Efficient Alternative Dispute Resolution in Intellectual Property

June 2009

Growth in international transactions has multiplied the potential for cross-border intellectual property (IP) disputes. Global challenges – such as the digital environment, climate change issues, access to health care, the protection of traditional knowledge and traditional cultural expressions and the preservation of biodiversity – may create new types of IP disputes. Meanwhile, the economic downturn is providing an incentive for stakeholders to seek more efficient and affordable means of resolving such disputes than through court litigation – making alternative dispute resolution (ADR) an increasingly attractive option.

ADR refers to neutral mechanisms allowing parties to solve their disputes outside of court in a private forum, with the assistance of a qualified neutral intermediary of their choice. ADR can only be applied if all parties agree to submit their dispute to the procedure or if it is mandated by a competent court. The benefits include time and cost efficiency, flexibility, party control, neutrality, a single procedure, confidentiality and expertise.

The WIPO Arbitration and Mediation Center

The WIPO Arbitration and Mediation Center (WIPO Center) was established in 1994 on a not-for-profit basis to facilitate the time and cost-effective resolution of IP and related disputes through ADR. It is recognized as an international and neutral forum especially appropriate for cross-border and cross-cultural disputes and conducts procedures under the WIPO Mediation, Expedited Arbitration, Arbitration and Expert Determination Rules (WIPO Rules).

The WIPO Rules contain specific provisions that are particularly suitable for IP and related disputes, such as those concerning confidentiality and technical evidence. However, their scope is not limited to such disputes and they can be, and have been, successfully applied in other areas. The WIPO Center makes available, in different languages, model clauses and agreements that parties may use as a basis for submitting their disputes to WIPO.

As experience has shown, the effectiveness of ADR depends largely on the quality of the mediator, arbitrator or expert. The WIPO Center maintains a database of over 1,500 qualified neutrals from 70 countries with further candidates added according to case needs, and it assists in the appointment of neutrals in each case.

The WIPO Center works also as a resource center to raise awareness of the valuable role ADR can play in different sectors. It provides ADR advice to interested private and public entities as well as training in IP-related ADR through workshops and conferences. The WIPO Center recently collaborated with the WIPO Academy in introducing an online course on Arbitration and Mediation under the WIPO Rules.

Tailored ADR services

The WIPO Center recognizes that certain sectors experience specific recurring types of disputes with particular features and needs that can best be addressed by specially tailored ADR services. It works with IP owners and users as well as their representative organizations to facilitate or establish specially adapted ADR schemes.

One such scheme is the WIPO-initiated Uniform Domain Name Dispute Resolution Policy (UDRP), under which the WIPO Center has been providing services since 1999. More recently, in 2008, the WIPO Center responded to a request by the Association of International Collective Management of Audiovisual Works (AGICOA) by developing the “WIPO Expedited Arbitration Rules for AGICOA”, tailored to the specific needs of AGICOA right holders. One provision includes the direct implementation of the award by AGICOA, which updates the rights and releases the royalties accordingly. For AGICOA disputes, the WIPO Center has identified a special panel of copyright and entertainment law arbitrators from various jurisdictions.

The WIPO Center also collaborates with stakeholders in emerging IP-related areas, including biodiversity, traditional knowledge, traditional cultural expressions and access to health care, in order to develop adapted dispute resolution systems. It has, for instance, been involved in informal explorations of ADR’s potential in the context of the Convention on Biological Diversity and the International Treaty on Plant Genetic Resources for Food and Agriculture.

Services of the WIPO Arbitration and Mediation Center
Mediation: a procedure in which one or more independent mediators assist the parties in reaching a settlement of the dispute through facilitating dialogue and helping the parties to identify their interests. The mediator does not render a decision. Arbitration: a procedure in which a dispute is submitted to one or more independent arbitrators who make a binding decision on the dispute. The decision of the arbitrator is internationally enforceable under the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Expedited Arbitration: an arbitration procedure with shortened timelines and reduced costs, normally providing for a sole arbitrator. The award is enforceable under the New York Convention. Expert Determination: a procedure in which a specific question is submitted to one or more independent experts who make a determination on the referred matter. The determination is binding, unless the parties agree otherwise.

Services of the WIPO Arbitration and Mediation Center

Mediation: a procedure in which one or more independent mediators assist the parties in reaching a settlement of the dispute through facilitating dialogue and helping the parties to identify their interests. The mediator does not render a decision.
Arbitration: a procedure in which a dispute is submitted to one or more independent arbitrators who make a binding decision on the dispute. The decision of the arbitrator is internationally enforceable under the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards.
Expedited Arbitration: an arbitration procedure with shortened timelines and reduced costs, normally providing for a sole arbitrator. The award is enforceable under the New York Convention.
Expert Determination: a procedure in which a specific question is submitted to one or more independent experts who make a determination on the referred matter. The determination is binding, unless the parties agree otherwise.

Trends in WIPO mediation and arbitration

The WIPO Center – having administered over 80 mediations and 110 arbitrations, the majority of which were filed in the last four years – has observed various trends and developments in IP dispute resolution:

41 percent of the administered procedures were mediation cases, 49 percent standard arbitration, and 10 percent expedited arbitration.
The WIPO clauses and procedures are often found in a combined model. For example, the most frequently used WIPO clause is that providing for “mediation, followed in the absence of a settlement by (expedited) arbitration”. It has the advantage of giving parties the opportunity to settle their case in a more informal forum before moving to arbitration.
WIPO standard arbitration tends to be used in more complex cases such as patent disputes, which generally last from 12 to 18 months. WIPO expedited arbitration is primarily used in disputes where a lower amount is at stake, less voluminous and technical evidence is involved and where a quick result is needed, which tends to be the case for trademark and software-related disputes. In general, the expedited arbitration procedure takes up to six months.

