Sunday, 6 April 2014

Arbitration of Intellectual Property and Technology Disputes

Jane Lambert











Arbitration is a method of resolving disputes. It arises out of an agreement between two or more parties to refer an existing or any future dispute that may arise to a third party known as the arbitratior ("arbiter" in Scotland) who will decide the case on its merits after considering evidence and arguments. The arbitrator's decision, which is known as an award, is enforced in England and Wales in the same way as a judgment (see s.66 (1) of the Arbitration Act 1996).  Her Majesty's Government is party to an international agreement to which most countries in the world belong known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention") whereby each party agrees to enforce in its territories arbitration awards made in accordance with its provisions.

What are the Advantages of Arbitration?
Because the arbitration arises out of an agreement between the parties, it is they rather than an outside agency such as HM Courts and Tribunals Service who control the process. That means that the dispute can be determined in a manner and at a time of the parties' choosing by a tribunal of their choice whose competence, experience and impartiality they can trust rather than by the judge to whom their case is allocated who may or may not have relevant knowledge and experience who will apply rules of procedure and evidence that may not be relevant when the case comes into his or her list. Arbitration can therefore be quicker, cheaper and less formal than litigation and render better justice though much will depend on the terms of the arbitration agreement and the skills, knowledge and experience of the arbitrator. In most cases arbitrations are conducted in private so that nobody but the persons involved in the process hear damaging or embarrassing disclosures. That often makes it easier for them to maintain or renew a business relationship once the dispute is resolved.

And the Disadvantages?
These are largely the converse of the advantages and usually result from a badly drawn up agreement or an incompetent, inexperienced or less than impartial arbitrator.  The costs and delay can be greater than the parties would have been incurred had they gone to court and the decision may be less than fair or wrong in law. In nearly every case the parties have to pay a fee to the arbitrator and hire the room in which the arbitration takes place and the office equipment, stationery and other consumables that the arbitrator uses. The privacy of the arbitration may hide from the public facts and matters that should be made known and indeed may remove one of the incentives to early settlement. Often the remedies available to the arbitrator and the opportunities to challenge an award are limited.

What Sort of Cases are suitable for Arbitration?
Generally these are cases in which the parties have agreed to resolve any disputes that may arise by arbitration at the time they made their contract. One such agreement might be for the supply of computer equipment or services where the supplier is in a developed country and the customer may be a government department in a less developed country where the judges are not known for their independence of the executive. Another might be a licensing agreement where the parties have done good business with each other before and expect to do so again. However, the parties can agree to refer an existing dispute to arbitration. One instance in which they may decide to do so is after they have exchanged letters of claim and response in accordance with the Practice Direction - Pre-Action Conduct, seen each other's evidence, tried unsuccessfully to resolve their dispute through negotiation. They may try arbitration because they do not want to go to court since the case turns on issues of law or fact that could be solved quickly, cheaply and easily by an experienced specialist arbitraior.

What Sort of Cases are unsuitable?
These are generally cases where the parties do not trust each other (which will include most infringement actions) where one of the parties wants an injunction to restrain the other side from damaging its interests.  Having said that s.48 (5) of the Arbitration Act 1996 confers upon an arbitrator (subject to any agreement to the contrary) the same powers as a judge:
"(a) to order a party to do or refrain from doing anything;
(b) to order specific performance of a contract (other than a contract relating to land);
(c) to order the rectification, setting aside or cancellation of a deed or other document."
 Moreover the civil courts have power under s.44 (2) (e) to grant injunctions in support of an arbitration. It should also be noted that arbitration is a procedure that can be used at any time. There is no reason why one part of the dispute cannot be resolved by litigation, negotiation or mediation and another by arbitration. Intellectual property disputes are usually determined in two phases: the first stage being to decide liability and the second the pecuniary remedy. The taking of an account of profits or an inquiry as to damages is a technical matter involving forensic accountants that could often be conducted more cheaply and quickly by an arbitrator.

