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ROLES OF ARBITRATION IN INTERNATIONAL INTELLECTUAL

PROPERTY DISPUTE RESOLUTION

















ADAM RICHARD TANIELIAN







A DISSERTATION PRESENTED TO RAMKHAMHAENG UNIVERSITY
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF DOCTOR OF LAWS
2013
COPYRIGHTED BY RAMKHAMHAENG UNIVERSITY
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Dissertation Title Roles of Arbitration in International Intellectual Property
Dispute Resolution
Students Name Mr. Adam Richard Tanielian
Field of Study Doctor of Laws
Advisory Committee
Chairperson
(Dr. Thomas Towey)
Member
(Dr. Scott Droege)
Member
(Dr. Piboon Puriveth)

Ramkhamhaeng University approved this dissertation in partial fulfillment of
the requirements for the degree of Doctor of Laws.
Dean of Graduate School
()
Director of the Institute of
(Mr. Satin Soonthornpan) International Studies
Examination Committee
Chairperson
(Dr. Watchara Neitivanich)
Member
(Dr. Thepparat Phimolsathien)
... Member
(Assoc. Prof. Dr. Thawatchai Suvanpanich)
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ABSTRACT
Dissertation Title Roles of Arbitration in International Intellectual Property
Dispute Resolution
Students Name Mr. Adam Richard Tanielian
Degree Sought Doctor of Laws (English Program)
Academic Year 2013
Advisory Committee
1. Dr. Thomas Towey Chairperson
2. Dr. Scott Droege
3. Dr. Piboon Puriveth
This dissertation focuses on intellectual property disputes with a dual
aim of proposing ways to improve time and cost efficiencies in existing
dispute resolution processes, and to develop new systems. Litigation and
arbitration are reviewed for their strengths and weaknesses. Arbitration has
weaknesses including the mutual consent requirement, lack of appeal, absence
of a system of case law, and jurisdictional variations relating to arbitrability of
certain IP disputes. However, advantages of arbitration such as
confidentiality, international applicability under the New York Convention,
limited discovery, and use of specialized tribunals support a recommendation
of arbitration as the better method.
Multijurisdictional and internet disputes are highlighted. Comparative
legal review and analysis is made, primarily pertaining Canada and the USA
in order to clarify issues within NAFTA. Comparison of American and
Canadian case law and statutes on patents, trademarks, copyrights, licensing,
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and trade secrets show similarities and differences between the nations. t.
/ and /. / differences between nations like Canada and the USA make
arbitration more appealing than litigation.
National policies strongly favor arbitration. Despite minor differences,
the Federal Arbitration Act is considered comparable to UNCITRAL Model
Law implementing statutes in practice. Recognition and enforcement of
foreign and domestic arbitral awards is available, and courts are most often
unwilling to disturb awards rendered by tribunals.
Rules of arbitration from UNCITRAL, LCIA, ICC, and WIPO are
reviewed. Court cases, primarily from the USA and Canada, show
interconnectedness between the FAA, Model Law, and rules of arbitration.
WIPO is determined to offer the best services for IP disputes, although the
degree of control over the arbitration process allows parties to tailor any
proceedings to fit their particular needs.
Lack of real remedies to internet piracy makes online dispute resolution
a key aspect of the bright future of arbitration, which is more powerful than
litigation in international disputes. Recommendations include that internet
infringement disputes be referred to compulsory arbitration under a new
UDRP-style system. Arbitration is recommended for the gamut of IP disputes.
Parties to contracts are recommended to include clear and comprehensive
provisions in contractual clauses. The continued evolution of private
international trade dispute resolution is supported.

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NAFTA






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(Model Law) UNCITRAL



UNCITRAL LCIA ICC WIPO

(FAA)
WIPO








UDRP
(IP)


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ACKNOWLEDGEMENTS

A multitude of people were instrumental in bringing this project to life.
Firstly, my teachers and professors provided instruction, guidance and
support through many years of school, both at the Institute of International
Studies at Ramkhamhaeng and in Michigan. I am grateful to all of them.
Thanks go to Dr. Xin Ren, Hon. Dorian Damoorgian, Dr. Belay
Seyoum, Professors Joey Cano and Miguel Orta, whose range of knowledge
and experience in fields of law were invaluable in the classroom and through
stages of the research leading to this dissertation. Very special thanks go to
Dr. Thomas Towey and Dr. Scott Droege for their time and efforts which
came at crucial times. Dr. Piboon Puriveth also deserves special credit both as
an administrator and as a faculty member for his support of my efforts toward
an LLD without a prior law degree. To the staff and administration at
Ramkhamhaeng University and the Institute of International Studies, I offer
my sincerest respect and humblest thanks for the opportunity to benefit from
English language education in Thailand, where I found high (enough) quality
at low (enough) cost was not impossible.
Many people in my larger-than-average family deserve recognition for
their roles in my education. My mother, Pam Tanielian, the former legal
secretary, taught me how to type and how hold an opinion under criticism,
both of which were useful overseas in the law school. Rick Tanielian, my dad,
instilled in me senses of integrity, commitment, and composure, all of which
helped me get through many difficult moments. Throughout semesters in the
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LLD English program, I could not help but think what my sister, Hon. Tina
Brooks-Green, might think or say, and so I acknowledge her presence in mind
or spirit. I would not have likely afforded the tuition fees had our father Ernie
Brooks not passed away in 2007, only thereafter contributing my education.
Sadly, Ernie was unable to provide support and assistance in life, but his
promise of an entry level legal position at Brooks and Kushman upon earning
a first degree in law provided me with motivation and inspiration.
At the time of completion of this dissertation, it appears the firm is not
compelled to honor the promise of its deceased founder and president.
Nonetheless, I extend thanks to the firm in both Southfield and Los Angeles
for the modest amount of attention I was given while expressing IP and other
firm-related ideas via email and voicemail during the research process,
knowing that we all deal with loss differently.
This project would not have been possible without access to and
freedom of information, so I must express thanks to pioneers in various fields
worldwide including law, politics, engineering and sciences. I feel a bit lucky
for my rights to seek, receive, and impart information regardless of frontiers. I
hope to support and carry on the great traditions of innovation and
advancement throughout my professional life so that others in the future may
also benefit from globalized dissemination of knowledge online and in print.
Lastly, to my wife, Sangthong Tanielian, I am eternally grateful. For
her support, reverence, appreciation, and consistent tolerance, especially
around tuition payment times, words can scarcely express my feelings.
Adam Richard Tanielian
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TABLE OF CONTENTS
Page
ABSTRACT (ENGLISH) .......................................................................... iii
ABSTRACT (THAI) .................................................................................. v
ACKNOWLEDGEMENTS.......................................................................... v
LIST OF TABLES ..................................................................................... xvii
LIST OF ABBREVIATIONS .................................................................... xviii
Chapter
1 INTRODUCTION .............................................................................. 1
Great Changes in the IP Economy .................................................... 1
IP Shareholders and Stakeholders ..................................................... 2
Legal Problems ................................................................................. 3
Proposed Solutions ........................................................................... 4
Prior Research on the Subject ........................................................... 5
Design of Research ........................................................................... 6
Value and Originality of the Research .............................................. 7
Research Methods ............................................................................ 8
Limitations of the Study ................................................................... 10
2 CURRENT STATUS OF IP DISPUTES ............................................ 13
Importance of IP ............................................................................... 14
Collective and Individual Benefit ..................................................... 16
International Intellectual Property System ........................................ 16
Movement toward Harmonization ............................................... 17
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Protection and Enforcement ......................................................... 18
Competing Agendas .................................................................... 18
Ambiguity or Clarity of Treaty Provisions .................................. 20
Function of International Law ..................................................... 22
3 REVIEW OF IP LAWSUITS ............................................................. 23
Patents .............................................................................................. 25
US Doctrine of Equivalents ......................................................... 26
Canadian Purposive Approach ..................................................... 26
Claim Construction ...................................................................... 29
Markman Hearings ...................................................................... 31
Discovery .................................................................................... 32
Antitrust ....................................................................................... 32
Remedies ..................................................................................... 32
Trademarks ....................................................................................... 34
Registrability ............................................................................... 34
Non-traditional Marks ................................................................. 37
Trade Dress .................................................................................. 38
Trans-Jurisdictional ..................................................................... 37
Abandonment .............................................................................. 40
Infringement ................................................................................ 41
Counterfeiting .............................................................................. 42
Domain Names ............................................................................ 43
Copyright .......................................................................................... 44
Rights Conferred ......................................................................... 42
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Registration ................................................................................. 43
Infringement ................................................................................ 44
Fair Use and Fair Dealing ............................................................ 45
Downloading as a Public Performance ........................................ 51
Service Provider Liability ............................................................ 52
Safe Harbor in USA ..................................................................... 53
International Internet Copyright Infringement ............................. 54
Outrageous Penalties ................................................................... 54
Nature of the User .................................................................... 53
Online Storage ............................................................................. 55
Reproduction and Distribution ..................................................... 56
Profit Motives .............................................................................. 57
Divided Claims ............................................................................ 62
Conflicts of Interest ..................................................................... 63
Licensing .......................................................................................... 64
Reasons for Licensing ................................................................. 64
Designing a Licensing Agreement ............................................... 65
Generic Disputes ......................................................................... 66
Compulsory Licensing of Pharmaceuticals .................................. 64
Challenge to Validity by Licensee ............................................... 65
Joint Ownership ........................................................................... 65
Good Faith and Fair Dealing ....................................................... 66
Trade Secrets .................................................................................... 68
Nature and Definition .................................................................. 68
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Jurisdiction .................................................................................. 75
Civil Remedies ............................................................................ 77
4 ARBITRATION v. LITIGATION: LITERATURE AND CASE ....... 74
Advantages of Arbitration ................................................................ 74
Time and Money .......................................................................... 75
American Discovery! ................................................................... 76
Confidentiality ............................................................................. 79
Specialized Tribunal .................................................................... 80
International Scope ...................................................................... 81
Complexity of Multi-party and Multi-jurisdictional Claims ........ 81
Jurisdiction .................................................................................. 85
Options for Private Organizations under International Law......... 87
Recognition and Enforcement...................................................... 89
Cases Pertaining to Recognition and Enforcement ...................... 91
Disadvantages of Arbitration ............................................................ 92
Mutual Consent Requirement ...................................................... 92
No Appeal.................................................................................... 93
Arbitrability Concerns ................................................................. 94
Arbitration Lacks a Case Law System ......................................... 100
5 ARBITRATION LAW ....................................................................... 102
UNCITRAL Model Law on International Commercial Arbitration .. 102
Arbitration Law in Canada and the United States ............................. 104
Importance of Case Law .............................................................. 105
Availability of Cases ................................................................... 106
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United States Case Law .................................................................... 107
Origins of the FAA ...................................................................... 107
Broad Interpretation ..................................................................... 108
Preemptive ................................................................................... 109
Compelling Arbitration ................................................................ 110
Separability .................................................................................. 112
Kompetenz-Kompetenz ............................................................... 113
Employment Contracts ................................................................ 114
Class Action Arbitration .............................................................. 115
Recognition & Enforcement or Refusal Thereof ......................... 117
Arbitrability ................................................................................. 123
Inconsistencies in American Courts ............................................. 126
Canadian Case Law .......................................................................... 128
Before the Model Law ................................................................. 128
Compelling Arbitration ................................................................ 130
Separability & Kompetenz-Kompetenz ....................................... 132
Employment Contracts ................................................................ 133
Class Action Arbitration .............................................................. 133
Post-Award Court Involvement ................................................... 137
Arbitrability of Validity ............................................................... 141
6 RULES OF ARBITRATION ............................................................. 139
Request for or Notice of Arbitration ................................................. 140
Answer or Response to the Request for or Notice of Arbitration ...... 141
Case Pertaining to the Notice and Response ................................ 142
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Appointment, Number and Nationality of Arbitrators ...................... 143
Cases Pertaining to the Composition of the Tribunal ................... 144
Seat, Language, and Applicable Rules of Law ................................. 145
Case Pertaining to the Seat, Language, and Rules of Law ........... 146
Statements of Claims, Case and Defense .......................................... 147
Case Pertaining to Statements ...................................................... 149
Challenge of Arbitrators, Revocation and Replacement Thereof ...... 149
Cases Pertaining to Challenge and Replacement of Arbitrators ... 150
Impartiality ....................................................................................... 151
Cases Pertaining to Impartiality ................................................... 152
Contests to Jurisdiction and Validity of Arbitral Agreement ............ 153
Cases Pertaining to Jurisdiction and Validity of the Agreement .. 153
Rules on Evidence, Experts and Witnesses ....................................... 155
Cases Pertaining to Taking Evidence, Experts and Witnesses ..... 156
Conduct of Hearings and Closure of Proceedings............................. 157
Cases Pertaining to Hearings and Closing Proceedings ............... 159
Interim Measures .............................................................................. 159
Cases Pertaining to Interim Measures .......................................... 160
Awards ............................................................................................. 161
Cases Pertaining to the Award ..................................................... 162
Post-Award ....................................................................................... 163
Cases Pertaining to Post-Award Actions ..................................... 164
Costs and Fees .................................................................................. 165
Case Pertaining to Costs and Fees ............................................... 166
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Confidentiality .................................................................................. 166
ICC Rules .................................................................................... 167
LCIA Rules .................................................................................. 167
UNCITRAL Rules ....................................................................... 168
WIPO Rules ................................................................................. 168
7 ODR AND THE FUTURE OF ARBITRATION ............................... 170
ICC DOCDEX and NetCase ............................................................. 171
WIPO ODR ...................................................................................... 173
UDRP Cases ..................................................................................... 173
Future of ODR .................................................................................. 176
8 DISCUSSION .................................................................................... 178
Advantage: Arbitration ..................................................................... 178
Discretion ......................................................................................... 179
Subjectivity ....................................................................................... 181
Disharmony ...................................................................................... 184
Specialization ................................................................................... 186
Preserving the Relationship .............................................................. 187
9 CONCLUSIONS ................................................................................ 188
Recommendations ............................................................................ 190
Increase Cooperation and Uniformity .......................................... 192
Contemplate IP Arbitration in Contracts ...................................... 193
Take a New Approach to Disputes .............................................. 194
Focus on Commercial and Organizational Infringers Online ....... 199
Compulsory ODR for Internet Infringement ................................ 196
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International Class Action Arbitration ......................................... 197
Piracy and Counterfeiting in NAFTA .......................................... 198
Harmonize US State and Federal Districts ................................... 199
Further Study .................................................................................... 201
APPENDIX ................................................................................................ 204
UNCITRAL Model Arbitration Clause ............................................ 205
WIPO Model Arbitration Clause ...................................................... 205
UNCITRAL Model Statements of Independence ............................. 206
REFERENCES ........................................................................................... 207
VITAE ........................................................................................................ 246














