Agree to disagree
Alternative dispute resolution mechanisms are not being used to their full potential, according to IPzen’s Julia Cytrynbaum
Technology has greatly affected business life. Technology is crucial in every sector and today businesses are ready to pay good money to give themselves an advantage, so much so that many more businesses that procure technology services and solutions have emerged.
What have also sprouted, with the development of this new requirement, are disputes and the necessity for adequate dispute resolution mechanisms. Businesses face many intellectual property risks, and in today’s aggressive market, the manner in which such a business handles these risks can, in essence, destroy it. Stakeholders, shareholders and investors keenly watch how a business handles and manages a potential threat, and it is indeed their prerogative because the threat of sanctions is what drives healthy business behaviour. It must also be noted that the way a company responds to efforts to undermine or use its reputation is a critical element of its brand, and a good trademark is intangible property and has commercial value.
Indeed, in addition to serving as a badge of origin (a sign that tells who has made the goods or provided the services), trademarks also serve as advertising and provide the guarantee of a certain expected quality. The dilution of registered trademarks with a reputation by blurring or tarnishing is therefore considered in some systems to amount to trademark infringement.
The need to protect technology
The advent of technology also implies the necessity for its protection, as well as protection of the brains behind such technology. This in turn naturally gives rise to frequent IP disputes as owners and creators take action to defend, or exploit, their work. IP disputes are the most commonly encountered types of disputes in business life, as well as the most commonly predicted type of disputes among businesses in the near future. In this light, protecting and defending IP is strongly linked to the pace of innovation, which in turn holds direct correlation to a country’s economic development.
In the Gowers Report (December 2006), commissioned by the UK government, IP rights were defended in these terms: “Ideas are expensive to produce but cheap to copy … Without protection, others will free ride on the creator’s initial investment and sell the invention or creation at a much lower cost. If the innovator knows that someone else can do this easily, there will be no financial incentive to innovate in the first instance.”
This link between innovation and IP rights reveals itself problematic when one considers how fast technology and innovation evolve. These disputes are required to keep up with such a fast pace, as they can very well affect a business’s ability to operate. So far, it is obvious that as per the rest of the business world, litigation is not the preferred solution and arbitration is, in theory, the most adapted dispute resolution mechanism. Mediation is, of course, also a possibility but its success is highly dependent on a company’s bargaining position as well as its ability to threaten with litigation, or go ahead with effective action in case no agreement can be hashed out from the amicable proceedings.
A theoretical preference for arbitration
The question remains as to why alternative dispute resolution (ADR) mechanisms aren’t being used as often as they can be, as they are theoretically appealing. A survey published in November 2016 found that, although arbitration is the most preferred system, litigation is the most used in technology, media and telecoms. Court litigation being the least desirable method, this reality gives us reason to scratch our heads since arbitration boasts many attractive features.
Arbitration is a binding procedure that boasts international enforceability under the New York Convention. What makes it all the more suited for IP matters is that such disputes are often complex, as well as particularly time- and information-sensitive. Selected arbitrators also demonstrate knowledge and expertise in pointed IP matters, which make them more appealing to the parties as opposed to court justices who lack specific IP-related expertise.
It is also worth stating that the international and cross-border nature of IP disputes is an important factor in making arbitration the go-to option, given how likely multi-jurisdictional disputes are to arise.
While transnational copyright and trademark claims are by now well known, patent infringements are no longer as territorially discrete as was once assumed. It is important that parties are able to resolve multijurisdictional IP disputes in one proceeding because international trade knows no borders. IP disputes frequently occur in multiple jurisdictions at once, depending on where the infringement takes place, and with different applicable laws.
Specifically in the case of IP, dispute resolution through judicial methods involves multiple lawsuits in multiple countries, each with greatly differing procedures, with variable outcomes and at great expense.
The procedural flexibility that arbitration can offer as opposed to court proceedings should not be neglected. With the state of technology today, digital media is prone to produce infringements of IP rights, thereby creating transnational cases that require courts to interpret foreign law. The confidential nature of arbitration, as well as the possibility of avoiding foreign jurisdictions, make arbitration particularly appealing for IP matters.
The reality of IP disputes: litigation takes the cake
As much as arbitration is most preferred, it appears that litigation remains heavily relied upon. There could be numerous speculative reasons for this, notably the fact that sometimes parties pay less attention to dispute resolution provisions because neither of them see, nor do they wish to see, a dispute arising in the near or far future. Since an arbitration provision requires the parties’ agreement either in the original contract or once the dispute has arisen, neither party takes the initiative to include a dispute resolution provision in the contract and must therefore rely, once the dispute is in full swing, on judicial court proceedings.
Another reason for this is the fact that arbitration has only risen in popularity in the past 10 years. As disputes generally arise some time into the life of the contract, it is largely possible that contracts drafted before arbitration became en vogue did not include an arbitration provision and as such, the parties had no choice but to resort to litigation. Also, the unmitigated difference in attitudes toward arbitration around the globe, an idea that is easily overlooked but nevertheless holds its water, could also explain why arbitration is not used as much as it should be.
Mature commercial and legal markets, a large number of multinational tech companies and a more litigious business culture in general exist in Europe and North America, all of which could eventually explain why arbitration provisions may be hard to introduce in some international contexts.
We must also note that lots of people believe that injunctive relief is difficult to obtain or administer with arbitration. As a result, it is easier to suggest that parties need to have more faith and confidence in the international arbitration process before such a process can be used to the full extent of its capabilities.
Lastly and as a sidenote, we must not neglect the importance in IP matters of disputes arising between third parties, in which case litigation is the default position.
With technology developing at such a fast pace and businesses needing leeway for innovation, it is most likely that arbitration will become increasingly popular. Businesses have already begun to understand that they need to play the right legal game to battle IP threats.
Nevertheless, they may need easier solutions than arbitration, in its current state, can provide. The approach to dispute resolution will have to change at the same pace as the digital world.
Early intervention or better mediation skills may be options, for the moment. For now, smart-minded IP firms, companies and business owners have started adopting technology solutions for their data and file management, a sign of what is next to come in terms of creativity and innovation. Software such as IPzen is becoming widespread because it frees up a significant amount of time and organisational effort, to be put to better use.
Adapting to the future—naturally, adapting oneself to technology solutions—is paramount in order to succeed in today’s market and IPzen is perfectly tailored to help you manage your cases and tackle dispute-related issues.
Dispute resolution takes many forms and is liable to changes, and it is quite an advantage to be the user of a technology that allows you to see the whole case through no matter what the procedures or protocol. Hopefully this is a sign of further globalisation, and I am certain that dispute resolution mechanisms will follow the trend and adapt to the future.