Where to find an Arbitrator
Moat arbitrators in the UK are trained and accredited by the Chartered Institute of Arbitrators ("CIArb") which keeps a searchable database of members with particulars of their qualifications. An international panel of arbitrators, mediators and other dispute resolution providers who specialize is intellectual property and technology is maintained by WIPO ("World Intellectual Property Organization") the UN agency for intellectual property. As you can see, I am a member of that panel.  And then there are us (see "Our IP and Technology Dispute Resolution Team" 28 Dec 2013 4-5 IP). Our members include Professor Louis Harms, the former Deputy President of the Supreme Court of Appeal of South Africa, Thomas Dillon who was a senior in-house legal advisor to the trade association of the US film and TV industry as well as me.

How to appoint an Arbitrator
If you have an arbitration agreement it will probably set out a procedure for appointing an arbitrator. Typical language will be
"Any dispute or difference shall be referred to arbitration before a single arbitrator agreed by the parties of in default of agreement within 28 days appointed by the Chair for the time being of the Bar of England and Wales."
The usual procedure is for the parties to exchange lists of names and curricula vitarum. If the same name appears on both lists he or she is likely to become the arbitrator. If the parties cannot agree the Chair of the Bar or other appointing party will select a suitable candidate from his or her list. Once the arbitrator has been agreed or appointed the parties may enter a supplemental agreement within the arbitrator covering such matters as his or her fees and the date, time and place of the arbitration.

What happens next?
That depends on the terms of the arbitration agreement and the rules that the parties have agreed to adopt. The arbitration may be conducted entirely in writing, orally or partly orally and partly in writing. Usually the complainant has to send a statement of case to the arbitrator and other side to which the respondent has to reply within a specified time. Such statements of case are very much like the particulars of claim and defence in civil litigation. After statements of case have been exchanged or indeed at any other time the arbitrator may invite the parties to a case management meeting or he or she may give directions on his or her own initiative in writing. In some cases disclosure of documents and the exchange of witness statements and experts' reports may be ordered. In other cases the arbitrator may order documents to be attached to the statements of case or witness statements. If the parties agree, or the arbitrator decides, that witnesses' testimony needs to be tested by cross-examination he or she will order a hearing which will be conducted very much like a trial. Arbitrators have power under s.38 (5) of the Arbitration Act 1996 to examine witnesses on oath and the civil courts have power under s.43 to compel the attendance of witnesses. Once the arbitrator has considered the evidence and arguments he or she will draft the award. The arbitrator has power under s.56 to without publication of his award until his or her fees have been paid. If as is frequently the case the person paying the arbitrator is the party who succeeds in the arbitration the arbitrator's fee (or at any rate a portion of it) can usually be recovered from the other side. The circumstances in which an award can be challenged are set out in s.67 and s.68 or they may be provision for an appeal or challenge in the rules or arbitration agreement.

Do you want to learn more?
if you happen to be anywhere near Sheffield tomorrow evening you can hear me mention arbitration as well as other forms of ADR in my talk to Sheffield Inventors' Group at the Business and IP Centre at Central Library at 18:00 tomorrow (see "Holding your Own - How to stop others from ripping you off if you are a Private Inventor" 5 April 2014 IP Yorks). If there is sufficient demand I will hold a seminar on ADR of IP disputes at chambers or alternatively a webinar which will of course carry SRA, BSB and IPReg points. If you are interested in attending such an event please call me on 020 7404 5252 or message me through my contact form. You can also tweet me, write on my wall or get in touch through Linkedin, G+ or Xing.  If you need someone to sit as an arbitrator, to represent you before and arbitration, to draft an arbitration agreement or otherwise advise in relation to an arbitration please call our clerks on +44 (0)20 7404 5252 or complete their enquiry form.

Further Reading

Jane Lambert "Our IP and Technology Dispute Resolution Team" 28 Dec 2014 4-5 IP
WIPO  "ADR Advantages"
            "Why Arbitration in Intellectual Property"

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