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LIST OF TABLES
Table Page
1 Articles Relevant to the Request or Notice ............................................. 141
2 Articles Relevant to the Response .......................................................... 142
3 Articles Relevant to the Composition of the Tribunal ............................ 144
4 Articles Relevant to the Seat, Language, and Rules of Law ................... 146
5 Articles Relevant to Statements .............................................................. 149
6 Articles Relevant to Challenge and Replacement of Arbitrators ............ 150
7 Articles Relevant to Impartiality ............................................................ 151
8 Articles Relevant to Jurisdiction and Validity of the Agreement ............ 153
9 Articles Relevant to Taking Evidence, Experts and Witnesses ............... 155
10 Articles Relevant to Hearings and Closing Proceedings ....................... 158
11 Articles Relevant to Interim Measures ................................................. 159
12 Articles Relevant to the Award ............................................................. 161
Table 13 Articles Relevant to Post-Award Actions ................................... 159
Table 14 Articles Relevant to Costs and Fees ............................................ 160
Table 15 Articles Relevant to Confidentiality ........................................... 163




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LIST OF ABBREVIATIONS

AAA American Arbitration Association
ABA American Bar Association
ACPA Anti-cybersquatting Consumer Protection Act
ACTA Anti-Counterfeiting Trade Agreement
ADR Alternative Dispute Resolution
APA American Psychological Association
BRICS Brazil, Russia, India, China, South Africa
BPCPA British Columbia Business Practices and Consumer
Protection Act
CA Canada
CIA Central Intelligence Agency
CIPO Canadian Intellectual Property Office
CLOUT Case Law on UNICTRAL Texts
DMCA Digital Millennium Copyright Act
DOCDEX Documentary Credit Dispute Resolution Expertise
EPO European Patent Office
EU European Union
FAA Federal Arbitration Act
FBI Federal Bureau of Investigation
FRCP Federal Rules of Civil Procedure
FRE Federal Rules of Evidence
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GDP Gross Domestic Product
IBA International Bar Association
ICANN Internet Corporation for Assigned Names and Numbers
ICC International Chamber of Commerce
ICJ International Court of Justice
ICSID International Centre for Settlement of Investment
Disputes
IP Intellectual Property
IPIC Intellectual Property Institute of Canada
IPR Intellectual Property Right
ISP Internet Service Provider
JPO Japan Patent Office
LCIA London Court of International Arbitration
MAL Model Law on International Commercial Arbitration
MPAA Motion Picture Association of America
NABA North American Broadcasters Association
NAFTA North American Free Trade Agreement
NGO Non-Governmental Organization
NY New York
ODR Online Dispute Resolution
OECD Organisation for Economic Co-operation and
Development
P2P Peer-to-Peer
PC Personal Computer
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PCA Permanent Court of Arbitration
PRC Peoples Republic of China
PWC PricewaterhouseCoopers
R&D Research & Development
RAM Random Access Memory
RIAA Recording Industry Association of America
ROC Republic of China (Taiwan)
S&P Standard & Poors
SCC Supreme Court of Canada
SEC Securities and Exchange Commission
SME Small and Medium Enterprise
TRIPS Trade-Related Aspects of Intellectual Property Rights
UDRP Uniform Domain Name Dispute Resolution Policy
UK United Kingdom
UKIPO United Kingdom Intellectual Property Office
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
UNCTAD United Nations Conference on Trade and Development
UNECE United Nations Economic Commission for Europe
UN/CEFACT United Nations Centre for Trade Facilitation and
Electronic Business
US United States
USA United States of America
USC United States Code
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USESA United States Economics and Statistics Administration
USPTO United States Patent and Trademark Office
WEF World Economic Forum
WIPO World Intellectual Property Organization
WTO World Trade Organization


CHAPTER 1
INTRODUCTION
Intellectual property is of high and increasing importance to all
economies
1
. IP law, while relatively new when compared to other branches of
law, has gained acceptance among nations, and IP has become central to
international trade diplomacy. Multilateral IP protection and enforcement
treaties have been some of the easiest agreements to gain ratifications in
numbers sufficient for entries into force because IP is not generally a
controversial or excessively politicized topic. Nations can usually agree upon
the inherent value of IP and in doing so, those nations assist individuals in
bringing about the greatest changes of our world.

Great Changes in the IP Economy

In the latter half of the 20
th
century, technological innovations
surpassed the expectations of many of the worlds foremost scientific and
economic experts, and IP gained new and broader importance. While patent
applicant demographics were once dominated by mechanical engineers and
chemists, post-WWII electronics, business methods, genetic engineering, and
integrated sciences opened up vast new frontiers in research and development.
The changing face of the car-guy between the 1960s and early 21
st
century

1
Supplementary data are available at the WIPO website (http://www.wipo.int/ipstats/en/).
2

is a perfect example of how times and technologies changed. Products and
components became smaller, faster, more efficient and far more difficult for
laypeople to understand or service. In general, laws remained more constant
than technology, but legal practitioners in the patents trade had to acquire
entirely new skills to handle the great challenge of understanding details of
technologies involved in 21
st
century disputes.
Population growth, expansion of trade, the public listing and cross-
listing of tens of thousands of companies led to massive branding projects
which resulted in more than six-fold growth in the number of trademark
registrations worldwide between 1985 and 2010, according to the World
Intellectual Property Organization (WIPO, 2011). Electronic media, increased
access to education, investment in arts, literature and entertainment created
new and growing markets for copyrights. Increased volume of IP in turn
necessitated increased numbers of licenses. Broader, more voluminous trade
worldwide enhanced the importance of technology-transfer, trade secret and
knowhow protection. The IP economy continues to grow in size and value.

IP Shareholders and Stakeholders

Patents provide the biggest challenge for courts, juries and litigants in
the IP field, but copyright, trademark, licensing and trade secrets law require
significant specialization too. IP law may be more obscure than other areas of
law because it is not easily sensationalized in the media nor often the subject
of dinner conversation, yet IP law incorporates more institutions and
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disciplines than other fields science, technology, investment finance, every
aspect of multinational corporations and IP law transcends boundaries more
than most other civil and criminal legal matters.
Virtually everybody who consumes any product or service is a
beneficiary of intellectual property rights and a stakeholder in a domestic and
international IP regime. Even though IPRs most often have limited lifespans
under statute, the consuming public may benefit indefinitely from market
expansion, economic growth and activity, and virtually endless product and
service developments. IP is a cornerstone of world trade, which is the
backbone of the local and national economy. Without IPRs, our lives would
be far less convenient; our communities would not be as healthy, safe, clean,
or prosperous; our systems of government and education would be of far
lower quality; we would not be as connected, nor would be able to
communicate as easily and quickly; our banking and financial systems would
be more unstable and less capable of recovery and growth. In sum, a world
without IPRs is generally undesirable to the majority of people.

Legal Problems

IP disputes are common and increasing in frequency, yet domestic
courts have been heavily criticized for, among other things, their low time and
cost efficiency and low skill in IP subject matter (Allgeyer, 2007; Eiland,
2012; Rader, 2011). International disputes are more common than ever before,
but sovereign nations have yet to fully harmonize laws despite a large number
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of multilateral treaties that were designed at least partially to make
international dispute resolution simpler.
Domestic litigation is often enough dissatisfactory for all parties to
disputes; litigating simultaneous claims in multiple nations is extremely
unattractive. Due to legal disparities between nations, parties to disputes
cannot use a singular litigation strategy in multiple jurisdictions.
Multijurisdictional litigation is costly and unpredictable. Variance in secular
court decisions is a common concern. Considering that court orders and
decisions are not generally extra-territorial in nature, parties are left with no
true international remedies via public courts.
Problems of jurisdiction are magnified in cases involving internet
infringement. The world online is largely a world without a binding law, and
without a universally accepted forum for dispute resolution for copyright
infringement. While rights are theoretically guaranteed under treaty and
statute, in practice there are no real remedies for injured parties in online
copyright disputes. A forum and process for binding dispute resolution is
needed for internet piracy cases.

Proposed Solutions

Considering the unappealing nature of international IP litigation, which
must be undertaken in multiple jurisdictions, arbitration appears to be an
attractive solution to the litigation dilemma, and may provide adequate
remedies for injured parties while also remaining reasonable to losing parties.
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Arbitration is considered an effective, binding form of dispute resolution
which has gained acceptance by courts and litigants worldwide(UNCTAD,
2003; Widd & Lundegard, 2010). International arbitral awards are recognized
and enforced in most states by treaty and statute. The ADR system needs to
grow and develop more to accommodate more diverse parties, and to resolve
more disputes faster and cheaper still. Enhanced use of traditional arbitration
is an obvious solution to various problems. Online dispute resolution should
also be expanded to facilitate more cases and provide real remedies for online
infringement.

Prior Research on the Subject

Comprehensive studies of IP ADR including comparisons of statute
and case law are in short supply. Most articles that address issues related to IP
arbitration focus primarily on patents, and the articles are generally in shorter
form, written for journals. Comparative law has recently gained wider
approval, and since the advent of the internet, comparative studies are more
practical but they are still in short supply compared to uni-jurisdictional
studies.
No singular lengthy comparison of Canadian and American IP law was
found during the literature and case law research, although numerous short-
form comparisons were available. Likewise, insufficient studies were found
referring to ODR or calling for expansion of the international arbitral system
to include online copyright infringement. Dissertations on arbitration were
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extremely rare, and none posited any vision for the future of online
arbitration.

Design of Research

In the following chapter, a brief overview of the international IP
economy and legal regime is provided. Following that are chapters containing
extensive literature and legal review. In chapter three is a thorough analysis
ofIP statutes and cases, mostly from the United States of America and
Canada. The aim of chapter three is first to give a basic overview of IP law, to
discover and assess similarities and differences in rights and decisions
between the United States and Canada. By establishing that there exist
significant differences between two friendly North American neighbors which
both share an English common law heritage, one can infer that a singular
litigation strategy is not available for international disputes, and thus that
arbitration is potentially attractive for resolution of such disputes.
Chapter four turns to analysis of arbitration versus litigation. Review
and analysis of literature and law help compare and contrast arbitration and
litigation. This chapter refers to case law and statutes on arbitration from the
US and Canada, among other jurisdictions. Arbitration laws from Canada and
the US are compared along with the UNCITRAL Model Law on International
Commercial Arbitration and FAA in chapter five. Model Law systems are
found compatible with the FAA system, which further supports a decision in
favor of arbitration and against litigation for international disputes.
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Chapter six is a comparison of arbitration rules from four prominent
authorities the ICC, the LCIA, UNCITRAL, and the WIPO Arbitration and
Mediation Centre. Court cases regarding specific rules are cited. All four
arbitral institutions are found to have similar procedures and rules, each
having unique strengths. WIPO is considered the best option for IP
arbitration.
Chapter seven provides a quick look at ODR. ICC and WIPO
experiences show ODR has great potential. UDRP cases bolster claims that
ODR is effective. The future of ODR is considered, and the door is left open
to imagine the larger possibilities of a system with compulsory international
jurisdiction for online piracy cases.
A discussion of arbitrations advantages in chapter eight leads to its
recommendation as the preferred dispute resolution method. After careful
consideration of /. /, several recommendations are offered in chapter nine,
perhaps the most important of which is development of a system of ODR for
copyright infringement which resembles UDRP. Suggestions are proffered ..
/.,. /....

Value and Originality of the Research

This research covers important topics for businesses, licensors,
licensees, inventors, investors, shareholders, legal professionals and others
with interests in IP. Businesses, inventors, investors, and lawyers in the North
American region may find the comparisons of Canadian and American law of
8

special importance considering the need at many firms to develop
international strategies. NAFTA Chapter 11 provisions on investor-state
dispute settlement through arbitration, where investment is defined broadly
including tangible and intangible property, and Chapter 20 choice-of-forum
provisions increase the importance of comparative IP and arbitration law
2
.
This piece of research references some pre-existing articles, several
statutes, treaties, and scores of cases relating to the core subject matter.
Original analysis of existing topics and conditions help further the larger
scholarly body of work. Research suggests that this is the first English-
language dissertation that takes on the subjects of comparative IP and
arbitration law in Canada and the USA with the aim of proposing broader and
more comprehensive use of arbitration in IP disputes.

