SpeedRead: Arbitrability of IP disputes – why this can be an issue and ways to resolve it

04 April 2017

Garreth Wong, Louise Lanzkron

Holders of intellectual property rights ("IPR") are often cautious about resolving disputes through arbitration, preferring instead to litigate within the familiar confines of the court system of the jurisdiction in which the IPR has been registered. Yet, arbitration can often be a useful mechanism by which to resolve an IPR dispute for a variety of reasons including protections which can be put in place in relation to confidentiality and the ease of enforcing awards in other jurisdictions. A single arbitration can also resolve in one forum multi-jurisdictional disputes (e.g. infringements in more than one jurisdiction), something the courts generally cannot do unless a European registered IPR is in issue.

The reluctance to arbitrate is in large part partly due to the uncertainties regarding whether IP disputes are arbitrable. But in this regard, a key distinction needs to be made between contractual or commercial disputes with an IP element (e.g. disputes regarding the interpretation of a licensing agreement) and disputes regarding central aspects of IPR, such as invalidity of patents and, to a lesser extent, infringement. Most countries recognise that commercial or contractual issues are arbitrable, but the picture is more mixed when it comes to the arbitrability of core aspects of IPR, particularly invalidity.

Some countries have expressly enacted that IP disputes are arbitrable: e.g. Belgium, Switzerland and the US. Whereas a few countries, such as South Africa, have legislated that patents issued in the country cannot be subject to arbitration. In jurisdictions such as England, Italy and France there has been judicial, rather than statutory, recognition of the arbitrability of IPR.

In most other countries, there is no clear legislative or court guidance on whether IP disputes are arbitrable. According to a survey carried out by Cook and Garcia 1, IP practitioners in Argentina, Austria, China (P.R), Greece, Japan and Portugal considered that most IP disputes, including issues regarding invalidity, were arbitrable in their jurisdiction. Practitioners in Chile, Colombia, India, Ireland, Russia, South Korea and the UAE expressed some doubt regarding whether IP disputes were arbitrable in their jurisdiction.

In an interesting development, the Hong Kong government published a Bill 2 proposing amendments to the Hong Kong Arbitration Ordinance (Cap.609) to provide that disputes over the subsistence, scope, validity, ownership, and / or infringement of an IPR can be submitted to arbitration in Hong Kong and it would not be contrary to Hong Kong's public policy to enforce such an award in respect of one of these issues. The Bill is currently making its way through Hong Kong's Legislative Council.

Given continuing concerns regarding the arbitrability of IP disputes, there has been significant discussion regarding the means to address such issues. For example, one suggested solution is to make it expressly clear that any 'invalidity' finding would be binding only between the parties to the arbitration (which, in any event, would be the case as arbitration awards do not bind non-parties to the arbitration) and to award the winning party (in the event of invalidity) a royalty free licence for the duration of the existing registration. Alternatively, the award may not need to deal expressly with invalidity at all, and instead focus on the consequences that follow and the appropriate remedies.

In response to the particular challenges of IP disputes, arbitral institutions have taken steps to ensure that their panels of arbitrators include the necessary sector specialists. The World Intellectual Property Organization (WIPO) has long had its List of Neutrals, comprising highly specialised and experienced practitioners and experts. The Singapore International Arbitration Centre (SIAC) has a published panel of arbitrators for intellectual property disputes. And the Hong Kong International Arbitration Centre (HKIAC) announced last year the launch of a new Panel of Arbitrators for IP disputes which has over 30 members with experience in licensing issues, copyright infringements, FRAND disputes as well as the registration of patents, trademarks and designs.

In March 2016, Apple Inc successfully convinced the US District Court of North California to grant a motion to compel arbitration of patent infringement claims against a Chinese registered company BYD Limited 3. This reflects the increasing acceptance of arbitration in resolving IP disputes. This is also reflected in the Queen Mary University of London 2016 International Dispute Resolution Survey 4 in which 51% of respondents to the survey indicated that they considered that in the TMT sector the majority of disputes in the future would relate to IP issues and 43% indicated that arbitration was their preferred dispute resolution mechanism. In light of the uncertainty resulting from Brexit, the use of arbitration in resolving disputes connected with IPR is only set to rise.

Part of Bird & Bird's series of Arbitration SpeedReads aimed at providing busy practitioners and in-house counsel with easy to read updates on topical Arbitration issues.

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1. Authors of 'International Intellectual Property Arbitration' 2010, Kluwer Arbitration
2. The Arbitration (Amendment) Bill 2016
3. Apple Inc. v BYD Co. Ltd., 15-cv-04985-RS (N.D. Cal. Mar. 2, 2016)
4. Published by the School of International Arbitration, Centre for Commercial Law Studies at Queen Mary University of London. For a more detailed discussion of the contents of the survey please see our article here.

Authors

Louise Lanzkron

DR Knowledge & Development Lawyer

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Garreth Wong

Partner

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