Introduction and Overview
Arbitration related to trademark and patent issues plays an important role in agreements such as licensing, technology transfer, joint venture agreements etc.
Arbitration proceedings are, in almost all cases, related to a contractual relationship in which the parties had previously agreed to arbitration.
IP infringement issues may therefore arise either in the form of a breach of contractual duties or as a tort, not covered by the specific agreement that includes the arbitration clause.
National courts as well as arbitration courts may be involved in the same dispute, the first for preliminary injunctive relief, the latter – or some-times even both – in parallel ordinary infringement proceedings. This may cause challenging situations, both for courts, arbitral tribunals and parties alike.
Today, most arbitration is “institutionalised arbitration”, i.e. the parties agreed to arbitrate any dispute under specific rules provided by an administrative body or arbitration institution, such as the WIPO Arbitration Rules, the ICC Arbitration Rules or the Swiss Arbitration Rules.
The arbitration proceedings are then based on said rules.
It may be one of the major advantages of arbitration that the proceedings up to a final and enforceable arbitral award should not take as long as national court proceedings in at least some countries. Some arbitration rules even provide for a timeline, which is to be observed by the tribunal.
Moreover, appeal to higher court instances may be severely limited, which may be an advantage from a pure perspective of timing.
Is arbitration suitable for all disputes?
Most national jurisdictions consider IP infringement disputes to be arbitrable.
Do national courts have exclusive jurisdiction in patent validity matters?
Most jurisdictions consider the issue of patent validity to be a matter of exclusive national sovereignty. This is why most national laws or case law do not allow the enforcement of arbitral awards, which declare a patent to be invalid (exceptions are e.g. Belgium and Switzerland).
Arbitral Tribunals may avoid this pitfall by obliging the patent owner to withdraw his patent from the respective patent registries and/or forbidding the inter partes enforcement of a patent (considered to be invalid by the arbitral tribunal) against the alleged infringer.
Jurisdiction of Arbitral Tribunals in infringement matters
IP infringement questions, especially when related to a contract containing an arbitration clause, are generally suitable for arbitration.
There are disputes where both national courts and arbitral tribunals are called upon by either party to decide an issue. This is not a problem, as long as the issues at stake are clearly different, e.g. if a national court is called to issue provisional measures only, and the arbitral tribunal is called to decide the case on the merits.
It becomes more challenging, if both courts are called by one of the two (or more) parties to decide on the same issues. The national court as well as the arbitral tribunal will then have to decide whether the case filed is within their jurisdiction.
Legal basis - Applicable Substantive and Procedural Laws
If no choice of law is made, challenging questions of international private law (law on code of conflicts) may have to be resolved in the arbitration dispute.
Contractual rights and obligations are generally at the parties’ discretion to decide which substantive law applies. It may be important in patent or trademark disputes, however, to keep in mind that some national laws may have special rules when it comes to formal legal requirements relating to the patent or trademark registry etc., which are not at the disposition of the parties.
If the parties agreed on some institutionalised arbitration, the procedural laws are generally clear and can further be clarified by the arbitral tribunal in the course of setting out the process. Often, the parties can be brought to agree on the IBA Rules on the Taking of Evidence in International Arbitration or further clarification is obtained by making reference to the UNCITRAL Model Law on International Commercial Arbitration.
Generally speaking, on the one hand, arbitration proceedings are more costly than national court proceedings in civil law countries. On the other hand, arbitration may involve less cost intensive discovery proceedings than any US proceeding. Moreover, lack of appeal possibilities may also have a cost reducing effect when compared to any national proceedings with one or two higher court instances.
Most European arbitration rules provide for reasonable attorney fee compensation for the prevailing party, which generally covers the actual and full attorney fees (which is often not the case in national litigation). Additionally, the losing party may have to bear the court costs.
Most nations worldwide are member states of the so-called New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.
In many states, it might therefore be “easier” to enforce an arbitral award with the help of a local national enforcement agency (mostly courts), rather than to enforce a national court judgement, which is foreign to the country where enforcement is sought. The contracting parties to the New York Convention have to recognize arbitral awards issued in another (contracting) state as binding and to enforce them in accordance with their rules of procedure. There are only very limited grounds that can be invoked against the enforcement of an award.
Nexus to UPC Agreement and Rules
The UPC agreement makes provision for the establishment of a patent mediation and arbitration centre in Ljubljana and Lisbon (Article 35 UPCA). The rules of procedure further emphasise that the court is required to explore with the parties the possibility of a settlement, including through mediation and arbitration, using the facilities of the patent mediation and arbitration centre in Ljubljana and Lisbon (Rule 11 UPC ROP).