Research Methods

Qualitative literature analysis forms the base of this research. Court
cases, rules of arbitration, arbitral awards, organizational and professional
reports, scholarly articles and other pieces of literature were retrieved online
for review. A small number of physical books and journal articles were
reviewed, but virtually all references were accessed via the public internet.
Google was the primary search engine used for retrieval of references.
Canadian legal cases were retrieved directly from sources like the Supreme

2
NAFTA text available at USTR website (http://www.ustr.gov/trade-agreements/free-trade-
agreements/north-american-free-trade-agreement-nafta).
9

Court and provincial courts in Canada. American cases were found primarily
through Google Scholar and to a lesser degree via websites like Justia,
Findlaw, and Openjuris. Statutes and treaties were accessed through WIPO
Lex, UN System, and national legislative websites. Rules of arbitration were
found online at their respective institutions. Academic articles were located
online via many sources, frequently after Google provided links on its web
and scholar search engines. The United Nations library in Bangkok provided
additional document support with complimentary access to databases.
Literature was sorted by reference class: statute, treaty, case, article,
trade report, etc. Analyses were conducted by prioritizing the classes in a
manner which suited the topic of the research. Considering that IP disputes
are most often private civil matters involving torts and contract law, statute
and case law were given the broadest amount of deference. Private
international law is predicated upon territoriality and therefore domestic law
received the highest grades of relevance and weight. t. , was
considered paramount.
Normally . ,. would be relevant to international legal matters,
but IP is a subject that falls outside of the scope of peremptory norms.
Following . ./., treaties were given deference, although most often the
case was that treaties were implemented through domestic legislation.
UNCITRALs Model Law was given equal weight and relevance to nearly
identical implementing statutes in Canada.
t. --. and /. , were given deference to the extent
that they were compatible with statutes and treaty provisions. Lastly, scholarly
10

and professional articles were given the lowest weight and relevance relating
to questions of law, but expert opinions contained in articles were considered
equal to other opinions in questions relating to value judgments of a systemic
nature, or for the purposes of criticism, or when assessing options, or
inconsideration of the future.
References were read for semantic and pragmatic value. Trends and
concurring opinions were highlighted. Opposing opinions, contradictory
information, and varying interest groups were separated for the purposes of
comparison between groups. Conclusions and recommendations were
formulated considering supporting facts, laws, and opinions contained in
references. Recommendations were intended to invoke a sense of near-
limitless opportunity in the future, and to propose that our systems adapt to
changing macro environments.

Limitations of the Study

Information asymmetry was the single greatest limitation in this study.
Due first to the location of the university across the Pacific Ocean from the
two nations under focus reports and cases were not as accessible as they may
have been had the research taken place in the USA, Canada or Western
Europe. Whereas American university law libraries have cases, statutes,
history, scholarly works and other reports in English available for students to
reference, no comparable resources were available in this research. Whilst the
internet seriously reduced information asymmetry, it did not abolish the gap.
11

Arbitration is a confidential process, the details of which are only
disclosed to the public upon the agreement of all parties involved, or when
there is a legal requirement for disclosure. Arbitral institutions and tribunals
have rules protecting confidential and undisclosed information, which is
crucial to IP arbitration. In most cases, the very existence of a dispute is kept
private and confidential. Arbitral institutions provide some aggregate
statistics, but in general no information regarding the identities of parties to
disputes or the merits of cases are available. Searches of databases yielded
only one detailed arbitration case involving IP, to . t..
3
, which was not
examined in this dissertation due to its age, the obsolescence of the
technologies involved, and changes in law since.
Budget significantly constrained my access to information, especially
that from institutions like the ICC, but a PCA representative informed me that
parties to disputes at the Peace Palace very rarely disclose any details to the
public this being one of the major advantages of arbitration over litigation
so it is doubtful that budget was the main reasons for low numbers of IP
arbitral reports retrieved. Due to lack of resources available to make a
comprehensive review of IP arbitral awards and case reports, the majority of
information analyzed was from litigation in the USA and Canada.
Judges interpret intellectual property issues as matters of law, as they
do with arbitration and the gamut of other topics that appear on dockets.
Domestic statutes and international conventions are applicable to private

3
IBM v. Fujitsu Ltd., No. 13T-117-0636-85 (American Arbitration Association Commercial Arbitration
Tribunal 1987).
12

arbitral proceedings, which supplement and complement litigation, providing
alternatives for parties to disputes rather than posing a monopolistic threat to
traditional litigation in public courts of law. Considering that statutes, treaties,
academic and industry articles, and court cases relevant to the subject of this
research are in abundant supply, it is unlikely that the limitations reduced the
overall integrity of the dissertation such that the conclusions would somehow
become objectively unreliable or lack some higher quality.
Readers should notice that this dissertation uses APA (2011) in-text
citation style rather than Bluebook style. Bluebook citation style is the
standard in legal publishing, whereas APA style is typically used for social
scientific research. Bluebook style footnotes allow the author to provide
supporting and complementary information, whereas APA does not
recommend extensive use of footnotes or including elaborate information
within footnotes
4
. To the extent possible, information which Bluebook
footnotes would have contained are structured into the body of this
dissertation, but the flow and structure of the document is remarkably
different from a Bluebook style piece. University style guidelines were a
possible limitation on this point.
Nonetheless, as all such dissertations and scholarly pieces are limited,
so is this one. Recommendations at the end of the document are in

4
APA 6
th
edition section 2.12 outlines rules on footnotes, which are used to provide additional
content or to acknowledge copyright permission status. Footnotes are considered potentially
distracting to readers. As such, they are expected to be infrequently used and kept short, not
extending into paragraphs as frequently seen in Bluebook style, where half the page or more may
be footnotes.
13

consideration of both the external subjects discussed herein, and the internal
limitations of the present study.



CHAPTER 2
CURRENT STATUS OF IP DISPUTES
According to the British Intellectual Property Office (2012)
5
, IP comes
in four main types: patents, trademarks, designs, and copyright. WIPO
(2012b) oversees treaties relating to the four basic types of IP the British
office mentioned in addition to numerous other varieties of subject matter.
Integrated circuits, genetic resources, plant varieties, utility models or
petty patents, and technology transfer relate to patents. Geographical
indications and internet domain names are related to trademarks. These forms
of IP are considered industrial property.
Copyright is of a different nature than industrial property, and is related
to rights for performers and broadcasters. Traditional knowledge and cultural
expressions also fall into the copyright category.
Undisclosed information or trade secrets are yet another class of IP
although there is no associated registered right. Confidential information is
most often protected under contract. Here, laws relating to unfair competition,
not only in the form of anti-monopoly laws, but also pertaining to espionage
and misappropriation of confidential information, intersect with IP laws.



5
Available at the office website (http://www.ipo.gov.uk/types.htm).
14

Importance of IP

At S&P 500 companies in the mid-1980s, tangible assets property,
plants, equipment, etc. represented about 70% of total assets. By 2005,
intangible assets accounted for about 70% of total assets, meaning IP became
the biggest asset category at large companies in about 20 years the life of a
patent(Razgaitis, 2006). Between 1990 and 2008 in the UK, investment in
intangibles/IP outpaced that in tangibles, with the gap growing widest after
1999, leading to intangibles investment making up nearly 60% of the total in
2008 (UKIPO, 2011)
6
.
IP can be sold, licensed or used as leverage against competitors,
providing market advantages for businesses. IP provides sustainable
competitive and comparative economic advantages for businesses and nations.
Innovation is associated with a higher standard of living, sustained higher
wages and increased sophistication in society (WEF, 2010-2011). Innovative
economies suffer fewer and shorter term shocks, and drive growth and
recovery in global financial markets (World Bank, 2010).
[Americas] single greatest asset is the innovation and the ingenuity
and creativity of the American people, said US President Obama (2010)
7
,
considering that IP-intensive industries accounted for 18.8% of all
employment and 34.8% of the gross GDP in the USA in the same year

6
More available at the office website (www.ipo.gov.uk).
7
Report available at the Justice website
(http://www.justice.gov/criminal/cybercrime/Joint_Strategic_Plan_On_IP_Enforcement.pdf).
15

(USESA & USPTO, 2012).The evolution of the US workforce closely
followed the growing importance of IP in the 20
th
century, when the creative
class grew from 10% to 30.1%, the working class declined from 35.8% to
26.1%, the service class grew from 16.7% to 43.4%, and the agriculture
class fell from 37.5% to 0.4% of the workforce (Matthews & Giovanetti,
2002).
Licensing and IP royalties help give western economies like the US,
UK, and France consistent trade surpluses in services whereas those countries
consistently post current account deficits (OECD, 2010)
8
.
While, for the time being, the USA and western Europe have distinctly
different goals and ambitions from the majority of the worlds countries and
people, as development and growth continue over time, it is doubtful that
rising powers like BRICS nations will not formulate IP strategies similar to
the US and EU. Yu (2009) found that:
As more countries migrate from the traditional agrarian and industrial
economies to ones that are based on post-industrial, knowledge-based
innovation, intellectual property assets will only become more
important.




8
Statistics available at the OECD document page (http://dx.doi.org/10.1787/sits_vol_1-2010-en-
fr).
16

Collective and Individual Benefit

In any country, innovation is an essential part of business and
economic strategy. IPRs provide incentives to innovate. With IPR protection,
individuals and organizations can depend on a limited monopoly in the market
for their inventions and novel goods. SMEs may prefer to use trade secrets
rather than patents to protect their inventions and stay competitive due to high
costs and complexity associated with the patent system(Kalanje, n.d.), but
regardless of the size of the organization, IP is an essential asset class.
Individual artists, designers, writers, musicians, computer
programmers, performers and broadcasters benefit from rights to exclude
others from reproducing, distributing, re-broadcasting, or capitalizing on their
protected works. Owners and holders legal and natural persons of all forms
of IP can increase revenues, salaries, stability and quality of life.

International Intellectual Property System

World trade changed the way people do business. Competition among
nations is still essential for innovation, productivity and growth, but a more
cooperative style of competition is necessary for the new international system
to function. Modern supply chains and distribution networks span the globe,
as does the influence of secular state and corporate powers. From natural
resource extraction to tertiary consumption, a product and its components
could cross dozens of national boundaries, requiring various levels of
17

permission from governments. Factor in knowledge, financing, and personnel
required to bring complex products like electronics to market and it is easy to
understand how the World Trade Organization (WTO, 2012) supported the
launch of its Made in the World initiative
9
.

Movement toward Harmonization
Changes leading to the globalization of trade are not limited to
technology, neither internally as companies source inputs from multiple
nations nor externally as the outputs of companies are distributed as far-
reaching as possible. Vast legal and political changes accompany the
changing style of business, especially since the mid-20
th
century.
Organizations naturally encounter increased risk when operating outside of
their home nation, or when incorporating subsidiaries under the laws of
foreign nations. In order to help minimize those risks and to facilitate more
efficient and stable trade, governments have collaborated in the framing of
treaties which increase compatibility of trade laws.
Companies need to protect patents, copyright and related rights, and
trademarks like physical assets and financial data. Licensing and transfer
agreements, IP assignment and registration can be complicated processes. For
the protection and benefit of all parties involved in any international IP
activity, some uniformity is necessary at varying domestic levels in order to
ensure the validity and enforceability of contracts and rights. Without

9
Additional information on Made in the World is available at the WTO website
(http://www.wto.org/english/res_e/statis_e/miwi_e/miwi_e.htm).
18

cooperation among nations leading toward more uniform trade systems, IPRs
included, provisions of secular national statutes may be incompatible with
those of other nations, which could result in diminished trade and
unreasonable risks of loss for foreign companies.

Protection and Enforcement
Protection of IPRs internationally is, according to the ICC (2005a),
necessary to provide incentives and financing for innovation and creation,
which in turn lead to economic, cultural and social progress. As consumer
demand increases worldwide, the two-way relationship between international
trade and IP protection manifests in growing numbers of disputes of
broadening scope. Internationally, while there is moderate uniformity in
legislation which in theory protects basic IPRs, there exist simultaneously
various conflicting interests and groups holding opposing viewpoints on the
nature and value of IP. Arguments on topics range from compulsory licensing
on pharmaceuticals, to patentability of genes and plant varieties, to
webcasting. Multiple unresolved disputes are complicating political and legal
fields. Unresolved disputes may represent failures to protect and enforce
rights while the increasing frequency of disputes may imply failure to
establish strong prevention and suppression mechanisms.

Competing Agendas
Vanderbilt University Law School professor and director, Laurence
Helfer (2009), considered the possibility that the international IP system may
19

be on the brink of a deepening crisis due to continuing conflicts alongside
what he called proliferation of fragmented and incoherent treaty obligations
and nonbinding norms. While more industrialized nations have preferred
greater application of existing treaties and expansion of the IP treaty set,
developing countries and consumer groups have forestalled some progress,
calling for a moratorium on making of new treaties. In the developing world,
certain types of infringement (i.e. counterfeiting and piracy, compulsory
licensing) and government ignorance thereof are often considered parts of a
development agenda. Both sides have valid arguments within their mutually
exclusive models and worldviews, but the non-enforcement development
agenda appears to support legal positivism far less than the position of the
wealthier IP proprietors and licensees.
Concern for consumers rights and the health of those in deep poverty
is clearly rational and humanitarian in nature. However, there exist
disagreements regarding who is to foot the bill for medicines, and relating to
uneven benefits corporations receive when compared to consumers in markets
saturated by infringing goods. In an economic paradigm where profit alone
most often justifies risks of undertaking R&D and investment projects,
companies expect their IP to be protected to the fullest extent of the law.
Notwithstanding clear provisions of written laws which criminalize
commercial infringement and offer civil remedies to injured parties, very
often the case is that pursuit of legal action against commercial infringement
results in financial loss. The prospects of unrecoverable legal costs are
20

unappealing to both private and public attorneys and thus, certain
infringements in physical markets and online continue and proliferate.

