Scope Of ADR In Disputes Relating To Intellectual Property

Intellectual Property (IP) is a highly valuable commodity for any corporate entity, especially in the era of increasing dependence on technology and the need to protect intellectual property rights. On most occasions, disputes relating to IP involve intricate issues, high stakes of the parties and hence, delays in the settlement of conflicts are highly undesirable. However, Intellectual property (IP) rights are only as strong as the means to enforce them.

Alternative Dispute Resolution (ADR) proceedings present many advantages for the settlement of intellectual property matters. Mediation, notably, seems like an attractive option for parties that place a premium on the preservation or improvement of their ties, seek to retain control over the dispute settlement process (party autonomy), value confidentiality, or want to arrive at the settlement quickly without losing out on their respective goodwill. Parties to an arrangement involving the utilization of intellectual property often share these goals when a dispute arises. A few examples of such arrangements include licenses pertaining patent, know-how and trademark, computer contracts, distribution contracts, joint ventures pertaining to research and developments, sports marketing agreements, film contracts, et al.

As far as arbitration is concerned, if we go by recent judgements, both from international and national courts, then it would not be erroneous to say that IP battles are protracted, expensive (with exorbitant damages being awarded), complex, considering the intangibleness of the properties in dispute and the nuances of the technology, as well as requiring domain knowledge in settling issues. Imperatively, IP disputes have a number of typical issues like criticality of time in view of the shelf life of products (read software) or in fact the life of the intellectual property itself (as in patents), applicability of the exclusive rights and entitlements in relation to grants, etc. that may be more efficiently addressed by arbitration than by court litigation.

It is observed that the long duration and high cost of IP litigation is primarily due to the prolonged periods and costs of discovery pertaining to tackling complex technical issues as well as educating both the bar and the bench on the same adequately to comprehend the case; not to mention the additional costs of technical and financial experts. These issues can be efficiently handled and avoided using ADR mechanisms as parties have the leverage to appoint the arbitrators, mediators or other experts to resolve their matter. Further, ADR can be neutral to the law, language and institutional culture of the parties. It can thus eliminate any home court advantage that one of the parties might otherwise enjoy in the context of court litigation, where familiarity with the applicable law and local processes can offer significant strategic advantages. A ratio supporting arbitration in patent disputes was laid out in Promega Corporation v. Life Technologies Corporation IP LLC 773 F. 3d. 1338 , where the United States Court of Appeals, Federal Circuit, confirmed the opinion of the District Court to compel arbitration between the Appellant and the Respondent with respect to a dispute arising between the parties out of a Patent licensing agreement. Previously, federal courts had ruled that private settlements (arbitration) of patent disputes were unenforceable because they were contrary to public policy.

The argument against the applicability of the ADR mechanisms in the IP dispute resolution stems from two major premises:

  1. Territoriality of IP Laws: IP Laws are essentially territorial in nature, hence, when issues pertaining to intellectual properties like patents which are linked with validity or infringement will come under the scrutiny, the courts may refuse to enforce a foreign award based on a foreign law as being contrary to public policy and Indian interests.
  2. No precedent value: This is the biggest roadblock in the way of using ADR-IPR interface as the decision arising out of the ADR mechanism will not set a public legal precedent. Hence, for the party seeking to obtain generally binding decision over a particular claim will not have adequate incentive to go through the ADR route. Moreover, court documents have a high evidentiary value with regards to priority dates (in patents) and “early to use” argument in Trademarks.

In addition to these, consent requirement in ADR makes it unsuitable in disputes between non-cooperating parties.

In the Indian scenario, though with the enactment of the Arbitration and Conciliation Act of 1996 (based on the UNCITRAL Model Laws of Arbitration) and in departing from the earlier, outdated Act of 1940, India has clearly taken the right step in the right direction, as a practice to be adopted, ‘arbitration’ is nascent, still evolving, and yet to gain a foothold in India. Woefully, the spirit and the philosophy behind the conception of the law is missing in its implementation despite the new beginning, as the system seems plagued with loopholes and shortcomings for not having adequately developed to be the quick and cost-effective mechanism for resolution of commercial disputes as is supposed to be. Though section 103 of the The Patents Act, 1970 (India) allows the Court to refer any question of patent validity to arbitration, the said Act and the Arbitration and Conciliation Act are silent on the enforceability of arbitral awards for infringement or validity.

To conclude, it can be said that the potential of mediation and arbitration for addressing IP disputes has not been fully realized as most IP owners and IP lawyers still rely on traditional means of court litigation. However, the perceptions have started to change due to a number of related developments that have taken place over the last ten years. Though it is slightly tricky and less attractive to resort to ADR for matters pertaining to validity and infringement of IP under the current legal framework, the disputes arising out of ancillary arrangements like licenses, distribution contracts, etc. can be efficiently addressed through ADR.


-Ikshit Mittal, Gujarat National Law University













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