Understanding the Benefits of Arbitration in International Patent Disputes

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Introduction

Arbitration, which includes international arbitration, can prove to be a valuable tool for enforcing patent portfolios, license agreements, and settling infringement disputes. When parties enter into agreements or licenses, such as commercial supplier, distributor or partnership agreements, it is advisable to include an arbitration provision to resolve any potential disputes arising from those agreements. This way, the parties involved can take full advantage of the various benefits that international arbitration offers in the event of an intellectual property dispute, as opposed to relying on district court proceedings.

Here are some of the main advantages of opting for arbitration as a dispute resolution method:

·         Confidentiality: Arbitration proceedings can be conducted privately, allowing parties to keep their disputes confidential and prevent them from becoming public knowledge, as can happen in court litigation. This is especially important in cases involving patents and other intellectual property disputes, which frequently involve sensitive information such as proprietary technology, financial data, and trade secrets. Although parties should still make an effort to enter into a strong confidentiality agreement, the fact that arbitration takes place in a private forum is a significant advantage.

·         Choice of Arbitrator: In case of a dispute, the parties can decide together to appoint one or more arbitrators to oversee the proceedings. This allows them to select arbitrators with technical knowledge and experience in patent litigation. Unlike in district court, where a judge is assigned to a case automatically and may lack the necessary experience, the parties in arbitration are free to mutually agree on an appropriate arbitrator. If they cannot come to a mutual agreement, they can choose a three-arbitrator panel, with each side selecting one arbitrator unilaterally and mutually agreeing on the third arbitrator.

·         Timing: Arbitrations are usually shorter than litigation, as parties can set time frames and agree on an appropriate case schedule within the arbitration agreement. This means that patent and other intellectual property disputes can be resolved more quickly in arbitration than in district court.

·         Flexibility: International arbitration is a more flexible way of resolving disputes compared to district court litigation. In arbitration, the parties can agree on the choice of law to be applied, even in foreign disputes. They can also agree on a set limit on the damages that may be awarded, thus eliminating the risk of excessive damages. Moreover, parties can limit or stagger the issues raised in arbitration or limit the scope of any ongoing dispute if the issues addressed in arbitration do not completely resolve the dispute.

·         Reduced Expense: Arbitration is a cost-effective alternative to litigation, especially when the parties are willing to minimize expenses. In arbitration, the discovery process can be very targeted, particularly if the parties agree to abide by specific rules, such as the IBA rules on evidence. Usually, in arbitration, the parties limit written discovery, and depositions are rare, while witnesses provide a written statement instead.

At the arbitral hearings, the taking of evidence provides additional opportunities for cost savings During an arbitration process, the parties involved can schedule the taking of evidence. They can also agree on a limited number of witnesses who will testify at the hearing. In general, witnesses provide affirmative testimony through a written statement, which is given in advance to the arbitrators and the opposing party. The cross-examination is conducted at the hearing itself. This approach eliminates direct examination, which saves time and cost.

·         One way to reduce expenses in international arbitration is by using junior lawyers more often rather than senior lawyers, which is common in district court litigation. The preliminary hearings and conferences in arbitration are usually less formal and do not require a lead attorney to speak. Junior lawyers can be given the opportunity to argue their party's positions and oversee the process of discovery. Consequently, attorneys' fees associated with arbitration are often lower than those of a district court case.

·         Post-Trial Briefing: In international arbitrations, the parties involved are usually granted the opportunity to provide a detailed summary of their case in a post-trial briefing. This is a privilege that is not commonly afforded in district court proceedings, particularly in trials that involve a jury. Post-trial briefing can prove to be an extremely valuable tool for the parties to present a comprehensive summary of their respective positions and ensure that all the relevant facts are presented before the arbitral tribunal for adjudication.

·         Limited Opportunities for Appeal: In contrast to litigation in district courts, where the opportunity for appeals is common and frequently exercised, arbitration proceedings do not typically permit a right of appeal concerning a final award. Moreover, there are only a few options available to a party that wishes to challenge an arbitral decision. This feature of arbitration reinforces the conclusive nature of arbitral verdicts and lowers overall expenses by sidestepping the danger of a lengthy—and expensive—appeal process.

·         Enforcement: It may be easier to enforce patent rights through arbitration, especially when it comes to enforcing patents in foreign countries. The main way to enforce patents in international arbitration is through the New York Convention. However, a foreign court may refuse to enforce if the specific dispute is not allowed under the laws of that country. International arbitration can provide a way to settle patent rights across an entire international patent portfolio without litigation in each respective country, depending on where the parties are located and conduct business.

International arbitration can also be used to settle a large number of interdisciplinary disputes. For example, parties can arbitrate trade secret misappropriation claims, which may involve issues of patent infringement or validity. Including other claims such as trade secrets claims in patent arbitration can increase your chances of recovering damages (if you are claimant) or open up your options for counterclaims (if you are respondent).

To take advantage of the many benefits of international arbitration, parties should consider including arbitration provisions in patent licenses, business contracts, and settlement agreements. There is no one-size-fits-all approach to including arbitration provisions, and contract terms should be creatively crafted to extend to any potential patent or other intellectual property dispute that may arise. By including arbitration provisions in technology licenses and other commercial agreements concerning patented technology, parties will be better equipped to take advantage of the benefits of international arbitration in case any patent disputes arise in the future.

Conclusion:

Arbitration provisions in patent agreements offer various advantages. It ensures privacy, provides technical expertise, is cost-effective, and allows for streamlined enforcement. Parties should consider crafting creative contract terms to cover all possible scenarios to enhance efficiency, reduce costs, and ensure a confidential and tailored approach to dispute resolution.