Resolving IP Disputes on an International Scale Is Manageable With Arbitration Procedures Determined in Advance and Enforceable in a Variety of Venues
September 29, 2004
Published in the Daily Journal IP Supplement
The advantages and trade-offs of selecting arbitration rather than litigation as a dispute resolution vehicle are fairly well known. Most companies find that arbitration can provide a more expedient, cost-effective, definitive, binding and simplified approach for dispute resolution. The fact that the grounds for appealing arbitration decisions are limited means that final resolution of the dispute generally comes much quicker, albeit at the risk of receiving a potentially erroneous decision with limited options for review. Arbitration can be particularly advantageous in the international context by adding the predictability that is required for successful international business transactions.
When disputes arise from international business transactions, the diverse cultures, practices and communication styles among parties typically enhance the complexity of the dispute, making resolution more difficult. If relying solely on litigation in national courts, business professionals naturally worry that a party from a distant country can drag them into foreign jurisdiction where procedures are alien and impartiality may be uncertain for outsiders. A party also may face multiple proceedings under different laws, which can lead to conflicting results. International arbitration has the potential to alleviate these concerns by allowing the parties to tailor the proceeding to their specific goals and needs.
National court rules applied in litigation are clearly not as flexible as administered arbitration procedures or procedures that may be contractually specified in arbitration clauses. Contracting for arbitration as the dispute resolution mechanism therefore permits greater liberty to tailor the procedure to suit anticipated disputes, goals and needs. As only one example, a business might contractually opt for arbitration on documents alone without a hearing, or an arbitration process that has alternative evidentiary and examination rules.
Litigation’s Limits
One of the primary advantages of arbitrating international disputes lies in gaining certainty of jurisdiction. Because all national courts have limited jurisdiction, a party wishing to litigate an international commercial dispute must first determine whether the national court has power under its own rules to hear the case. By contrast, where the parties have an arbitration provision in their initial agreement, they have already agreed to jurisdiction in the arbitration forum, and the jurisdictional uncertainty possible with litigation is removed.
Arbitration can eliminate the need for conventional service of process. Since serving a foreign corporation can be an expensive and difficult procedure, international arbitration can possible affect the speed and cost of resolving the dispute. For example, selecting an arbitration forum such as the International Chamber of Commerce would alleviate some cost and delay relating to litigation service of process. The ICC secretariat is responsible for notifying the respondent of any arbitration request filed with the ICC, which is particularly cost-effective and efficient when a dispute involves multiple, multi-national parties.
Even if a national court has personal jurisdiction over the parties and the dispute, and a favorable judgment is obtained, the question remains whether the judgment is enforceable internationally. The judgment will, of course, always be enforceable in the territory of the national court. But if the opposing party is a foreigner, with no assets within that territory, the judgment may have little or no value. Furthermore, enforcement of a national court judgment in a foreign country will depend on whether the rules of private international law in that country permit such enforcement. In cases involving multiple parties of different nationalities, this may result in some foreign judgments being enforceable, while others are not.
By contrast, international arbitration awards are more widely recognized and enforced in foreign jurisdictions than are national court judgments, in part because of wide adherence to an international arbitration convention. To date, approximately 130 countries are now parties to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The large number of signatories empowers international arbitral tribunals with jurisdiction over a wide range of parties and disputes. Significantly, the convention requires the court of a contracting state to refrain from hearing a dispute subject to an arbitration agreement, offering international arbitral awards much greater international recognition, and thus enforceability, than judgments from national courts.
Bespoke of Off-the-Rack?
Having selected international arbitration, a company must decide whether to have the arbitration administered by a specified arbitration institution or handled on an ad hoc basis. Generally speaking, arbitration institutions offer several advantages. First, a published set of well-understood and widely recognized rules is already established, which provides predictability. The parties are relieved of the need to custom design a procedure, although they have the ability to vary the rules by agreement. Second, full-time staff administer and manage the proceedings. Program administrators generally have experience in the field, which can facilitate and expedite the process. Third, the institution may provide panels or lists of international arbitrators.
There are, however, two primary disadvantages to administered procedures. Administered programs can be expensive if the fee is calculated relative to the amount in controversy. In complex EP disputes involving multiple parties, this may be a significant concern, although it can be addressed by fee- and cost-shifting provisions in the contract. Also, administered programs can take longer than ad hoc arbitration proceedings due to potential delays with the institution’s procedures or the selection of arbitrators. On the whole, however, the benefits of administrative programs generally outweigh the potential drawbacks.
When selecting an administered international, arbitration program, companies should evaluate the rules and competencies of particular programs in light of specific business objectives. The International Chamber of Commerce Court of Arbitration in
Another forum is the
There are significant differences between the two processes. First, under the ICDR rules, the tribunal may, at a party’s request, take whatever interim measures it deems necessary, including injunctive relief. This is particularly notable in IP disputes in which a temporary injunction can have a determinative impact. In contrast, the ICC rules do not expressly provide the arbitral tribunal with the authority to order interim injunctive relief.
Second, while the ICDR does not have a list of arbitrators specializing in intellectual property issues, an ICDR tribunal may appoint independent experts to report to it on specific issues designated by the tribunal. The ICC rules do not expressly empower the arbitrator to seek an expert’s advice; instead, the parties themselves decide the extent to which experts are involved.
Finally, under the ICC rules the ICC court automatically scrutinizes the award after it is drafted by the tribunal, affording extra protection in ensuring the correctness of the award. The ICDR has no scrutiny process. Rather, a party has only the right to ask the tribunal to interpret the award or correct any clerical or computation errors or make an additional award as to claims presented but omitted from the award.
Additional Benefits
Intellectual property disputes are often highly technical or scientific in nature. Parties litigating a dispute in national courts cannot choose their own judges, but in arbitration, parties may require appointment of a particular arbitrator or one with specialized competence in the relevant field.
Confidentiality is generally a significant concern in EP disputes. Companies seeking to protect trade secrets and intellectual property interests while preserving the confidentiality of a dispute are often faced with the reality that litigation is rarely confidential, particularly in the event the dispute does not settle prior to trial. Parties to arbitration can provide for protections to ensure privacy and confidentiality. Moreover, absent an agreement, ICC proceedings and the final award are confidential.
In selecting international arbitration as a dispute resolution mechanism, companies should weigh its advantages in light of the special concerns and realities of conflict management in the international commercial arena. When choosing an administering institution, they should consider the advantages of ICC proceedings generally and with specific consideration for intellectual property disputes in the international realm.
James W. Morando, a senior litigation partner at Farella Braun + Martel, maintains a diverse trial practice with emphasis in technology, intellectual property, trade secrets and other complex litigation. He is the founder of the firm’s intellectual Property Litigation Group.
Nan E. Joesten is a member of the Intellectual Property and Technology Group at Farella Braun + Martel. She maintains a diverse complex commercial litigation practice with particular expertise in a variety of intellectual property matters, including patent and trademark infringement actions, trade secret misappropriation cases, and technology-related litigation.