The Dispute Avoidance and Resolution Best Practices for the Application Service Provider Industry, developed by the WIPO Center for the Application Service Provider Industry Consortium, recommend that contracting parties in the application service provider (ASP) supply chain rely on arbitration and alternative dispute resolution (ADR) procedures to resolve their disputes, rather than court litigation.
The dispute resolution processes described below are recommended as particularly appropriate for the cost-efficient and expeditious resolution of ASP supply chain disputes (e.g., relating to service level agreements).
Mediation
Mediation is a private, voluntary, non-binding, confidential and flexible procedure in which a neutral intermediary endeavors to assist disputing parties, at their request, to reach a mutually satisfactory settlement of their dispute. Or, if requested, provide a neutral evaluation of the parties' respective positions and the final outcome. The mediator has no power to impose a settlement on the parties. Either party may abandon a mediation at any stage prior to the signing of an agreed settlement.
Mediation Followed, in the Absence of a Settlement, by Expedited Arbitration or Arbitration
This procedure combines, sequentially, both mediation and expedited arbitration or standard arbitration. Where the parties agree to submit to the procedure, they must first endeavor to resolve the dispute through mediation. If a settlement is not reached through mediation within the period of time designated by the parties (either 60 or 90 days are recommended), the dispute may be referred by either party to arbitration for a binding decision.
Arbitration
Arbitration is a private, voluntary and confidential procedure involving the adjudication of rights, in accordance with the applicable law, by a tribunal of one or more arbitrators that has the power to render a decision that is final and binding on the parties. In contrast to mediation, once the parties have freely agreed to submit a dispute to arbitration, a party cannot unilaterally withdraw from the arbitration. Arbitration is particularly appropriate in international contracts.
Expedited Arbitration
This is a form of arbitration in which certain modifications are introduced to ensure that the arbitration can be conducted and an award rendered in a shortened time frame and, consequently, at a reduced cost. To achieve those objectives, the modifications provide for a sole arbitrator (rather than a tribunal of several arbitrators), shortened time periods for each of the steps involved in the arbitration proceedings, and condensed hearings before the sole arbitrator.
The most effective way to resolve a dispute through one of the above processes is on the basis of a set of institutional rules. The WIPO Center's Rules have been developed by international experts and are considered to be particularly appropriate for commercial disputes involving information technology and intellectual property.
To defray the costs associated with the administration of the above dispute resolution procedures and to remunerate the arbitrators and mediators, the Center requires the parties to pay a fee. The Center's fees are considered to be the lowest among the major international dispute resolution service providers.
In order for a dispute to be resolved through one of the above dispute resolution processes requires party agreement. Generally, a dispute resolution clause (i.e., a clause dealing with the process or procedures by which disputes arising out of, or relating to, the parties' contractual relationship can be resolved) should be settled at the time of negotiating the other terms and conditions of the agreement. Once a dispute has arisen, it may be impossible for the parties to agree about anything, let alone the procedures about which to resolve their dispute. Moreover, a pre-dispute clause provides both parties with a degree of certainty regarding how problems will be resolved and can expedite the dispute resolution process. It is, however, possible to decide on a dispute resolution process after a dispute has arisen, particularly if the parties' relationship is such that an agreement on the process could be achieved without significant delay, expense or acrimony.
Because alternative dispute resolution is particularly suitable to resolve international disputes, WIPO clauses are often found in agreements concluded between parties from different jurisdictions. However, WIPO clauses also lend themselves to contracts concluded between parties from the same jurisdiction. Typically, WIPO clauses are found in licensing agreements (e.g., information technology licenses, transfer agreements relating to patents or manufacturing know-how, franchising and merchandising contracts involving trademarks, and agreements in relation to entertainment industry products) and in service level agreements, computer contracts, joint venture agreements, multi-media contracts, research and development contracts, mergers and acquisitions involving intellectual property assets, and publishing, music and film contracts.
To assist contracting parties, the WIPO Center has developed standard dispute resolution clauses, in several languages, for each of the procedures administered by the Center. Parties desiring more specific dispute resolution clauses may consult the Center for free-of-charge drafting advice.