International Arbitration and Intellectual Property

June 8, 2012

For Intellectual property disputes, especially when they have an international dimension, arbitration is very often the wisest and most efficient way to solve the dispute. For a right holder the Inter partes principle of arbitration may also limit the risk concerning the invalidation of its rights.

It is usually said that arbitration, contrary to judicial proceedings, offers the advantages of confidentiality, rapidity and flexibility. On the latter point, the free will of the parties allows them to decide on which conflict will be subject to arbitration as well as the composition of the arbitral tribunal, the place of arbitration, and the applicable law and procedural rules. Nothing prevents different disputes subject to different laws being joined before a single arbitral jurisdiction, in charge of settling all the disputes, according to the law(s) chosen by the parties. This, for example, avoids contradictory decisions being rendered by different national tribunals concerning related disputes. Finally, in an international context, it is often easier to enforce an arbitral award abroad than it is a judicial decision. Arbitration therefore presents incontestable advantages for companies, particularly those of international scope.

The Possibility of Arbitration of Disputes on Intellectual Property Rights

What about disputes concerning intellectual property rights? Is it possible to submit such disputes to arbitration? Is the answer the same in both a national and an international context? Is it pertinent to consider the specific rights involved when making the decision about whether arbitration is possible? In order to answer these questions, is it necessary to refer to the national law of the country having granted the monopoly resulting from the intellectual property rights? In other words and as an example, do you treat in the same way a national dispute over the interpretation of a license granted on a French copyright and a dispute between a Canadian and a Finnish company concerning the cancellation of a Japanese patent?

Rights Subject to Registration Formalities

By virtue of the principle of the free will of the parties, the choice of the parties to submit disputes that they have chosen to arbitrate must be respected. Generally this question is not discussed when it concerns intellectual property rights that are not registered, such as, for example, copyrights or the rights applicable to software or databases. Likewise, the question does not raise any particular difficulties when the dispute concerns a contractual aspect on which the parties do not agree. However, registered rights such as patents, trademarks, designs and models are a completely different matter. Can an arbitral tribunal cancel or invalidate a title that has been granted by the state or by an institution created by several states (for example, the European Office for Harmonization in the Internal Market or the European Patent Office)? Is there not a contradiction to public order or with the exclusive competencies that certain offices hold (this is the case, for example, in Germany for patents and in China and India for trademarks)?

Concerning national disputes, the answer is often easier than it is for international disputes. The answer may in fact be found in national law. As an example, Swiss, Belgian and American laws expressly provide for the possibility to arbitrate on certain intellectual property rights. On the contrary, South African law provides that disputes concerning registered patents in that country cannot be settled by arbitration. In the silence of the law, the answer may be found in case law. Thus, in France, up until a 2008 decision of the Paris Court of Appeal, one generally considered that arbitral tribunals were not competent to decide upon disputes relating to the validity of intellectual property rights. Today the thinking is otherwise in this country. For international disputes, the arbitral tribunal often adopts a more independent and pragmatic reasoning. If it is clear that in general the arbitral tribunal takes into account the laws of the concerned countries, this is generally in order to avoid the eventual problem of enforcement of the award. In principle, if the arbitral tribunal notes that its award will not cause any problem of enforcement, it concludes that it is competent even for cases of registered intellectual property rights. The limit is always that its decision is valid only between parties. In other words, an intellectual property right invalidated by an arbitral award does not produce any effects for third parties to the arbitration. For this reason also, holders of intellectual property rights may have an advantage in going through arbitration rather than resorting to judicial proceedings.