The World Intellectual Property Organisation (WIPO) in cooperation with the Intellectual Property Department of the Government of Hong Kong, Special Administrative Region, People's Republic of China
Hong Kong, June 1 to 3, 1998
LITIGATION AND ALTERNATIVE DISPUTE RESOLUTION FOR EFFECTIVE ENFORCEMENT.
By Pravin Anand - Anand & Anand
1. INTRODUCTION
1.1 For a thousand years Europe has known trial by ordeal where innocence was determined by a mere ability to perform cruel tests such as walking barefoot on burning coal. Trial by battle was the next alternate where kings sent out their armies or champions and the winner would represent the truth. About 700 years ago a more humane form of dispute resolution emerged - trial by litigation.
1.2 In a world of cloning, lunar motels and cyberspace, does this make litigation old and obsolete or does it make it robust and time tested? The answer is probably a mix of both.
2. LITIGATION AND ADR
2.1 ADR means alternate to bringing a law suit although dispute resolution processes like Arbitration, mediation and mini trials may not necessarily be "alternate" to litigation. They are all tools available to a lawyer who can use them wisely to achieve creative solutions.
2.2 To define the terms in a simple sense:-
- Negotiation is when the parties to a dispute talk it out.
- Arbitration is when parties choose to have a neutral give a binding decision in relation to their dispute.
- Expedited arbitration is another form of arbitration where the rules give the arbitrator broader powers to speed up the proceedings.
- Mediation involves a neutral person who facilitates negotiations by helping the parties understand their interests in an informal, non confrontational way. The mediator cannot impose a settlement. This is particularly good where parties want to continue with their business relationship.
- Mini trials are variations where parties present an abbreviated version of their case to neutrals for evaluation.
- Mediation and default arbitration, is a combined procedure where the parties agree to refer their disputes to binding arbitration if their mediation efforts are not successful.
- Expert determination is a system by which parties may agree that an expert's decision on some point, such as similarity of two computer programmes, may bind them.
2.3 ADR is consensual in nature which means that there must be an agreement between parties either before the dispute has arisen or even during litigation to have their dispute decided by a private forum.
The agreement provides parties with a lot of flexibility in terms of the procedure that they wish to apply, the law, the forum, language etc.
2.4 The crucial issue is why "ADR" or why "Arbitration" when there is a low cost state funded court system available as opposed to arbitration where parties have to pay the cost of the arbitrator which in some cases like ICC arbitration may be commensurate to the amount involved.
The advantages of arbitration are many:-
a) The most important reason is "time". In this world of Moores Law where computer costs half every 18 months because of doubling of computer speed, litigation life measured in years is totally unacceptable to industry. But then Arbitration may also take long time and for this reason the rules of the WIPO Centre on expedited arbitration are quite relevant.
b) On the whole, Arbitration costs lesser than litigation because of its final nature while in litigation appeals may rapidly multiply cost.
c) Another great advantage of Arbitration is that you can select your own arbitrator. This is particularly important in Patent, Trade Secret and High Technology cases where you can get an expert in the filed of your choice. You can always have a technical advisor in court proceedings but eventually the judge must understand the technology in order to apply it and even if he does so, he may lack the proper mind set to decide the matter.
d) Confidentiality is preserved so the fact that the proprietor of an Intellectual Property settled for a "lesser sum" with one infringer would remain a secret and not affect all other cases.
e) The International Character of IP Rights has made arbitration more attractive than multinational court litigation.
For example, Domain name cases where some consent has been obtained as a condition of registration are best decided by mediation or arbitration. Litigation can fail due to complex jurisdictional issues or there may be contradictory judgements in different courts.
f) The other great advantage of Arbitration is that Arbitral Awards are enforceable in many countries under the New York Convention (115 countries) while court judgements are not.
g) The fact that a Party can choose its own judge, forum and choice of law makes it more business like. Parties do not like to suffer the severe disadvantage of suing in another country with a totally alien legal culture. It is perceived that foreign courts do not understand foreign concepts and foreign ways of doing things.
h) Another reason which favours ADR as a whole is that the ongoing relationship between parties may be embittered and destroyed by litigation while it is likely to be preserved in the case of ADR.