Ambiguity or Clarity of Treaty Provisions
The language of treaties is often broad and general, so while a party to
a treaty may not invoke its internal law as reason for non-performance of
treaty obligations, as per Article 27 of the Vienna Convention on the Law of
Treaties
10
, a party may still implement and enforce a far different standard
than other parties without technically failing to perform a treaty. For this
reason, IP developers and proprietors from wealthier nations such as the USA
and those in Western Europe are often dissatisfied with certain protection
standards in the developing world, where they feel they are deprived of
remedies.
Somewhat ironically, those same wealthier nations tolerate rampant
infringement of copyright online in their own nations. With the expansion and
improvement of the internet, the world has seen an emerging double-standard
relating to copyright protection and enforcement in the USA and Western
Europe. Original members of the WIPO Copyright Treaty and WIPO
Performances and Phonograms Treaty
11
have consistently failed to regulate
infringing internet sites headquartered in their countries the largest markets

10
Text available at the UN website (http://untreaty.un.org/cod/avl/ha/vclt/vclt.html).
11
Text and information available at WIPO website
(http://www.wipo.int/copyright/en/activities/internet_treaties.html).
21

in the world for online infringing content yet those same nations criticize
others for failing to enforce anti-piracy laws.
It remains uncertain whether or not the soft law of treaties is a
primary cause for conflicts in IP policy, treaty interpretation and application.
The WTO TRIPS Agreement
12
, for example, grants developing and least
developed countries a grace period for implementation of domestic statutes in
support of the international law, but the language therein is not remarkably
ambiguous or easily misconstrued as tolerant of infringement. WIPO-
administered treaties contain some very clear and specific provisions
regarding the international registration, protection, and enforcement of IPRs.
Likewise, the Berne Convention, Paris Convention, and Madrid
Agreement
13
clearly provide for multilateral, reciprocal recognition of
copyright and related rights, and industrial property owned by nationals of one
member country in all other member countries, but implementing statutes
allow different types of exclusions within individual nations, and -/ /..
infringers face non-uniform actions and penalties depending on the member
states internal policies.
In my opinion, the instant problem appears to be specific non-
performance of treaty obligations rather than vague treaty articles. Why
nations and private bodies corporate have not sought more extensive dispute
resolution measures to remedy their complaints is yet unclear given that there

12
Text and information available at WTO website
(http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm).
13
Treaty texts available at WIPO website (http://www.wipo.int/treaties/en/).
22

are in existence numerous potential forums and avenues, both domestic and
international, for pursuit of damages, injunctions, compensation, award, etc.
Function of International Law
The international IP system is still developing, of course, and will
continue to be expanded and refined over hundreds of years. In 2013, it is a
sturdy system which does provide many solutions to potential and existing
problems, although sometimes more in theory than in practice.
Comprehensive utilization of the international legal system has not yet been a
guiding force among nations and private companies, leading to or stemming
from an apparent lack of integrity and authority at the international level.
International law may lack compulsory jurisdiction in secular societies, and
there is no coercive super-state which can enforce laws directly when
violations occur. There is no genuine international government, nor any
branch thereof, but treaties among civilized nations are concluded, valid and
binding.
There exists an historical . ,. consisting of various general
principles, including , . ..., respect for private property, and of
good faith relationships. The modern international IP system, as an extension
of historical trade and diplomatic systems, is a piece of the larger international
system. There are rules and procedures written into law which are practiced
by / /.. participants. There are also acts of bad faith, failures to comply,
mistakes and errors leading to conflicts and disputes. Accordingly, there are
formal methods and institutions for resolution of such disputes. Different
methods offer different strengths, weaknesses, opportunities, and threats to
23

different parties, but each method has potential to help solve the problems one
case at a time.



CHAPTER 3
REVIEW OF INTELLECTUAL PROPERTY LAWSUITS
Depending on the jurisdiction and nature of rights granted and
protected under statutes or a particular contract, disputes may arise in limited
forms. IP disputes most often arise out of licensing and franchise agreements.
Such disputes may be related to payment and amount of royalties, or the
extent of licensed rights, or termination or a license, compensation for breach,
or relating to relevance of competition law, among other contractual breaches.
Disputes could arise out of technology transfer agreements or IP assignment
and compensation terms in employment contracts (ICC, 1998a).
Infringement disputes are also common. In each dispute, depending on
the applicable law, an additional issue may be raised regarding validity of the
IPR or relevant agreement. In some jurisdictions, antitrust complaints may
accompany other IP disputes.
IP law is generally part of federal law in nations where decentralization
may have otherwise occurred, or where there are semi-autonomous states or
provinces which also legislate, enforce and adjudicate laws. For example, in
+ ...-. . +/ c.-,
14
, the US Federal Circuit held that the Federal
courts rather than state courts hold jurisdiction over patent validity and
infringement. IP provisions are also included in many national Constitutions.

14
Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., No. 504 F.3d 1262
(US Federal Circuit 2007).
24

In the following subsections, Canadian and American standards are
compared and contrasted. Statute and case law help give a clear picture of the
similarities and differences between the two friendly neighbor states.
American cases are more abundant in total than are Canadian cases. Canadian
courts have more frequently referenced American cases in opinions than have
American courts cited Canadian decisions. For those reasons, more American
cases than Canadian ones are cited. Canada still follows a British
Commonwealth legal tradition which pre-dates Canadian independence, and
for that reason, British and related court cases are also cited.
Private international law is constrained by the principle of territoriality.
t. / and /. / vary slightly between jurisdictions. In the public courts of
a territory, all parties to a lawsuit are bound to the same laws, rules, and
procedures. Treaties are sometimes cited by courts in opinions. The
charming Betsy doctrine, adopted by the US court in ., . s/.
c/-, o.,
:
holds that an act of Congress ought never to be construed
to violate the law of nations if any other possible construction remains.
Nonetheless, decisions are of a local nature and the law of the land remains
superior. As such, cases involving domestic participants only are applicable to
lawsuits which may involve international participants. The latter variety of
case is in such short supply that the following review would not be possible if
we were to rely on international cases.


15
Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 117-18, 2 (1804).
25

Patents

Infringement may only occur when there is a valid patent.
Internationally, patentability is generally defined in Article 27(1) of the WTO
TRIPS Agreement. An invention must be new, involve some inventive step,
and have industrial applicability to be eligible for patent. Prior art may be
used to inspire or create some new product or process, but there must be a
non-obvious change from existing patented materials.
The US Supreme Court held a patent invalid for obviousness in rst
t./ . :././/.
:c
. The US Federal Circuit Court of Appeals upheld a
trial courts decision that a patent was invalid for obviousness in o.
r//- :/ . t//,
17
. In these cases, there could be no claim
of infringement because there was no patent.
Patents may be awarded erroneously and invalidated later upon the
patent owner filing suit for infringement. In .,. c--. .
r.
:s
, the US Circuit Court upheld a district court decision that invalidated
three patents on the basis of public use. Prior to registering the patents,
Konrad demonstrated his inventions to university computing personnel who
had no knowledge of a requirement of confidentiality, so public use was

16
KSR International v. Teleflex, 127 S.Ct. 1727, No. 04-1350 (US Supreme Court 2007).
17
Brown & Williamson Tobacco Corp. v. Philip Morris Inc., 229 F.3d 1120, Nos. 99-1389, 99-1403 (US
Circuit Court of Appeals 2000).
18
Netscape Communications Corporation, Microsoft Corporation, and America Online, Inc. v. Allan
Konrad, 295 F.3d 1315, No. 01-1455 (US Circuit Court of Appeals 2002).
26

established and Konrads infringement suits against Netscape, Microsoft,
AOL and others were unsuccessful.

US Doctrine of Equivalents
Once a patent has been declared valid, terms in the patent claim are
interpreted to determine whether or not there is infringement. Since the US
Supreme Court applied the doctrine of equivalents in c.. :/ . t..
+ t..
:.
, literal infringement of a patent claim need not be present for a
finding of infringement if there is equivalence between the accused product or
process and the claimed element(s) of the patented invention. The US Patent
Offices Manual of Patent Examining Procedure 2186 (2010) refers to a
question from r.:./ . u/ t.
:
on how to qualifying
infringement:
Does the accused product or process contain elements identical or
equivalent to each claimed element of the patented invention?

Canadian Purposive Approach
Inspired by the UK House of Lords decision in c . u// s-/
::
,
starting with t. c-//. . o../-
::
Canadian courts have taken a
purposive approach when deciding on infringement. The purposive approach

19
Graver Tank & Mfg. Co. v. Linde Air Products, No. 339 U.S. 605 (US Supreme Court 1950).
20
Warner-Jenkinson Co. v. Hilton Davis Chemical Co., No. 117 S. Ct. 1040, 41 USPQ2d 1865, 1875
(US Supreme Court 1997).
21
Catnic Components Ltd. v. Hill & Smith Ltd., R.P.C. 183 (UK House of Lords per Lord Diplock 1982).
22
Procter & Gamble Co. v. Beecham Canada Ltd., No. 61 C.P.R. (2d) 1 (F.C.A. 1982).
27

does not strictly follow the doctrine of equivalents approach, but neither does
it exclude its applicability. The c test consisted of two basic questions:
1. Does the variant materially affect the way the invention works and
was that obvious at the date of publication? If "Yes", then the element
is essential. If "No", then ask question #2;
2. Would it be apparent to a skilled reader that the particular
descriptive word or phrase cannot have been intended by the patentee
to exclude the minor variants? (Or, phrasing the double negative as a
positive: Did the patentee intend to include the variant?) If "Yes", then
the element is non-essential. If "No", then it is essential.
If the distinctive difference between two patents is a non-essential part,
and if there is otherwise equivalence between the objects, then infringement
may be more easily qualified. c was fully adopted by the Canadian
courts after ou . t/ t//,
23
.
In t-,.. . t.-,
:
, the British Court used the c test to
decide on whether or not infringement existed. The questions asked in
t-,.. t
:
, which became known as the protocol questions after r/./.,
. t///.
:c
were asked again in t-,.. tt
27
, a Hong Kong trial and appeal
concerning the same European patent which was the subject of the t-,.. t

23
O'Hara Manufacturing Ltd. et al v Eli Lilly & Co. et al, No. 26 C.P.R. (3d) 1 (F.C.A. 1989).
24
Improver Corporation v. Remington Consumer Products Limited, No. FSR181 (English Patents
Court 1990).
25
Id.
26
Wheatley &Anor v. Drillsafe Ltd &Ors, No. 1999/0327/3, [2000] EWCA Civ 209 (British Court of
Appeal, Civil Division 2000).
27
Improver Corporation v. Raymond Industrial Limited, No. FSR 422, 233(CA) (Hong Kong Court of
Appeals 1991).
28

trial in the UK. The Hong Kong Court of Appeal disagreed with the High
Court, and agreed with the UK judge (British Intellectual Property Office,
2011; Schlosser, 2000).
The purposive approach stems out of a need to quell certain
disagreements regarding patent claim interpretation in Canadian infringement
cases. Historically, Canadian courts considered two different forms of
infringement: literal and substantive. Literal infringement occurs when the
defendants product or process falls clearly within the claim language.
Substantive infringement occurs when the defendants product contains all
essential elements of a claim, making the products the same in substance.
However, there has been no single rule for determining whether or not a
feature is essential (Schlosser, 2000).
In t.. r/. . t/. s.
:s
, Justice Binnie recognized the
unpredictability caused by the substantive method for finding infringement.
The t.. r/. case and r//,/ . c-
:.
opened up a more inclusive
approach for courts to interpret claims leading to decisions on infringement.
Rather than choose between literal or substantive infringement, the Canadian
Supreme Court supported a combination of the two (Cameron, 2012).
However, there may still be some need for further clarification of these rules.
Cameron (2001) contended that the decisions in r//,/ and t..
r/. seemed contradictory, on the one hand supporting an all-elements
literal approach and on the other hand endorsing the courts to rewrite patents

28
Free World Trust v Electro Sante Inc. et al, No. 9CPR(4th)168 (Supreme Court of Canada 2001).
29
Whirlpool Corporation v. Camco Inc, No. 9CPR(4th)129 (Supreme Court of Canada 2001).
29

by categorizing claims into essential and non-essential elements, the latter of
which could be varied similar to the doctrine of equivalents or completely
ignored as per the all-elements approach. Cameron implied the reasoning set
forth in OHara, where the court said that it must interpret the claims; it
cannot redraft them, may not entirely reflect the attitude of the court.

Claim Construction
Claim construction is a pivotal part of any patent lawsuit. Patent claim
terms may involve complex technical jargon. The US court considered itself
competent to construe language as persons experienced in the field of the
invention in u./ . ot
30
. In t/ . ..
::
the court
determined such a person to be a bachelor of science, or application engineer,
which the judge then filled in for. Obviously, judges frequently construe
patent claim terms incorrectly, which is why US courts, unlike Canadian ones,
often rely upon outside information to guide them.
Depending on the jurisdiction, the process of interpreting claim terms
varies. Whereas the SCC held in t.. r/. . t/. s.
::
that extrinsic
evidence shall not be considered in the interpretation of claim language, the
US Circuit in its decision in t///, . +ru
::
ended some disagreements
when it allowed both intrinsic (i.e. patent prosecution history, foreign and

30
Hoechst Celanese Corporation v. BP Chemicals, Ltd., No. 78F.3d1575, 1578 (US Federal Circuit
1996).
31
Robotic Vision Systems, Inc. v. View Engineering, Inc., No. 189F.3d1370, 1373 (US Federal Circuit
1999).
32
Supra note 28.
33
Phillips v AWH Corporation, No. 415F3d1303 (US Federal Circuit 2005).
30

related patents, prior art) and extrinsic evidence (i.e. inventor or expert
testimony, documentary evidence) insofar as the extrinsic evidence did not
contradict or override the intrinsic evidence (Cameron, 2012; Menell, Powers,
& Carlson, 2010).
Federal Circuit Judge Rader commented in his concurrence in the
decision in c,/ . t+s
:
that the reversal rate regarding patent claims
constructions by district court judges was hovering near 50% between April
1995 and November 1997. Even a rate that was much higher would provide
greater certainty, he said. US District Chief Judge Holderman (2007) said the
reversals are nothing of which to be proud. Even the US Court of Appeals
seemed to disagree with itself in cto. . c.- o,/
:
when it
constructed the same claim differently than in cto. . :.
36
.
According to US Circuit Courts, between April 1996 and December
2000, district court judges misinterpreted at least one claim construction term
in 33% of 323 cases. In Circuit Court decisions, Moore (2001) found no
statistically significant difference in how judges with technical background
reviewed district court claim constructions when compared to judges without
technical backgrounds. Moore also found that there was no statistically
significant difference in review of district court claim constructions between
judges with patent experience and judges without patent experience.

