Is intellectual property dispute arbitrated? Why do we arbitrate intellectual property disputes?-Q&A.-Shenzhen deep trust patent Agency Co., LTD

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Is intellectual property dispute arbitrated? Why do we arbitrate intellectual property disputes?

Release Time：

2022-09-06

Arbitration or non-arbitration

Today, many intellectual-property-related contracts include arbitration clauses, or the parties sometimes agree to submit disputes over intellectual property infringement to arbitration. However, there are many issues to consider before agreeing to arbitration. These issues need to be considered in the light of the potential disputes foreseen by the parties or whether they have agreed to enter into a submission agreement at all.

Why do we arbitrate intellectual property disputes?

There are many reasons why a party may choose to arbitrate an intellectual property dispute. These include:

Professional：One of the main visible benefits of arbitration is that the parties may choose to appoint one or more professional arbitrators relevant to the dispute. This will not only greatly reduce the time required to resolve disputes, but also reduce the risk of unfair outcomes by non-professional courts.

A single Tribunal：The territorial nature of intellectual property means that the resolution of most complex intellectual property disputes has to involve multiple jurisdictions. Parties may often be involved in proceedings involving multiple countries at the same time. Unlike commercial litigation, courts do not define intellectual property litigation as a foreign inconvenience jurisdiction for the simple reason that the most convenient court to determine the validity or infringement of an intellectual property is the court in the country where the intellectual property is registered. With arbitration, parties can resolve disputes through a single tribunal, thereby avoiding the high cost of multi-jurisdictional litigation.

Program flexibility：The parties may accept flexible procedures for disputes. This includes asking the arbitral tribunal to issue decisions on a case-by-case basis on different issues or differences in the validity and infringement of intellectual property rights.

Time and expense：In a single Tribunal, disputes are decided by a panel and procedures are flexible, saving time and money.

Security：In Hong Kong, arbitration proceedings and awards are confidential, unless otherwise agreed by the parties (subject to some exceptions), meaning that the parties' disputes will not be made public. In patent cases, this benefits the patentee because any challenge to the validity of the patent can be kept confidential. In addition, in trade secret disputes, the principle of confidentiality makes it easier for the parties to bring the case to an arbitral tribunal rather than hearing it in open court, where the entire process is confidential. This is the same way that matters involving trade secrets are dealt with in court.

Nature of the award：In accordance with the agreement signed by the parties, the parties may make appropriate adjustments to the arbitral tribunal's award. Parties disputing the amount owed under the grant may request the arbitral tribunal to make a simple determination as to the amount owed, if any, rather than seeking a determination as to whether the patent is valid or infringed. This benefits both the patentee and the licensee. If the dispute is heard in court and the non-infringement and/or invalidity defenses are successful, it is not in the interest of the parties. If the patent is declared invalid, all third party competitors will be able to produce the product described in the patent claim. If the patent is found not to have been infringed, this will provide clear guidance on how to proceed with workarounds.

Compulsory execution：Throughout the world, court decisions are enforceable only on the basis of mutual cooperation between regions, or even on the basis of damages, and injunctions issued by foreign courts are not enforceable in most countries. However, under the New York Convention, arbitral awards (including injunctions) are enforceable in most countries around the world.

Why not arbitration?

Parties may also choose not to arbitrate, for a number of reasons. These include:

Limited publicity：One of the parties wants to make the dispute public. The holder of an intellectual property right may want to let others know that it is enforcing the right. The defendant infringer may want to use the validity of the intellectual property holder to publicly attack as a bargaining tool. Once a defense challenging validity is filed, it is usually public in court proceedings, and these grounds can be exploited by others.

Lay judge：Parties to an unwarranted case may wish to choose to have the dispute decided by a non-expert judge. Interlocutory applications may also delay court proceedings. Non-expert judges also tend to decide cases based on their perceived merits rather than on technical arguments. These factors may be a strong motivation for defendants to choose court proceedings. Some plaintiffs in tort or inadmissible cases may also favor non-expert judges.

Multi-jurisdictional litigation creates leverage：If one party is well funded, suing in multiple jurisdictions and forcing the other party to defend multiple lawsuits may prevent the defendant from properly defending himself or herself due to financial incapacity. This can force a party to settle early or, in some cases, to go bankrupt.

Interim injunctive relief：Similarly, if a party can accept a court's interim injunction, such as a tort interim injunction or a recently issued injunction. These can be powerful tools to force many parties not to give up on a negotiated settlement.

Other litigation advantages：In many jurisdictions, the litigation advantage is greater than the arbitration advantage, such as the ability to obtain full disclosure of documents from the other party in most common law jurisdictions. In most arbitrations, only partial documentation is required. Generally, it is also difficult to obtain disclosure of documents from third parties or compel witnesses to appear in court.

High cost of arbitration：Depending on the type of case, arbitration costs can be high, especially when the case involves multiple parties. The fees of the arbitral institution and venue must be paid. For some claims, such as unpaid royalties or franchise fees, debt recovery proceedings through the courts may be much faster (summary judgment) and not too expensive.

Source: Law firm Roth & Russell

Author: Wang Shan, head of Shanghai litigation team of Lusheng Law Firm