WIPOD – Arbitration and Mediation Matters: Transcript of Episode 4

WIPO ADR for Fashion and Luxury Disputes

Selin Ozturk: Welcome to WIPOD Arbitration and Mediation Matters. The WIPO Arbitration and Mediation Center’s (the WIPO Center) podcast on intellectual property and innovation disputes. My name is Selin and thank you for listening, as this podcast aims to provide practitioners a deeper understanding of the use of alternative dispute resolution (ADR) mechanisms, for example, mediation and arbitration for such disputes.

Today we are delighted to have with us Ida Palombella and Chiara Accornero to share their views on using alternative dispute resolution for disputes in the fashion and luxury industry. Ida is a partner at Deloitte Legal in Milan and is responsible for the Intellectual Property and Information Technology services, as well as the fashion and luxury sector. She has extensive experience gained in prestigious national and international firms in the field of intellectual property and technology in and out of court, as well as in the management of IP aspects of extraordinary transactions.

Chiara Accornero joined the WIPO Arbitration and Mediation Center here in Geneva in 2016, and was the Center’s representative at Maxwell Chambers in Singapore from 2017 until mid-2021. Thank you both for joining us today. Chiara, if you would, please take us away!

Chiara Accornero: Thank you for the kind introduction Selin. In the last few years, WIPO has seen a marked increase in mediation and arbitration cases, with businesses looking for alternatives to court litigation, especially in cross-border disputes. A number of these cases are in the fashion and luxury industries, for example in relation to IP (licenses, IP infringements, royalty payments) but also in relation to contractual obligations. For example in the area of advertising and image rights, franchising and distribution, manufacturing, product development and marketing.

Ida, is there any particular type of dispute in the area of fashion and luxury that you see the most?

Ida Palombella: Well, the fashion and luxury industry has faced several challenges in the last few years and has completely changed the ways it operates on the market. Particularly during the pandemic, the vast majority of disputes we have seen have been in the fields of distribution, like online distribution, mostly through e-commerce and the use of social networks. There has been a dramatic increase in these kinds of disputes.

Then of course, we have the big classics, like trademark infringement in disputes related to IP rights and infringement of IP rights, both in contractual and not contractual environments. Then we also have to mention the new frontier, where we are seeing that probably in the future we will see an exponential increase in disputes in IP rights in the Metaverse, the so-called “new internet”. We are already aware of the first legal actions started by Hermes and/or Nike for the alleged infringement of their IP rights in creating NFTs, and I think this will be the next step ahead of litigation in the fashion industry.

Chiara Accornero: Thank you Ida that actually reflects quite well our experience. So we see that often parties to fashion disputes are from different jurisdictions or involved in cross-border transactions, and even more now with the digitalization of fashion. We also see disputes where time is of the essence for parties, and this is because the market in fashion evolves very quickly, where the seasons are very short and the product cycles are very fast.

We see that disputes in the area of fashion do require a certain sector knowledge, and the expertise and experience to recognize and understand the legal issues of the industry. Confidentiality is also a very important consideration for parties. This is when confidential information is at stake, but also for reputational reasons.

Ida, do you find that disputes in the fashion industry have some specific characteristics? What are fashion brands and companies looking for when managing disputes (e.g.,need for fast and effective solutions, expertise, and confidentiality)?

Ida Palombella: The list you made of the characteristics of ADR perfectly fits the needs of the fashion industry. First of all, most of the disputes are international, are between or among parties located in different countries - different jurisdictions, so the international profile is very common in this industry. Most of the mediations are cross-border, so being flexible to mediation and arbitration can be much easier to handle compared to tribunals and courts that are located in specific countries.

Then confidentiality! Confidentiality [is relevant] for two reasons as you mentioned. One is the contents of the disputes; the information that is potentially disclosed that forms part of the dispute. But also the confidentiality that relates to the dispute in and of itself, because reputation is particularly relevant in this industry.

Therefore, where litigation in court can be easily disclosed to the press and can someway affect the reputation of a brand, this kind of dispute resolution means are kept confidential and this preserves what is really important for brands. [Confidentiality is] really, in my experience, one of the topics that is raised most frequently when you have to choose what kind of litigation to start. And then of course, expertise. The knowledge of the industry. That knowledge of the industry is very important.

Also when you are choosing the forum in the jurisdiction clause in drafting an agreement, when you are negotiating an agreement, even when you go for the choice of courts, you tend to choose, in this kind of disputes, the courts that are more experts in the industry. For instance, in Italy you tend to choose the court of Milan, who has the largest experience. But the ADR, like the one WIPO provides, has this great “plus” that you can build a panel made by experts and this, I think, is another big opportunity for brands.

Chiara Accornero: Absolutely, we see this as well. In particular, that mediation and arbitration can be attractive strategies for fashion and luxury companies to control disputes from a global perspective. This is really because of their flexibility, for example, parties can choose someone with a specific expertise in the industry, but also parties can structure the procedure, as they like, so for example, in terms of timeline. Parties can also use WIPO online tools; for example, video conferencing services and these are also offered for free by WIPO and have been increasingly used in recent cases with a very positive feedback from both the parties and the mediators.