34
Cybor Corporation v. FAS Technologies, Inc., and Fastar Ltd., No. 96-1286,-1287 (US District for
Northern California, Appeal to the Federal Circuit 1998).
35
CVI/Beta Ventures, Inc. et al. v. Custom Optical Frames, Inc. et al. , No. 92 F.3d 1203 (US Federal
Circuit Court of Appeals 1996).
36
CVI/Beta Ventures, Inc. v. Tura LP, No. 112 F.3d 1146 (US Federal Circuit Court of Appeals 1997).
31

Judicial discretion has been recognized as a threat to reliability and
accuracy, where judges may express opinion based on political, social or
economic preferences, or with career goals in mind which leads to
unpredictability for litigators (Gennaioli & Shleifer, 2008). Judges in the
American Federal Courts are experts in law, but do not specialize in any one
area of law. Their overall performances or those in certain cases may or not be
representative of their performances in patent and other IP cases.

Markman Hearings
Beyond inclusion of extrinsic evidence in claim interpretation, other
differences exist between the American and Canadian systems. In Canada,
judges alone decide patent cases whereas in the USA, a party has the right to a
jury trial upon request (Shaughnessy & Bernstein, 2005). Juries in the USA
decide on matters which may well be above their level of expertise, but they
are not expected to decide on complex matters of law such as patent claim
construction. The US Supreme Court held in /- . r....
::
that there
was no Seventh Amendment right to a jury trial on the issue of patent claim
construction and therefore judges may conduct .. . reviews of claim
constructions in US appeals.
In Canada, there is no such /- style hearing. In Canada, patent
claims are construed once by the trial judge. In t././ . /. r.
38
,

37
Herbert Markman and Positek, Inc. v. Westview Instruments, Inc. and Althon Enterprises, Inc., No.
95-26 (Supreme Court of the US 1996).
38
Realsearch Inc. et al. v. Valone Kone Brunette Ltd. et al. , No. 27 C.P.R. (4th) 274 (F.C.T.D.) revd
(2004), 31 C.P.R. (4th) 101 (F.C.A.) (Canada Federal Court Trial Division, Federal Court of Appeal 2003).
32

the Federal Court of Appeal held that there was insufficient evidence to
suggest that a /- type of preliminary determination would save time or
money. The Court warned against the /- hearing, quoting the UK
House of Lords in ://, . r/.-
39
, stating that preliminary points of
law are too often treacherous short cuts. Their price can be delay and
expense.
According to Shaughnessy and Bernstein (2005), Canadian courts
interpret patent claims more generously than US courts, meaning more
protection for inventors since a finding of infringement is more likely. If such
is the case, then defendants may more often desire the /- hearing in
Canada.

Discovery
Canadian discovery is less expensive and time consuming than the
process in the USA, and Canadian discovery is subject to the implied
undertaking rule, where counsel do not use information produced in discovery
stages as fuel for other lawsuits such as antitrust in other jurisdictions (ibid).
Discovery costs and burdens in the United States represent perhaps the most
compelling reason to arbitrate international claims. This topic of discovery is
expanded in Chapter 4.


39
Tilling v. Whiteman, No. 1 A.C. 1 at 25 (UK House of Lords 1980).
33

Antitrust
.// . s/. c/,/.

marked an end to the American view that


arbitration was an inappropriate means of resolving antitrust claims. Antitrust
issues are arbitrable in both the US and Canada. While the Canadian
Competition Act sets out the same basic prohibitions as American antitrust
laws (price-fixing, horizontal territorial restrictions, bid-rigging, predatory
pricing), the Sherman Act, Clayton Act with Robinson-Patman Act
amendments and related case law are far more expansive and complex than
Canadian jurisprudence.
Generally, Canadian IP cases are not encumbered by attaching claims
of antitrust to the extent found in the US. For example, there is no requirement
to disclose prior art when making Canadian patent applications, so antitrust
implications of the American r//. t. . t. /.,
:
case are
not found north of the border. Antitrust is relevant to IP law in various
instances, but primarily as a strategic counterclaim that often lacks merit
(Steinman and Fitzpatrick, 2001). For the purposes of efficiency, the two will
be considered separate issues here. An entire dissertation could be written on
the intersection of antitrust and IP law, and how that relates to international
arbitration, but that is not our topic under study in the instant research.


40
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., No. 473 US 614, 628 (US Supreme Court
1985).
41
Walker Process Equipment, Inc. v Food Machinery & Chemical Corporation, No. 382US172 (US
Supreme Court 1965).
34

Remedies
Once validity and infringement are established, a plaintiff has a few
options it may pursue. The plaintiff may request an injunction. The US
Supreme Court held in .o, . .t/,.
42
that a plaintiff seeking a
permanent injunction must show that:
1) it has suffered irreparable injury;
2) remedies at law, such as money damages, are inadequate to
compensate for that injury;
3) considering balance of hardships between plaintiff and defendant,
remedy in equity is warranted; and
4) public interest would not be disserved by the injunction.
In . . /
43
, the US court denied the plaintiffs application for
injunction due to failure to show irreparable harm by continued infringement,
and because if the injunction were granted, the harm to Microsoft users in the
public would have outweighed the hardship suffered by z4 with continued
infringement.
The . case resulted in up to US$160 million in monetary damages
another potential remedy paid by the infringer to the plaintiff (PWC, 2008).
In the USA, for the 13 year period between 1995 and 2007, the annual median
for damages awarded per patent case was US$3.8-3.9 million. In that period,
different industries recorded different median damages awards. Mining, office
equipment, and software industries all had median damages awards of greater

42
eBay v. MercExchange, No. 126 S.Ct. 1837 (US Supreme Court 2006).
43
z4 Technologies v. Microsoft, No. F.Supp.2d (WL 1676893, E.D. Tex 2006).
35

than US$8 million. Business services, manufactured goods, and
pharmaceuticals industries saw damages awards of between US$1 million and
US$2 million between 1995 and 2007. Telecommunications cases resulted in
median damages awards of over US$31 while automotive cases were few and
failed to reach US$35,000. Several landmark cases, including ., resulted in
damage awards of greater than US$100 million in the same time period.
/ . t..

resulted in damages awards of greater than US$1.5


billion (PWC, 2008).
Damages quoted by PWC included reasonable royalties, which have
been the most common basis for damage awards in patent cases since the
2000s, whereas in the 1980s and 1990s, lost profits were most often the basis
for calculating damages.

Trademarks

Article 6 of the 1883 Paris Convention empowers individual member
nations to make their own determinations on what is and is not registrable as a
trademark. Article 15(1) of the TRIPS Agreement gives more direction to
parties, stating generally that any sign, or any combination of signs, capable
of distinguishing the goods or services of one undertaking from those of other
undertakings, shall be capable of constituting a trademark. TRIPS did not
deviate from the Paris Convention insomuch that it created a conflict of treaty

44
Lucent Technologies Inc. v. Gateway and Microsoft v. Lucent Technologies v. Dell, Inc., 509
F.Supp.2d 912, Civil Nos. 02CV2060-B(CAB), 03CV0699-B (CAB) and 03CV1108-B (CAB) (US District
Court of Southern California 2007).
36

law, but it provided the most essential criteria for trademark registration in
most countries: distinctiveness. The US Supreme Court in r/- .
s-

held that a mark is inherently distinctive if its intrinsic nature


serves to identify a particular source.

Registrability
12 of the Canadian Trademarks Act sets out what is and is not
registrable material. Similar to 15 U.S.C. 1052, a mark is not registrable if it
is a mere surname, or if the word is clearly descriptive or deceptively mis-
descriptive of the goods or services, or consists primarily of a descriptive or
mis-descriptive geographical origin. In both the USA and Canada, descriptive
marks may qualify for protection if the terms have acquired a secondary
meaning through use (CIPO, n.d.; Harvard Law, n.d.).
Generic terms are not eligible for protection. The US 2
nd
Circuit held in
u/.,t.. . c.//
46
that a generic term, hog, which had for
many years been in public use referring generically to large motorcycles could
not be removed from public domain and exclusively applied to Harley
Davidson motorcycles, which more recently began making trademark use of
"HOG". t/.. . c
:
showed that the generic part of a service mark is
not protectable. t . t... t/...
s
showed the same for domain names

45
Wal-Mart Stores, Inc. v. Samara Brothers, Inc., No. (99-150) 529 U.S. 205 (2000) 165 F.3d 120 (US
Supreme Court 2000).
46
Harley-Davidson, Inc. v. Grottanelli, No. 164 F.3d 806, 1999 WL 13271 (US 2nd Circuit Court of
Appeals 1999).
47
Donchez v. Coors Brewing Co., No. 392 F.3d 1211 (US 10th Circuit Court of Appeals 2004).
48
In re Reed Elsevier Properties Inc., No. F.3d., 2007 WL 1086403 (US Federal Circuit 2007).
37

when Reed tried to register www.lawyers.com as a service mark, which the
US Trademark Board refused because it was generic.
The US 4
th
Circuit Court in oox . o
.
held that a descriptive mark
without a secondary meaning does not qualify for protection. c/. r
...- . c/. r + ...-
50
showed that a descriptive mark which has
acquired a secondary meaning through years of use is valid once registered in
the US. In zns v. Oak Grove
:
, the US Circuit Court looked at four
factors when determining if a term had acquired a second meaning: (1) the
amount and manner of advertising; (2) the volume of sales; (3) the length and
manner of the terms use; (4) the results of consumer surveys.
Non-traditional Marks
In the USA, registration of non-traditional marks (i.e. sound, smell,
taste, touch, holograms, and moving images) are more common than in
Canada, where such registration has been more difficult (Sotiriadis, 2006).
Ashton and Katz (2010) found that as of 2010, zero smell marks were
registered in Canada whereas several had been registered in the USA.
Objections to non-conventional trademarks in Canada were found to be more
common than in the US due largely to t/,/, . c.-
:
, which held that a
Canadian mark must be something that can be seen. In 2010-2011, the

49
OBX-Stock, Inc. v. Bicast, Inc., No. 558 F.3d 334 (US 4th Circuit Court of Appeals 2009).
50
Cold War Museum, Inc. v. Cold War Air Museum, No. F.3d. 2009 WL 3644936 (US Federal Circuit
2009).
51
Zatarian's, Inc. v. Oak Grove Smokehouse, Inc. , No. 698 F.2d 786 (US 5th Circuit Court of Appeals
1983).
52
Playboy Enterprises, Inc. v. Germain No. 16 C.P.R. (3d) 517 (F.C.T.D.) (Canadian Federal Court Trial
Division 1987).
38

Canadian IP Office launched a project to recognize the registrability of
holograms and moving images, which fit within the scope of the t/,/,.
Some legal experts foresee an extension to other non-traditional marks in
Canada (Keri & Kurkinshaw, 2011).

Trade Dress
Trade dress in the US, or distinguishing guise in Canada, may be
registered trademarks and are similarly protected. 13 of the Canadian
Trademarks Act allows registration of a distinguishing guise if:
/ /.. ... c. /, /. ,,/ / ,....
/. /.. /.-. ... /. .. / //, ,,/
/ ., .
/ /. ./... .. /, /. ,,/ / /. .,./, ,..
./ /. .. ... ./ .// / /.. ...
//./, ..//, /- /. ..../,-. / , ..,
The USPTO (2000)
53
instructed examining attorneys to consider if the
proposed trade dress is:
: -- / /,. ..,
: ... .../ /. /./. .// ...
: -.. ./.-. / --/,.,.. . ..///. /- /
-. / ,./ / / ,. ..... /, /. ,.//
.. -. / /. ,.

53
Additional information is available in the Examination Guide at the USPTO website
(http://www.uspto.gov/trademarks/resources/exam/guide2-00.jsp).
39

,//. / ., --./ -,. . /- /.
-,,, ..

Trans-Jurisdictional
Registration may not be necessary for a trademark to become valid.
Article 6/ of the Paris Convention pertains to well-known marks, which
may acquire rights via use rather than registration. In both Canada and the US,
registration provides advantages, but is not necessarily required for protection.
In Canada, the Federal Court holds jurisdiction over cases involving the
Trademarks Act, and the Superior Courts of the provinces have concurrent
jurisdiction to hear trademark infringement proceedings. Likewise in the
USA, trademarks are governed by both state and federal law, although the
federal Lanham Act (15 U.S.C. 1051 et seq.) is the main and more extensive
source of protection.
Although trademarks registered in both the USA and Canada provide
protection throughout the nations, in exceptional cases a geographical
limitation can be imposed. For example, o.,. r, . u
54
showed that
an American state registration for a trademark, namely Burger King
restaurant, when made prior to a federal registration of a trademark under the
same trade name, was sufficient to allow use of the same trade name, Burger
King, by a company other than the one registered under federal law, if only in
the location where the other company innocently used the trademark prior to

54
Burger King of Florida v. Gene and Betty Hoots, 403 F.2d 904, No. 16706 (US Seventh Circuit Court
of Appeals 1968).
40

the federal registration. In o.,. r,, the American court held that Hoots
was allowed to continue use of the Burger King name in Mattoon, Illinois
despite the federal protection of exclusive rights to the name granted to the
Burger King fast food restaurant chain, which retained exclusive rights
throughout the country except in the Mattoon, Illinois area where Hoots had
used the trademark prior to the larger companys federal registration.

Abandonment
In the USA, nonuse of a trademark for two consecutive years is ,-
/. evidence of abandonment under 1127 of the Lanham Act. In t./.
. cc

, the US Court applied 1988 and 1995 amendments and found prima
facie evidence of abandonment after two years of nonuse. According to the
Court in t./., if an owner discontinues using the mark with the intent
not to resume, others are no longer restrained from using it since it ceases to
be associated in the publics mind with the owners goods or services.
In the USA, under 1058(b) of the Lanham Act, an owner must provide
to the USPTO an affidavit showing current use of a mark or acceptable
nonuse thereof, or the Director shall cancel the mark. Canada has no such
requirement to demonstrate use, but an applicant may request cancellation of a
mark under 45 of the Trademarks Act if a registered mark has not been used
for three years.


