration, Mediation, Expert Determination Cases and Good Offices Requests, available at: https://www.wipo.int/amc/en/center/caseload.html
[30] GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 139.
[31] WIPO Caseload Summary WIPO Arbitration, Mediation, Expert Determination Cases and Good Offices Requests, available at: https://www.wipo.int/amc/en/center/caseload.html
[32] See WIPO Recommended WIPO Contract Clauses and Submission Agreements, available at: https://www.wipo.int/amc/en/clauses/
[33] See WIPO Recommended WIPO Contract Clauses and Submission Agreements, available at: https://www.wipo.int/amc/en/clauses/
