Arbitration is a form of ADR (alternative dispute resolution). It can be used as a way to avoid court proceedings. If someone has infringed your intellectual property or accused you or your business of doing so, you may be wondering what the benefits of arbitration are versus litigation. If so, it is important to understand exactly what arbitration is as a form of ADR and its effectiveness in relation to IP disputes.
A dispute can arise in many different circumstances involving various different types of intellectual property, including artistic works protected by copyright, registered and unregistered design rights, trade marks and brands, inventions, trade secrets and know how.
Parties typically end up in dispute where it is alleged that one party has used or misappropriated the intellectual property of the other without permission, with a view to shortcutting the investment which has been made into the development of the relevant IP. Disputes most often arise between competitors or parties who are (or were) in a contractual relationship relating to the IP (such as licensor and licensee or join venture collaborators).
Arbitration vs. Litigation in IP Disputes
Litigation is the process of a dispute being decided upon in a court of law, by a judge who (in the case of IP disputes) typically has experience of the specialist relevant law. There is a specialist IP court, the Intellectual Property Enterprise Court (IPEC), intended to provide a less costly and less complex alternative to the High Court (which is intended for larger and more complex claims).
Arbitration is when the two parties in dispute agree to appoint a third party arbitrator to resolve their dispute. The arbitration can take on a number of different forms, depending on the issues or the complexity of the case. The parties typically have more flexibility to agree where an arbitration will take place and the rules which will govern the procedure of the arbitration. An arbitrator’s decision is final and binding, and is not usually subject to appeal (in contrast to the position in court proceedings). Arbitration can be less costly than court litigation, and there is an extensive international enforcement regime for arbitration awards which is helpful if your opponent is based in another country.
One advantage of arbitration over litigation is that it is possible to keep the dispute completely private. The confidentiality of both parties is kept during the process. This can be very valuable if protecting the reputation of a business is a priority, as claims of IP infringement or theft can be serious and damaging. In contrast, the owner of the IP may wish the outcome of a decision to be public knowledge, as this forms part of a deterrent for stopping future infringers.
The outcomes sought during litigation are often the same as those awarded through the arbitration process. However, if urgent action is required – such as an interim injunction – then litigation will be the better choice. In IP disputes, the focus is often on getting an infringer to stop what it is doing, and monetary remedies can be a secondary consideration. The objective typically is to explore a commercial resolution of the dispute through an exchange of correspondence and sensible settlement negotiations.
It is perhaps because of this that arbitration is not commonly used in the UK when it comes to IP disputes. Both parties must agree to an arbitration. If the parties to a dispute are not in a pre-existing contractual relationship (in which arbitration may be incorporated into the contract as an alternative to litigation), such agreement can be difficult to secure when parties are in an adversarial situation and are seeking not to give away any tactical advantage from any potential litigation.
There are nonetheless certain circumstances where arbitration should not be forgotten as an option, including where your opponent and its assets are based abroad or where there is a cross border element to an IP dispute, in which case arbitration may avoid an argument over which country’s courts have jurisdiction.
Other forms of ADR, and in particular mediation, enable the parties to reach solutions that are not based on winning or losing, and that promote ongoing commercial relationships. The point is that parties to an IP dispute should always consider whether any form of ADR over and above litigation would better suit their commercial objectives in securing a resolution of that dispute.