55
Defiance Button Machine Company v. C&C Metal Products Corporation, No. 511, Docket 84-7775,
759 F.2d 1053, 225 U.S.P.Q. 797 (US 2nd Circuit Court of Appeals 1985).
41

Infringement
The Canadian Intellectual Property Office defined infringement simply
as violation of trade-mark rights through unauthorized use of a trade-mark.
In both the US and Canada, the likelihood of confusion standard is used to
determine whether or not infringement exists. In +t . s/..//
c
, the US
Circuit Court considered several factors as relevant in determining whether
confusion between related goods is likely:
1) strength of the mark;
2) proximity of the goods;
3) similarity of the marks;
4) evidence of actual confusion;
5) marketing channels used;
6) type of goods and the degree of care likely to be exercised by the
purchaser;
7) defendant's intent in selecting the mark; and
8) likelihood of expansion of the product lines.
In o. c . o.o.
:
, the US 1
st
Circuit Court held that
confusion among non-buyers may be considered evidence of infringement. In
o, . r/.
58
confusion was unlikely between two marks, so both were
allowed to stand.

56
AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, No. 76-1744 (US Ninth Circuit Court of Appeals 1979).
57
Beacon Mutual Insurance Co. v. OneBeacon Insurance Group, No. 376 F.3d 8 (US 1st Circuit Court
of Appeals 2004).
58
Origins Natural Resources, Inc. v. Kotler, No. WL 492429 (US Federal District, SDNY 2001).
42

The Canadian Supreme Court, in .,.. . +/..
.
, when
deciding on the likelihood of confusion, directly applied the Trademarks Act
6(5), which states that the court shall have regard to all surrounding
circumstances including:
/. /.. .... / /. ..-/ ..-. .
/. .. .// /., /.. /.-. /.
/ /. /.,/ / -. /. ..-/ ..-. /.. /.. ..
/. .. / /. .. ... /..
. /. .. / /. .. .
. /. ..,.. / ..-//. /.... /. ..-/ ..-.
,,.. .. /. .. .,,... /, /.-

Counterfeiting
Statutes and practices regarding counterfeit goods (willful, bad-faith
infringement) are similarly oriented in the USA and Canada, which are both
original members of the ACTA. 15 U.S.C. 1125 proscribes trademark
dilution, whereas Canada does not have a statute which specifically protects
well-known or famous trade-marks. However, the SCC used 22 of the
Trademarks Act to provide the same or similar protection for famous marks in
....c/.t. . o... c/. t..
c
.

59
Masterpiece Inc. v. Alavida Lifestyles Inc., No. 2011 SCC 27, [2011] 2 S.C.R. 387 (Canadian Supreme
Court 2011).
60
VeuveClicquotPonsardin v. Boutiques CliquotLte, No. 30398, 2006 SCC 23, [2006] 1 S.C.R. 824
(Supreme Court of Canada 2006).
43

t. . . t,
c:
in the USA and t. . . s,,
c:
in
Canada yielded very similar results, showing the uniformity between the
nations on the topic of prohibiting counterfeiting. Damages may be higher in
the USA, where the Lanham Act provides for trebling of damages when
willful infringement is found, as seen in c. . s,-//
63
.

Domain Names
Internet domain names are protected as trademarks, and numerous
disputes have resulted regarding ownership and use of domain names. US law
on domain names is more comprehensive than Canadian law, probably
because the origins of the internet and ICANN are American. In the first 10
years of UDRP cases, from the first case in 1999 through 2008, over 43% of
complainants and nearly 40% of respondents in 14,663 cases were from the
United States of America, whereas less than 2% of complainants and less than
5% of respondents were from Canada (WIPO, 2009).
+/... / s t. . t.. t.-.
c
showed application
of anti-dilution provisions of the American Lanham Act to a domain name

61
Louis Vuitton Malletier S.A. v. Ly USA, Inc., Coco USA Inc., Chong Lam, Marco Leather Goods, Ltd.,
Joyce Chan, No. 08-4483-cv, 08-4525-cv, 08-4528-cv, 08-5108-cv, 08-5273-cv, 08-5290-cv (US 2nd
Circuit Court of Appeals 2010).
62
Louis Vuitton Malletier S.A.; Louis Vuitton Canada, Inc.; Burberry Limited; Burberry Canada Inc. v.
Singga Enterprises (Canada) Inc., Lisa Lam and Kenny Ko (AKA Wai Shing Lot and Shing Wai Lo),
collectively doing business as Singga Enterprises Canada Inc.; Yun Jaun Guo (AKA Jessi Guo and Yung
Juan Jessie Guo), doing business as Carnation Fashion Company; and Monica Mac (AKA Jia Xin Mai
Mac and Monica Jia Xin Mai Mac), Pablo Liang, Rebecca Mac and Gordon Chan (AKA Hung Bing Chan),
collectively doing business as Altec Productions, No. T-1276-10, 2011 FC 776 (Canadian Federal Court
2011).
63
Cartier v. Symbolix Inc., No. WL 857632 (US Federal District, SDNY 2008).
64
Archdiocese of St. Louis, et al. v. Internet Entertainment Group, Inc., No. 34F. Supp. 2d 1145 (US
Federal District, E.D.Mo. 1999).
44

dispute. ACPA was applied in cc/ . t..,
c
, wherein the US 8
th

Circuit rejected a first amendment defense for misuse of trademarks in
domain name registration. Rightful owners of trademarks were awarded
monetary damages under the ACPA in c// . s,.. r./
cc
for defendants
infringements via domain names. The sum total of cases settled in public
courts and through the UDRP system are but a small fraction of the enormous
number of complaints of online infringement. One possible reason courts have
been unsuccessful in enforcing laws more strictly is public backlash at
internet regulations, which are often perceived as invasions of privacy and
suppressions of free speech. In democratic societies, there is currently little
possibility that the government will succeed in any mission to regulate
internet infringement.

Copyright

Copyright law has changed significantly in scope since the mid-1990s
with the expansion and improvement of the internet. Copyright infringement
is now most likely to occur online, where laws are still underdeveloped and
often conflicting internationally. Economic and moral rights granted under
copyright are technically the same regardless of the medium of fixation, but

65
Coca-Cola Company, et al. v. William S. Purdy Sr., et al., No. 382 F.3d 774 (US 8th Circuit Court of
Appeals 2004).
66
E. and J. Gallo Winery v. Spider Webs Ltd., et al., No. Civ. Act. No. H-00-450, 129 F. Supp.2d 1033,
286 F.3d 270 (US 5th Circuit Court of Appeals 2002).
45

the electronic medium facilitates greater access and thus greater potential to
infringe upon protected works.

Rights Conferred
Rights are granted in the Berne Convention Article 5 without any
formality, although protection and means of redress afforded to authors are
subject to domestic law in the country where protection is sought, following
the territorial principle of private international law. Contracting parties of the
Berne Convention and other treaties concerning protection of copyright and
related rights, such as the USA and Canada, have virtually identical general
definitions of copyright infringement.
Rights granted to copyright holders are generally uniform among
contracting states of the Berne Convention, with some variance relating to
moral rights and exceptions to infringement. Copyright holders may:
1) prohibit infringement by the copying of the whole or substantial part
of the work,
2) communicate the work to the public,
3) import the work for sale or hire,
4) rent out the work,
5) present the work for public exhibition,
6) make adaptations of the work.
Reproduction, distribution, and communication rights are commercial
economic rights which parties not holding a copyright may not usurp.

46

Registration
Although copyright exists upon creation of the work in material form,
registration provides ,- /. proof of ownership and may, depending on
the jurisdiction, be required to pursue damages for infringement. In Canada,
registration is evidence that a copyright subsists under Article 52(2) of the
Copyright Act, but such registration is not required for award of statutory
damages (Hofbauer, 2009; IPIC, 2012).
American courts have decided differently on the issue of registration.
In r.//.. :, . c//
c:
the US Circuit Court held that a copyright must
be registered for the court to have jurisdiction in an infringement suit. Later,
in o./ . o:
cs
, the US Court held that damages for infringement are
not available unless copyright is registered prior to infringement.

Infringement
The US Copyright Office (n.d.) defined copyright infringement as:
when a copyrighted work is reproduced, distributed, performed,
publicly displayed, or made into a derivative work without the
permission of the copyright owner.
s../. . :.. o.,
c.
showed that for a finding of
infringement, a work must be slavishly copied or a plaintiff must show that
the original and accused works are substantially similar.

67
Well-Made Toy Mfg. Corp. v. Goffa International Corp., No. 354 F.2d 112 (US 2nd Circuit Court
2003).
68
Bouchat v. Bon-Ton Department Stores, No. 506 F.3d 315 (US 4th Circuit 2007).
69
Steele v. Turner Broadcasting System, No. 607 F.Supp.2d 258 (US District Court 2009).
47

Copyright is established upon fixation of a work in a tangible medium,
meaning that ideas are not protected under copyright. /.. .
t...-
:
, ., u// . :.../ c.., t
71
, and / . oc
::
in
the USA dealt with topics related to Article 9(2) of the TRIPS Agreement.
Decisions in those three cases showed that imitation of the sentiment, theme
or idea of a work is not infringement.
Both American and Canadian legal systems come from English
common law traditions, so there are several similarities between the two on
the subject of copyright. Copyright infringement is generally qualified when
there is proof of (1) ownership of a valid copyright, and (2) copying of the
work. Infringement may be direct, contributory, or vicarious. Contributory
infringement includes intentionally inducing or encouraging direct
infringement. Vicarious liability may arise when a person profits from direct
infringement while declining to stop or limit it (Pinsky Law, 2010a).
In t. . c/., +.
::
, the US Court, citing c/.-/
t.. . +..
:
, held that providing the site and facilities for known
infringing activity is sufficient to establish contributory liability. US Courts
have not yet established a sturdy norm that stands up to criticism in finding

70
Dennis Matthews, d/b/a J.D. Benjamin Company v. Alan Freedman, d/b/a Freedman Enterprises,
Elliot Kaplan, and Camelot Enterprises, Inc., 157 F.3d 25, No. 98-1408 (US First Circuit Court of
Appeals 1998).
71
Murray Hill Publications Inc. v. Twentieth Century Fox Film Corporation, 361 F.3d 312, Nos. 01-
2668/2721 (US Sixth Circuit Court of Appeals 2004).
72
Livia Milano v. NBC Universal, Inc., 584 F.Supp.2d 1288, No. CV 06-3237-GAF (US District Court of
Central California 2008).
73
Fonovisa, Inc. v. Cherry Auction, Inc., No. 76 F.3d 259 (US 9th Circuit 1996).
74
Columbia Pictures Industries, Inc. v. Aveco, Inc., No. 800 F.2d 59 (US 3rd Circuit 1986).
48

direct infringement. In s., . +tut+
:
, the Court found direct infringement
for allowing video games to be posted on a bulletin board system, but in s.,
. s/.//
:c
, the court found only contributory infringement despite the
material facts being almost identical to those in the former s., case.

Fair Use and Fair Dealing
American and Canadian courts have decided similarly on certain
infringement issues and differently on others. Fair use in the USA and fair
dealing in Canada, while similar in theory, differs in practice. Factors
considered in deciding both US and Canadian cases include the purpose or
commercial nature of the dealing, the character of the dealing, the amount of
the dealing, alternatives to the dealing, the nature of the work, and effect of
the dealing on the work; but the weight assigned to each factor is different in
each jurisdiction (D'Agostino, 2008).In Canada, fair dealing exceptions are
very limited (Sotiriadis, 2006) and did not include parody in c-,,.
c../. . / t / c.
::
, whereas the US Copyright Office
(2009) found that parody fell within the scope of fair use.
Canadian courts have been said to show preference for users, whereas
the US courts show preference for publishers (D'Agostino, 2008). The
American system has long been criticized as favoring corporate rights over

75
Sega Enters. Ltd., and Sega of America, Inc. v. MAPHIA, et al., No. 857 F.Supp. 679 (US District
Court, ND of California 1994).
76
Sega Enterprises Ltd. v. Sabella, No. C 93-04260 CW (US District Court, ND of California 1996).
77
Compagnie Gnrale des tablissements Michelin-Michelin & Cie v. National Automobile,
Aerospace, Transportation and General Workers Union of Canada, 2 F.C. 306 (Canadian Federal Court
Trial Division 1996).
49

those of consumers when compared to systems in Europe. The Canadian court
showed its preference for users or consumer rights over those of producers
and corporations in oc c. . t.
78
, when the trial court judge applied
the Copyright Act 80(1)(c) and held that downloading a song for personal
use does not amount to infringement. + t.. . ,.
:.
in the USA
held the opposite, finding that users who upload and download files violate
both distribution and reproduction rights. The US Supreme Court has
preferred to consider users of file sharing websites the direct infringers while
holding website owners and operators are contributory and/or vicarious
infringers (see c . c/.
s
). In oc . c./..
s:
, the US Circuit
Court upheld individual downloader liability for direct infringement, which
the court refused to consider fair use.
Fair use is the defense .. . in the USA for P2P sharing systems and
other download websites although courts have on numerous occasions
decided against internet companies attempting to offer free access to
protected material online without paying royalties. The US Court held that
loading copyrighted software into RAM met the fixation requirement of the
Copyright Act in +t . t./
82
and rejected the fair use defense. Likewise, in

78
BMG Canada Inc., et al. v. John Doe et al., No. T-292-04, FC 488 (Canadian Federal Court Trial
Division 2004).
79
A&M Records, et al. v. Napster et al., No. 00-16401, 00-16403, 239 F.3d 1004 (US 9th Circuit Court
2000).
80
Metro-Goldwyn-Mayer Studios Inc. et al. v. Grokster, LTD., et al., No. (04-480) 545 U.S. 913 (2005),
380 F.3d 1154 (US Supreme Court 2005).
81
BMG Music, et al. v. Cecilia Gonzalez, No. 05-1314, 03 C 6276 (US 7th Circuit Court of Appeals
2005).
82
MAI Systems Corp. v. Peak Computer, Inc., No. 991 F.2d 511 (US 9th Circuit Court of Appeals
1993).
50

t/,/, . t.
s:
, the defendant argued the fair use defense. In t/,/,, the
court considered the four factors in 17 U.S.C. 107, the first of which was the
commercial nature of Frenas use of Playboys pictures, which were posted on
a commercial bulletin board system, and thus the fair use defense was
rejected.
Googles principle defense in +./ c./. . c,/.
s
was fair use.
The Circuit Court did not approve of a proposed settlement agreement
between parties in +./ c./. for several reasons, including that many of
the affected parties in the class action objected to the agreement, considering
Googles use unfair and of such a nature that it contravened Article 13 of the
1994 WTO TRIPS Agreement, whereby the digital library unreasonably
prejudiced the legitimate interests of the authors. In the words of one objector
to the agreement, Google pursued its copyright project in calculated
disregard of authors rights. Its business plan was: So, sue me.
+./ c./. brought attention to another difference between
Canadian and American law: views regarding unpublished works. In the USA,
if a work is unpublished, the law weighs against fair use whereas in Canada, if
a work is unpublished the law weighs in favor of fair dealing (D'Agostino,
2008). The Canadian court in ccu . t. s.,
s
held that if a work has
not been published, the dealing may be fairer in that its reproduction with

83
Playboy Enterprises, Inc. v. George Frena, d/b/a Techs Warehouse BBS Systems and Consulting,
and Mark Dyess, No. 93-489-Civ-J-20, 839 F.Supp. 1552 (US District Court, MD Florida 1993).
84
Authors Guild et al. v. Google Inc., 770 F.Supp.2d 666, No. 05 Civ. 8136 (US District Court of
Southern New York 2011).
85
CCH Canadian Ltd. v. Law Society of Upper Canada, No. 2004 SCC 13, [2004] 1 SCR (Canadian
Supreme Court 2004).
51

acknowledgement could lead to a wider public dissemination of the work
one of the goals of copyright law. The US 2
nd
Circuit Court decided against
fair use of unpublished works in both .. t . u., u/
sc
and :t
s/,. . t.- u..
87
.