2.5 Having said this, let us see the advantages of litigation:
a) There is a perception that agreeing to ADR would be seen as a sign of weakness. Consequently, where there is wilful infringement and a need to send a strong signal that nothing less than full victory would do - Litigation is a preferred option.
b) The precedent value of Litigation is its main strength . Thus in the software industry in USA there has been a lot of Thematic Litigation to determine fundamental paradigms that may define competition in future. The "look and feel" cases and the "Abstraction - Filtration - Comparison" test are examples of this.
As opposed to this, Arbitration awards are not published and have no precedent value. The converse argument is that if the decision is a negative one it could act as a road map for infringers.
c) Judges are subjected to the discipline of statutory procedural rules, Evidence Act and a structure of appeals. As opposed to this, arbitrators enjoy a lot more freedom and in certain situations, this may not be desirable.
d) Another great strength of litigation is the fact that the courts are great at granting interim orders. In some countries, arbitrators do not have this power and even if they do, it leads to practical problems. If an arbitrator refuses interim relief because he does not wish to prejudge the issue, courts are reluctant to grant relief on the ground that a competent tribunal is seized with the matter and if it has refused the relief there must be a good reason for doing so.
Considering that in some countries interim relief of injunction, Anton Piller Orders, Mareva Injunctions and Norwich Pharmacal Orders are practically the main thing (with little or no possibility of damages being granted) this can be a major problem.
The time lost in appointing an arbitrator may be too late where immediate relief is desired. The WIPO Supplementary Emergency Interim Relief Rules provide for an emergency arbitrator available on 24 hours notice who can convene ex parte hearings and make ex parte awards.
2.6 Some of the main issues relating to Arbitration are as follows:-
a) An award, unlike an IP right is in personam and can only bind the parties. Under the laws of some countries a distinction is made between disputes relating to the validity of an IP right and disputes relating to existence or ownership of the right. It is felt that disputes of the latter kind are good subject matter for arbitration while arbitration may not apply where the grant of a registration is involved because these are acts of a sovereign power. It is only the sovereign power which can adjudicate regarding validity and adjudication and the adjudication by a private tribunal simply has no effect.
In recent years most countries have liberalised their thinking. Some countries like France and Japan qualify arbitrability on public policy grounds permitting only those matters to be referred which can be lawfully compromised by the parties. Others like the US have a more liberal approach and disputes with regard to ownership, validity and infringement of patents and trade marks can be arbitrated.
b) Enforceability of awards is another issue as the steps that need to be taken vary from country to country. In some countries like USA, Switzerland and India, an award must be filed with the court and a judgement would make the award a rule of the court. In countries like England and China there is no need to file the award or register it.
2.7 Mediation is quite successful in trade mark conflicts where creative business driven solutions are possible such as addition of a House Mark or slight change in the mark or confining the mark to a different trade channel.
A variation to litigation is an expedited trial procedure known in India. The judge can persuade the defendant at the plaintiffs' suggestion to record evidence before a court appointed official. Normal trial may take five years but this procedure is known to reduce the period to as short a term as six months to one year. Once evidence is recorded, it is the court who decides the dispute but effectively the bottleneck due to the courts cluttered diary is overcome.
In a court proceedings where the plaintiff seeks an Anton Piller Order, a court official or independent solicitor can be appointed to give a neutral fact finding on some issue. The report of the neutral is almost impregnable and often catalyses a settlement.
3. CONCLUSION
Any person involved in the enforcement of IP rights must familiarise himself with these invaluable tools of Arbitration and Mediation.
It is ideal to include a multi step process in contracts, so that there is a "back up" technique if one fails to achieve the desired results.
The message is best put in the words of Abraham Lincoln " "You should discourage litigation. You should persuade your neighbours to compromise whenever you can. You should point out to them that a nominal winner is often a loser - in fees, in expenses and it is a waste of time".
The emphasis on the adversarial approach should be diluted as justice thrives best in a system founded on compromise, negotiation and mutual understanding rather than hostility and acrimony.
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