WIPO mediation and arbitration have been used in disputes covering a variety of fields, including patent infringement and licenses, information technology transactions, telecommunications, distribution agreements for pharmaceutical products, copyright issues, research and development agreements, knowledge transfer, trademark co-existence agreements, art marketing agreements, joint venture agreements, engineering disputes, life sciences, sports, entertainment, domain name disputes and cases arising out of agreements in settlement of prior multi-jurisdictional IP litigation. Parties have also used the Center’s services in non-IP-related disputes, such as general contractual matters, insurance, construction and employment (at an IP law firm).

A WIPO Expedited Arbitration Relating to a Banking Software Dispute
Another area in which WIPO ADR has recently been used is banking. Banks can be involved in a variety of IP-related disputes, for example, in connection with the use of a bank’s trademark or the development of software systems, as this case demonstrates. A U.S. company providing data processing software and services and an Asian bank concluded an agreement regarding the provision of account processing services. The parties agreed the U.S. company was to be the exclusive service provider for certain of the bank’s affiliates in North America and Europe. Any dispute arising out of or in connection with the agreement would be resolved under the WIPO Expedited Arbitration Rules. Four years later, the U.S. company alleged the bank had violated the agreement by using the processing services of third parties in the countries covered by the agreement. When the parties failed to settle the dispute, the U.S. service provider commenced WIPO expedited arbitration proceedings, claiming infringement of the agreement and substantial consequential damages. The parties agreed upon a sole arbitrator who held a two-day hearing in New York. The parties and the arbitrator agreed to use the WIPO Center’s electronic case communication facility, WIPO ECAF. After three months, the arbitrator rendered a final award for partial infringement of the agreement granting damages to the U.S. service provider.

A WIPO Expedited Arbitration Relating to a Banking Software Dispute

Another area in which WIPO ADR has recently been used is banking. Banks can be involved in a variety of IP-related disputes, for example, in connection with the use of a bank’s trademark or the development of software systems, as this case demonstrates.

A U.S. company providing data processing software and services and an Asian bank concluded an agreement regarding the provision of account processing services. The parties agreed the U.S. company was to be the exclusive service provider for certain of the bank’s affiliates in North America and Europe. Any dispute arising out of or in connection with the agreement would be resolved under the WIPO Expedited Arbitration Rules.

Four years later, the U.S. company alleged the bank had violated the agreement by using the processing services of third parties in the countries covered by the agreement. When the parties failed to settle the dispute, the U.S. service provider commenced WIPO expedited arbitration proceedings, claiming infringement of the agreement and substantial consequential damages.

The parties agreed upon a sole arbitrator who held a two-day hearing in New York. The parties and the arbitrator agreed to use the WIPO Center’s electronic case communication facility, WIPO ECAF. After three months, the arbitrator rendered a final award for partial infringement of the agreement granting damages to the U.S. service provider.

Settlement trends

The PriceWaterhouseCoopers (PWC) study on “International arbitration: Corporate attitudes and practices” observed a general trend according to which parties explore settlement at different stages of the dispute resolution process. Twenty-five percent of the study’s participants indicated achieving a settlement before the arbitral award, while 7 percent reported settlements that were implemented in a consent award, suggesting an approximate settlement rate of 32 percent in international arbitration within the perimeters of the survey.

The WIPO Center observes an even higher settlement trend in relation to IP-related disputes.¹ The flexibility of WIPO ADR procedures allows parties to combine the different procedures and to consider amicable settlement throughout the process.

In WIPO mediation, 71 percent of cases settled, 23 percent did not and 6 percent are pending. Most settlements occur during the mediation phase, consistent with the parties’ intent in using this mechanism and with the role of mediator. The mediator assists the parties to explore workable, interest-based solutions that help them to preserve their long-term relationship.

But a number of WIPO cases also end in settlement after the termination of the mediation. By enabling the parties to identify their interests and to better understand their dispute, mediation can provide a basis for direct negotiation between the parties after the mediation. For example, in a recent WIPO mediation, a European university holding several pharmaceutical patent applications and a European pharmaceutical company used mediation in order to conclude a license agreement. The mediator, a lawyer with years of experience in the pharmaceutical industry, helped the parties to identify the issues and deepen their understanding of the legal circumstances. After the mediation, the parties resumed direct negotiations and reached an agreement.

Interestingly, a significant proportion of WIPO arbitration cases also result in settlement: 50 percent of cases settled (including consent awards), 39 percent did not settle and an award was issued (excluding consent awards) and 11 percent are pending. The WIPO Arbitration Rules provide that the arbitral tribunal can suggest that the parties explore settlement whenever it deems appropriate. If the parties so wish, the arbitral tribunal can give them a preliminary view of the case in order to facilitate settlement discussions. Where the parties conclude a settlement before an award is made, the arbitral tribunal can, upon the parties’ joint request, record that settlement in the form of a consent award, which is enforceable under the New York Convention.

Remedies

ADR procedures are flexible mechanisms allowing parties to explore appropriate remedies that may not always be available in court litigation.

While monetary relief remains the most common form sought in WIPO cases, parties often also request specific actions as a remedy, such as a declaration of non-performance of contractual obligations, or of infringement of rights. Other forms of remedies sought are, for instance, further safeguards for the preservation of confidentiality of evidence, the provision of a security, the production of specific data, the delivery of a specific good or the conclusion of new contracts.

By Sarah Theurich, WIPO Arbitration and Mediation Center
Acknowledgement Ignacio Decastro, WIPO Arbitration and Mediation Center

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