Downloading as a Public Performance
U.S. and Canadian courts do not agree entirely on the question of
whether download of a musical work or electronic transmission thereof
constitutes public performance of that work. The US 2
nd
Circuit Court said
no in ts . +sc+t
ss
. The Canadian Federal Court of Appeal said yes in
c. r./. . soc+
s.
and soc+ . o.// c.
.
. soc+ . o.//
was affirmed by the SCC. In this instance, it is terminology that differs while
the effects of the cases are largely the same, requiring royalties for electronic
transmissions of protected works.


86
New Era Publications International v. Henry Holt Co., No. 884 F.2d 659, 88-7707, 88-7795 (US 2nd
Circuit Court of Appeals 1989).
87
JD Salinger v. Random House, Inc., No. No. 657, Docket 86-7957, 811 F.2d 90 (US 2nd Circuit Court
of Appeals 1987).
88
United States v. American Society of Composers, Authors and Publishers et al., No. 09-0539-cv(L)
(US 2nd Circuit Court of Appeals 2009).
89
Canadian Wireless Telecommunications Assn. v. Society of Composers, Authors and Music
Publishers of Canada, No. A-391-06, FCA 6, [2008] 3 FCR 539 (Canadian Federal Court of Appeal
2008).
90
Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, No. A-582-08, FCA
139 (CanLII) (Canadian Federal Court of Appeal 2010).
52

Service Provider Liability
Cases involving potential liability for a technology service provider in
Canada and the USA have been decided similarly. In s, . t../
.:
, the
US Supreme Court found that providing the public with a device which could
be used to infringe, namely the Betamax, does not constitute contributory
infringement. The Canadian Supreme Court followed that general idea in
ccu . t. s.,
.:
when it held that the Law Society does not authorize
copyright infringement by maintaining a photocopier and posting a notice
warning that it will not be responsible for any copies made in infringement of
copyright.
The general principles leading to those decisions were applied in
soc+ . c. t.. t...
93
, which used s.2.4(1)(b) of the
Canadian Copyright Act to exclude ISPs from liability so long as they act
only as a conduit for communication of material which may be infringing. In
the USA, both t./,. :./ . .-
.
and cs . t,.
.
held that
automatic copying, storage, and transmission of copyrighted materials, when
instigated by others, does not render an ISP liable for direct copyright

91
Sony Corporation of America et al. v. Universal City Studios, Inc. et al., 464 U.S. 417, No. 81-1687
(US Supreme Court 1984).
92
Supra note 85.
93
Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Internet
Providers, 2 S.C.R. 427 (Supreme Court of Canada 2004).
94
Religious Technology Center and Bridge Publications, Inc. v. Netcom Online Communication
Services, 907 F.Supp. 1361, No. C-95-20091 RMW (US District Court for Northern California 1995).
95
Costar Group, Inc. v. Loopnet, Inc. et al., 373 F.3d 544, No. 03-1911 (US Fourth Circuit Court of
Appeals 2004).
53

infringement. However, an ISP may be held liable for contributory or
vicarious infringement in the USA.

Safe Harbor in USA
In such a case where an ISP is tried for secondary infringement in the
USA, 512 of the Copyright Act, or the safe harbor section of the DMCA,
may provide further immunity for providers if the ISP:
.. /.. ./ /./..,. / /. -./ .,
., /. -./ /. ,.- ../ /,,
/. /.. / ./ ./ /./..,. .. / /
.-. /- .// /,, ., ,,.
., /, ./ /./..,. ... .,.../,
.-.. .//. . /. -./
In - . :.:./.
.c
, YouTube defended against an infringement
suit by claiming safe harbor protection, which was not entirely effective in the
US Circuit Court. The Court decided that a reasonable jury could find that
YouTube had knowledge or awareness of specific infringing activity on its
website, to which it was willfully blind.
One should note that YouTube is a content provider rather than a
provider of hardware and network access. Inclusion of common websites and
content delivery networks under the blanket term "ISP" leads to ambiguity in
the law. Problems of definition may also arise where multinationals are

96
Viacom International, Inc., et al. v. YouTube, Inc., et al. , No. 10-3270-cv (US 2nd Circuit Court of
Appeals 2011).
54

involved because they may offer a variety of services, from content delivery,
to hosting of websites and email, FTP. Courts and legislators need to pay
more attention to internet tiers, virtual private networks. Further analysis on
the nature of peering and offloading over multiple points of presence is also
needed.

International Internet Copyright Infringement
Consider, for example, the ,. and c/. cases in the USA,
which held that internet companies are most likely indirect infringers, whereas
individuals who upload and download are direct infringers. While it may be
remarkably difficult to convince an American judge that the opinions in those
cases were incorrect or inappropriate, from a scholarly perspective we can
assess the facts and find rather easily that the opposite interpretation is more
accurate that the companies are direct infringers whereas individual users
who profit are the indirect infringers, and non-profit use is excluded from
infringement. This line of reasoning has special significance in providing
international remedies to online infringement, which courts have failed to do.

Outrageous Penalties
In 2006, Jammie Thomas-Rasset was sued by Capitol Records pursuant
to the US Copyright Act at 17 U.S.C. 101, 106, 501-505 for illegally
downloading and distributing recordings via Kazaa, a then-popular P2P file
55

sharing network application. c,/ . :/-
.:
was the first case of its kind,
where an individual consumer downloader was tried a US Court. In 2007, a
jury returned a verdict finding infringement and the court issued a damages
award of US$9,250 per each of 24 songs, totaling US$222,000. The defendant
motioned for new trial, and a second verdict was returned in 2009, at which
time an award of statutory damages in the amount of US$80,000 per each of
24 songs was made, totaling US$1,920,000. More motions followed, and by
2011, the Court granted a reduction of the damages to the constitutional
maximum of US$2,250 per song three times the statutory minimum.
In a memorandum of law and order, the US District Court for the
District of Minnesota found the outrageously high verdict was so severe
and oppressive as to be wholly disproportioned to the offense and obviously
unreasonable. The maximum award allowed by law was US$54,000 for the
number of songs in question, yet years passed before the award was reduced
to its constitutional maximum. Minimums of $750 per song imply commercial
distribution on the part of infringing persons, yet no evidence was presented
suggesting that Thomas intended to use the songs in any way other than for
her private enjoyment.
In s, oc . :../.-
.s
, a jury in the US District of
Massachusetts found willful infringement and awarded Sony statutory
damages of US$22,500 for each of 30 infringed recordings pursuant to 17

97
Capitol Records, Inc., et al. v. Jammie Thomas-Rasset, No. 06-1497 (MJD/LIB) (US District Court,
District of Minnesota 2011).
98
Sony BMG Music Entertainment v. Joel Tenenbaum, No. 721 F. Supp. 2d 85 (US District Court,
District of Mass. 2010).
56

U.S.C. 504. Upon remittitur, the judge reduced the US$675,000 fine by a
factor of ten, to US$67,500 on constitutional grounds, which followed the
award in c,/ . :/-. In 2011, the 1
st
Circuit Court of Appeals in
:../.-
99
reversed the reduction and reinstated the original penalty. We're
seeing unconstitutional awards handed down by juries. Violation of basic
rights of defendants suggests broader error in methods of handling these
cases.
In a 2004 case that never went to trial, a Texas county judge William
Adams was videotaped beating his 16 year-old daughter, Hillary, because she
downloaded pirated content online. The 8-minute video went viral after it was
posted on YouTube by the daughter in 2011. Phone calls made by viewers
from all over the world to the Rockport, Texas police department prompted an
investigation into the incident, but by that time the five-year statute of
limitations on the crime had expired. Hillary, who suffers from ataxic cerebral
palsy, described a life of dysfunction to the media. Wife and mother, Hallie,
used the words secret and addiction in her explanation of the incident
caught on film (Miller, Boyle, & Buckland, 2011). Although criminal law and
copyright infringement are emotional, it is neither reasonable nor civilized
behavior to usurp executive power and deprive ones own daughter of due
process rights in conflict with more than one statute, which the judge did.


99
Sony BMG Music Entertainment, et al. v. Joel Tenenbaum, No. 10-1883, 10-1947, 10-2052 (US 1st
Circuit Court of Appeals 2011).
57

Nature of the User
The Minnesota District Court said Thomas-Rasset was one of more
than 2 million users sharing more than 800 million files on the day the 24 files
were retrieved from Thomas-Rasset via Kazaa. The court did not mention any
specific details of the process by which the defendant reproduced or
distributed any material. In fact, the defendant probably did not actually .
anything, just as other Kazaa users did not generally actually . anything that
amounted to active reproduction or distribution. Prior to the injunction and the
closure of the Kazaa network, which was basically the exact same thing as
Napster yet famously operated for the better part of a decade after the ,.
injunction, the Kazaa program did basically all of the work.
Upon installation of the Kazaa application, a shared folder was
automatically installed on the computers hard drive, to which all files were
downloaded and from which files could be uploaded to other users without the
approval or knowledge of the uploading user, unless the user specified another
download file folder or prohibited uploads. The program presets allowed for a
certain number of simultaneous uploads and downloads unless the user
changed the settings. Thomas-Rassets nearly 2,000 and Tenenbaums 1,153
songs in shared folders were accessed by other users because those defendants
did not move the files to another folder, specify another download folder or
prohibit uploads. Considering the untold numbers of files that were
reproduced and distributed on Kazaa and Napster each day, there was
virtually no way to prove that Tenenbaum and Thomas-Rasset were more
notorious than other users. It was random enforcement, and thus not equal
58

protection considering that other known violators were not charged while
Tenenbaum and Thomas-Rasset were.
The Circuit Court in :../.- discussed P2P networks, through
which the unauthorized and illegal downloading and distribution of
copyrighted materials especially music recordings became commonplace.
c . c/. mentioned that, as the :../.- Circuit Court stated, the
advent of P2P networks has likely resulted in copyright infringement on a
staggering scale. The :../.- Circuit Court also noted that between
1999 and 2008, the recording industry as a whole suffered a fifty percent drop
in both sales and revenues, a figure the plaintiffs attribute[d] to the rise of
illegal downloading, which it was previously established was due mostly to
P2P networks like Kazaa, Limewire and Napster rather than due primarily to
individuals like Tenenbaum and Thomas.
More recently, torrent sites have become preferred mediums for
downloading, but the function is basically the same. Users do very little; they
point, click, maybe drag and drop, and type in keyword strings, but there is no
need for users to physically copy files. The software does the work. Simplicity
is the reason that systems work for users who are not by definition experts nor
have much, if any, technical knowledge of computer hardware or software. If
users had to do much other than execute simple commands, they would not be
able to download or upload anything.
Holding users liable for direct infringement while finding website
owners and operators are liable for indirect infringement implies that users are
the primary infringers and those with more direct influence in the system,
59

which is false. Users did not hijack Limewire, Napster or Kazaa and use it for
some purpose other than what it was intended to be used for. They used it for
exactly what it was designed and operated to do: illegally reproduce and
distribute copyrighted material. Users took advantage of a service that was
offered to the public a service that should have been but was not regulated
by the state media commission. In essence, holding users liable for the bulk of
online infringement is contrary to media policy, whereby broadcasters are
liable to the public for content, and whereby those who are in the most control
of the network are the most directly responsible for its maintenance and
operations.

