Germany: No-Fuss Arbitration Proceedings — Can Also Be Used In Intellectual Property Right Infringement Cases

Last Updated: 5 December 2011
Article by Christof Augenstein

While disputes in the area of company law are regularly determined by arbitration tribunals, many companies fail to use this instrument for disputes involving commercial intellectual property law. They could also benefit from the advantages of arbitration in this area, in particular by resolving a dispute with as little "fuss" as possible and without major media interest. Even questions concerning the invalidity of commercial intellectual property rights can be decided in a way that is binding on the parties.

Major international enterprises rely predominantly on arbitration tribunals for their legal disputes. In particular when it comes to disputes under company law, companies value the discretion of arbitration proceedings compared with a public court case with the associated interest of the media and the general public. It is rare for the public to even be aware of disputes that go to arbitration, such as, for example, the dispute about the departure of Siemens from the joint-venture company AREVA NP for the construction of nuclear reactors, or the Federal Government proceedings against the heavy goods vehicle toll collection consortium Toll Collect.

On the other hand, proceedings in respect of the infringement of commercial intellectual property rights such as patents, trade marks or industrial designs are generally brought before the state courts and therefore played out in public. This also applies to disputes between major international enterprises, which attract the associated media interest. An example of this is the current dispute between Apple and Samsung on the sale of the Galaxy Tab.

In Germany, the Düsseldorf Regional Court ruled that the Galaxy Tab was infringing Apple's industrial design rights. The hearing was well-attended, and the reaction in the press – especially for Apple – was negative. For example, Samsung's argument that Stanley Kubrick had portrayed a computer in the image of the Apple iPad in his film "2001 – A Space Odyssey" was reproduced with relish. The public commotion could last a fair while longer, as, according to online reports, some 19 cases in a total of 9 countries are pending. In some cases Samsung also appears as claimant, so the parties face one another in different roles. Arbitration proceedings could therefore help both parties by excluding the public.

Arbitration can offer a further advantage in international disputes. It is rare that – as in Germany – there are specialist chambers competent to decide on intellectual property disputes. In arbitration proceedings both parties are in a position to decide on the arbitrators themselves, and so they can select persons with the appropriate expertise to rule out the possibility of erroneous judgements. The choice of arbitrator also enables account to be taken of different cultural backgrounds by appointing arbitrators from different countries and cultural circles.

In international disputes it is also advantageous that arbitration awards are generally easier to enforce abroad than the judgements of national courts. More than 140 countries worldwide have signed up to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

First, however, both parties must have created a contractual basis for arbitration proceedings. In contrast to proceedings before national courts, no-one can be compelled to take part in arbitration proceedings, for which reason the majority of all disputes will probably continue to be brought before the national courts in future. It would, however, be possible to set up an arbitration agreement without problems, even if the parties had already been involved in extensive disputes.

Many of those who participate in the markets do not consider an arbitration tribunal in cases involving patents or other commercial intellectual property rights, because they believe that the validity of commercial intellectual property rights lies outside the competence of an arbitration tribunal, as commercial intellectual property rights are in fact granted by a national act of sovereignty. In theory, private parties to arbitration proceedings cannot reverse this decision. However these difficulties can be bypassed by the fact that the effects of nullity are limited expressly to the relationship between the parties. Where necessary, an arbitration tribunal can grant a potential infringer a free licence to an intellectual property right such as a patent. A contractual agreement of this kind does not affect the national competence to revoke and grant intellectual property rights. As a result, the party to arbitration proceedings may continue to use the technology in the same way as if the intellectual property right in question had been declared null and void by a national court. This question could thus also be clarified in arbitration proceedings and comprehensive disputes about commercial intellectual property rights be settled without fuss and without negative press.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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