Another advantage of mediation, arbitration, in particular of mediation, is that parties can really explore remedies that are not always available in court litigation. So, for example, a declaration of non-performance or infringement of rights, or even the delivery of a specific good or the conclusion of new contracts. And we see that through mediation, parties can go beyond their strict legal rights and obligations and they can really find solutions that suit their business interests. For example, we have seen mediations where parties were able to renegotiate their contractual relationship or even commence one in the first place. This is really another advantage of mediation, which not only resolves dispute but also maintains and even begins business relationships.

Ida, how do you think that mediation and arbitration can help fashion brands manage their disputes?

Ida Palombella: Yeah, definitely. I agree with you. It's exactly as you described this kind of flexibility. You know, I always say when you have creative industry and creative brands, your client is a creative. You have to be creative also in the use of laws and the use of tools to solve disputes. And so the more you have a flexible way to solve the dispute, the better. Specifically for these kind of clients and as you mentioned, any possible means that you can use in order to preserve the business relationship is fundamental. For instance, we know that mediation is more commonly used in common law countries that are more flexible actually, whereas civil law countries like Italy, when you go for litigation in court, you are bound by strict rules of procedures.

We have to really push a little bit more and I think in jurisdictions like Italy, but also France, Germany, jurisdiction that are based on civil codes, in order to promote a little bit more the use of mediation, it is an alternative way that, particularly when you have a business relationship between the parties that may want to go on with their business after the litigation is closed. Then mediation is really a fantastic way to explore - a fantastic tool that we should really, really promote more and more. I think that if we are able to explain how flexible it is and useful and functional it is, in particular in order to preserve the business relationship or what it is that you were describing - I think it would become more and more common to see this kind of alternative way of solving disputes; avoiding going to courts and have costs and have a situation of uncertainty that goes on for months and sometimes for years, which is a big disruption for business.

Chiara Accornero: No, absolutely we see that as well. And in fact, in our mediation and arbitration cases, we often see mediation as a first step in a multi-tiered dispute resolution process. So either before arbitration or before litigation. And based on our experience, we really encourage having this first mediation step. This is because most cases settle in the mediation phase, really about the 70% and in fact, last year, 78%, so close to 80%.

Even in those few cases where parties do not reach a full settlement in the mediation phase, usually through the mediation, they manage to resolve some of the issues at stake so that the subsequent dispute resolution process, whether arbitration or court litigation, is actually faster. And to also help parties refer their disputes to WIPO mediation, arbitration, we have model clauses the parties can use in different languages, but we are also available for any consultation in case you want to draft a specific clause or a submission agreement or.

Ida, are there any other factors that fashion brands, fashion companies, should consider when using mediation and arbitration?

Ida Palombella: Well, I see what we have described in our chat today as relevant. Of course, whenever you think ahead of potential disputes, you are entering in a better agreement. Model clauses that you mention, for instance, are a perfect way to provide in advance tools to the parties that whenever, unfortunately, a litigation will arise, they will already have set rules that can be applied in terms of law applying to the subject matter of the dispute, the seat of the disputes, the language, and possibly the use of tools like WIPO provides in order for them to also have a panel made by experts.

The main rule, in my opinion, is to think ahead. Have awareness and knowledge of the tools that institutions like WIPO put at disposal of companies in order to find the best possible way to sort out this kind of claims, these kind of disputes. And for all the reasons we have described today, I think that this kind of means would be more and more in use in the fashion industry, from single procedure, international procedure, costs, speedy expertize, confidentiality, preserving the business relationship. I think the list is really long and I really don't see any way that companies would not want to use this kind of means. They have to gain better knowledge. So our main task as the institution, in your case, as lawyers, in my case as professional means industry is to made brands aware of the big advantages of this kind of means to solve disputes.

Chiara Accornero: Thank you, Ida! We also actually often see mediation and arbitration used to even where there is no contractual arrangement between the parties. So for example, in the case of an infringement or pending litigation and for example, for these [types of cases] we have we call it a Unilateral Request for Mediation. So this is a very short document, a very short form, that a party involved in a dispute, for example an infringement, can submit to us [to WIPO] in order to propose mediation to the other party. The filing is free of charge and once we receive the request, we can contact the other party and assist the other party considering the mediation option.

Ida, is this something that you see as well? Do you think that mediation and arbitration could also be useful in infringement cases or pending litigation?

Ida Palombella: We are starting to see them. Of course, it is very difficult because these are even more controversial, because when you have an agreement, the parties are more keen in preserving the business relationship, they want to cooperate maybe more in order to avoid disruption of their business. Whereas when they are third parties with no contractual link among them, no contractual arrangement, of course, it is somewhat more difficult, but sometimes we see it and it also depends on the local procedure. Sometimes pending court litigation allows to solve at least some issues by mediation, by alternative dispute resolution while the litigation is pending, which is not possible in other jurisdictions. But again, what we need to do is make the parties aware that they have this possibility. And this can really help, also when there is a litigation between the parties that have no business in place, but in any event, the costs and uncertainty that is caused by litigation is something that, of course, may damage business anyway. And so also to have access to these alternative disputes resolution means to minimize the damage that litigation can bring.

Selin Ozturk: Thank you, Ida and Chiara, for joining us today.

Chiara Accornero: Thank you, Selin.

Ida Palombella: It was very interesting to understand that from an institutional point of view, the key questions are the same in terms of what we see in practice and what WIPO is expecting to see in the markets. So total coincidence of the main aspect of this kind of topic.

Selin Ozturk: For more information on WIPO’s alternative dispute resolution services, you may visit the WIPO Center’s website or follow us on LinkedIn.