Online Storage
Websites like Putlocker, Gorillavid, Mediafire and others retrievable
via directories like Filestube host online storage, which are as threatening to
media companies and copyright as P2P networks are. If courts focus on
individuals as the main cause of infringement, then the problem cannot be
solved. In finding a party wholly responsible for infringement, the courts
should focus on the international scope of the online activity. If it were
possible to trace an online file back to its original upload, its not unlikely that
the file were uploaded from a jurisdiction which allows for backup copies of
media, and its not impossible that the upload could was made for the
purposes of free online backup storage in the event of a loss of memory on a
PC. Subsequent downloading of that material should not be the fault of an
uploader who cannot control the function of online storage systems.
60


Reproduction and Distribution
The US court held in +t s,.- that temporary fixation of a file into
a computers RAM met the requirement for reproduction under the Copyright
Act. When films are viewed via live-streaming websites such as Filenuke or
Vidbux, there is more than one party involved, and more than one RAM
where the file is fixed. The computers at the hosting company need to be
accessed, even if only as a conduit, and thus there is memory allocated when
files are shared. When a file passes through the memory of a commercial
server and is sent out to the PCs of the general consumers in the public, then
that is distribution.
Kazaa and Napster programs reproduced and distributed copies of files
shared on the network. Those programs had wide-reaching access to millions
of PCs on the networks, helping users call up files by name via online
application directories, from which users picked any one of several potential
sources to download from, most often at random or based upon connection
speed. Users did not generally seek files from specific users, nor did they
most often establish connections with other users outside of the program
which facilitated, organized, and carried out all infringing actions. If Kazaa
and Napster had even one computer which was permanently linked to the
application, if there was even one server, if there was any full time support
whatsoever at any company office, then the mathematical probability is 1 that
Kazaa and Napster fixed infringing files into RAM, thereby reproducing and
later distributing by passing along infringing content.
61


Profit Motives
When an individual user uploads, accesses, downloads, or conducts any
other activities relating to a copyrighted file online, that user is not generally
trying to make money. Very few uploads or downloads result directly in
monetary gain. Users pay for internet services and they often enough use the
service to its fullest extent, including utilizing upload and download sites.
Similar to a subscriber to cable or dish TV, or a radio listener, internet users
scan and scroll through channels websites and they access and consume
content which appeals to them. Names of websites like 1channel.ch allude to
this idea that surfing the internet is the new version of flipping through the
channels on the tellie. Absent a communications control commission, the
internet offers a lot of illegal content, but without state censorship, the user
cannot be reasonably expected to know what is and what is not fair use or fair
dealing, or legal or illegal content. Lacking a regulatory body, the individual
user is not likely causing harms to the extent of website owners and operators
those who would be censored if there was proper regulation.
Businesses need to generate revenues which match or exceed their
expenses to break even or make a profit and to stay in business. Technologies
and experts required to operate businesses like Novamov and Filetram are not
cheap. Advertising helps pay for expenses, but some websites like Sockshare
and UploadC offer premium memberships, which increase revenues. Websites
specializing in online storage and live-streaming media like Filebox and
NOSvideo make profits by keeping costs low, and costs are kept low by not
62

paying royalties on a certain amount of reproductions and distributions of
copyrighted material their companies provide.
While the ignorant user sees a bargain and a potential economic gain,
whereby the costs that may have been incurred by consuming media through a
legal medium are conserved, the ruthless website owner and operator sees a
profit. Websites get their content for free from uploaders who are ignorant or
sticking it to the man and billions of dollars in profits are made by avoiding
royalty payments and licensing fees. Virtually the same system as was seen in
s., . +tut+ is available all over the internet, now for free due to
increased opportunity to make advertising revenues, which replaced the old
fashioned membership fee requirement.
Whereas website owners and operators may be contributory infringers
internationally in cases where people download overseas then burn physical
copies of discs to sell as pirated media in physical markets, whereby a source
internet company may also qualify as an organized criminal group under
Article 2(a) of the Convention against Transnational Organized Crime, such a
business is more literally the direct infringer in all other cases considering the
facts and allowing for an interpretation of laws which supports broader
prevention and suppression of online infringement.

Divided Claims
Commercial copyright infringement in violation of 17 U.S.C. 506(a)
is extraordinarily common in 2013, as it was in 2006, and in 2001. Where one
party supplies the hardware while another the software, and another the
63

service and maintenance, where uploaders and downloaders are separate
legally from the companies which induce via advertising and orchestrate
infringement, and where unauthorized reproduction and distribution occur
globally across multiple jurisdictions which have different laws and secular
interpretations of treaty obligations, it may be difficult to establish who is
responsible for infringement. Currently, the high prevalence of online
copyright infringement when compared to prosecutions of direct infringers
does seem to imply that courts have been reluctant to find direct infringement,
and thus that indirect infringement cannot exist.

Conflicts of Interest
Multiple parties involved in internet copyright matters have varying
interests. Consumers obviously want to cut their expenses and get media for
free if possible, and theyll undertake certain risks to obtain free media. Media
companies clearly want to protect their copyrights and claim astronomical
damages, despite continued growing year-on-year revenues at the largest
conglomerates, which may benefit from purported network effects of online
infringement that some commentators believe helps oligopolies maintain large
market shares (Social Science Research Council, 2011).
Litigation of online copyright disputes is obviously an incredibly
complicated matter, which may involve multiple jurisdictions or at least
multiple parties from or residing in multiple jurisdictions. International
agreements such as the WIPO internet treaties and TRIPS have clearly not
solved the online copyright infringement problem, although the medium
64

should be extremely easy to regulate as far as the general public is concerned.
Conflicts of law and fact, and interpretations thereof cloud various issues
relating to online copyright disputes, prolonging the agony of injured parties.
In the world of online copyright, we find a right without a remedy, which is a
failure of the system.

Licensing

Licensing of IP is a major feature of modern industries. Royalties and
licensing are one of relatively few categories where the USA consistently
enjoys a surplus in foreign trade (OECD, 2010). Copyright, trademark, patent,
trade secrets and know-how may be licensed at any level in a supply chain,
horizontally and vertically, from natural resource extraction to retail and after-
sale service. Licensing-in or out may occur in any size of organization, from a
sole proprietorship to a multinational corporation. Licensed technologies may
be used directly or structured into research and development projects.

Reasons for Licensing
Where small firms and individuals cannot afford to bring inventions to
market, they may opt to license their IP out to larger companies which have
established production and marketing channels. Some inventors may prefer to
license to smaller companies where the invention could be more integral to
growth and continued operations. University licensing offices may likewise
prefer to deal with start-up companies, perhaps ones with close ties to faculty
65

or ones experienced in commercializing university patents(Jacobs, 2006).
Trademark and other licenses are included in franchise agreements. Licit
reproduction, distribution and broadcast of copyrighted media occur under
license.
A 2005-2006 Licensing Foundation of the USA and Canada survey
found that over 40% of 524 respondents who work directly with licensing
reported that generating licensing revenue was an extremely important
motivating factor in organizational development of IP. Similarly, respondents
in the survey most often reported that they wanted to use IP as a basis for
strategic partnering and joint ventures. Licensing was seen as a way to
improve bargaining strength and protect against litigation (Razgaitis, 2006).

Designing a Licensing Agreement
Smith (2006) advised parties to technology licensing agreements to
consider various dimensions in the scope of license grants, such as: (1)
technology to be licensed; (2) exclusivity; (3) duration; (4) revocation clauses;
(5) geographical limitations; (6) field of use restrictions; (7) trial evaluation
periods; (8) rights to modify; (9) rights to create derivative works; (10) rights
to reproduce; (11) rights to manufacture; (12) rights to bundle; (13) rights to
sell; (14) rights to sublicense; (15) rights to transfer.
Beyond the scope of the license, payment and terms must be
established clearly (i.e. up-front fees, recurring fixed fees, royalties on sales,
support and consulting service fees). The potential infringement of a third
party and indemnification for such a case are important considerations, in
66

addition to provisions regarding warranties, limitations of liabilities, audit
rights, moral rights relating to any branding involved, escrow, assignment,
publicity, and non-disclosure. Finally, termination and dispute settlement are
necessary contractual clauses (ibid). International agreements require special
care in jurisdiction and governing law clauses.

Generic Disputes
Contractual terms relating to, . /, field of use restrictions, degree
of exclusivity, payment structure and amount, technical and business
milestones can easily become sources of disputes. Licensors and licensees
need to be aware of legal conditions and potential for litigation. Courts may
enforce a contract by awarding compensatory, consequential and incidental,
liquidated damages or punitive damages.
WIPO (2012a) offered a few generic examples of licensing disputes:
(1) A pharmaceutical company licensed know-how and patented
pharmaceuticals. The licensee refused to pay the license fee, so the
licensor initiated legal action.
(2) A biotech firm entered into a license and development agreement
with a large pharmaceutical company. Years after the agreement
was established, the biotech firm terminated the contract, alleging
that the pharmaceutical company deliberately delayed the
development of a compound that was central to the agreement. The
biotech firm thereafter filed for legal action, claiming damages for
the pharmaceutical companys alleged failure to perform the
67

contract, which required achievement of technical milestones. The
parties settled and continued to cooperate on the project.
(3) An Asian patent owner entered into an exclusive licensing
agreement with a US manufacturer. The licensor took legal
actionafter a dispute arose regarding payment of royalties under the
agreement.
(4) A European inventor holding patents in Australia, Canada, Europe,
and the US licensed patent rights and know-how to an Asian
company. The parties later disagreed on who should pay renewal
fees on the patents. The licensee terminated the license, and the
licensor pursued legal action claiming damages and seeking a
declaration that he was free to use the patents. The decision found
the licensee did not have right to terminate the contract as it did, so
damages were awarded and materials were ordered returned to the
licensor.
(5) An internet distribution agreement was made between a European
security software developer and a US licensee. Years after the
agreement, the licensee claimed the software did not prevent
computer intrusions, and thereafter claimed damages for breach of
contract.

Compulsory Licensing of Pharmaceuticals
Perhaps the most prominent difference between Canadian and
American systems is the issue of compulsory licensing of pharmaceuticals. A
68

1999 complaint by the United States regarding Canadas term of patent
protection led to a WTO Dispute Settlement Body recommendation/ruling
which prompted Canadas Bill S-17 amending the Patents Act in 2001
100
.
After 2003, the WTO implemented Paragraph 6 of the Doha Declaration,
allowing countries to produce generic copies of patented pharmaceuticals
under compulsory licenses for export to developing and least-developed
countries which lack the capacity to manufacture such products domestically.
In 2005 Canadas Access to Medicines Regime was implemented (Douglas
& Jutras, 2008).
In the United States, conflicting interests of healthcare industries, the
general public and NGOs have made adoption of compulsory licensing policy
difficult. In 2006, the Life Saving Medicines Export Act was introduced in the
109
th
Congress, but the bill stalled. Former President Clinton has on numerous
occasions advocated compulsory licensing of HIV/AIDS drugs (e.g. Hoen,
2003). On the other side of the argument the United States has, as a
Congressional research report put it, been forceful in defending the interests
of the U.S. pharmaceutical industry (Fergusson, 2006). In an already litigious
industry, compulsory licenses are the source of disputes worldwide. Canada is
certainly friendlier to compulsory licensing than the United States.


100
Supplemental information available at WTO website
(http://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm).
69

Challenge to Validity by Licensee
Whereas in Canada, a licensee is estopped from challenging the
validity of the IP it is licensing and remains liable for paying royalties/fees
even if rights in the licensed IP is found invalid (ABA, 2011), the US
Supreme Court held in ..t--.. . c.../
101
that a licensee may
challenge the validity of a patent licensed to it without stopping payment of
royalties or being sued for infringement.

Joint Ownership
Whereas in the United States, absent an agreement to the contrary,
under 35 U.S.C. 262, a co-owner of a joint patent can use or license the
patent without consulting or sharing the proceeds with the other co-owners, in
Canada a co-owner may independently make use of patent rights or may
assign the entirety of patents rights to a third party, but may not license only
some rights to a third party without consent of other co-owners (Cameron,
1997-2007; Hagedoorn, 2003; Henderson & Tanner, n.d.).
t,. . s,./, :/
::
illustrates this principle of Canadian patent
law. The US Federal Circuit Court in s/., . t../t//
::
, citing
r//,/- . s c..
:
, applied this principle of American law, that a co-
owner of a patent can even grant a license to a third party without consent of

101
MedImmune, Inc. v. Genentech, Inc., No. 549 US 118, 05-608, 127 S.Ct. 764 (US Supreme Court
2007).
102
Forget v. Specialty Tools of Canada Inc., No. 62 C.P.R. (3d) 537 (British Columbia Court of Appeal
1995).
103
Schering Corp. v. Roussel-Uclaf SA, No. 104 F. 3d 341 (US Federal Circuit Court of Appeals 1997).
104
Willingham v. Star Cutter Co., No. 555 F. 2d 1340 (US Federal Circuit Court of Appeals 1977).
70

the other owners. Laurie (2006) considered problems that may result if one
co-owner tries to enforce patent rights without others joining suit. The Federal
Court of Appeals had to dismiss an infringement claim in t/ . ts
s.,/
:
due to nonparticipation on the part of a co-owner. The court
remarked in r//,/- . s c.. that co-owners are at the mercy of
each other.

Good Faith and Fair Dealing
Depending on the nature of a contract dispute and location of parties
thereto, state, provincial, or federal courts may accept jurisdiction in the USA
and Canada. Licenses are contracts and as such general contract law and rules
apply. In both Canada and the USA, parties are expected to enter into
contracts, and perform duties and obligations with good faith.
In Canada, the duties of good faith and fair dealing have long been a
part of the common law, and some provinces have codified the requirement
into statutes (Adler, n.d.). t../ c. . c-//., u-.
:c
showed that
only upon execution of an agreement, and not beforehand during negotiation
or bargaining stages, are parties to a contract entitled to rely on good faith and
fair dealing from other parties. In Harveys Restaurant v. Cara
::
, the Ontario
Superior Court of Justice held that:

105
Ethicon, Inc. v. United States Surgical Corporation, 135 F.3d 1456, No. 97-1269 (US Federal Circuit
Court of Appeals 1998).
106
Peel Condominium Corporation No. 505 v. Cam-Valley Homes Limited, No. C33234, 53 OR (3d) 1;
196 DLR (4th) 621; 14 BLR (3d) 169; 142 OAC 251 (Ontario, Canada Court of Appeal 2001).
107
1117304 Ontario Inc. (Harvey's Restaurant) v. Cara Operations Ltd. , No. 02-CV-21983, 54 BLR
(4th) 244 (Ontario, Canada Superior Court 2008).
71

(i) good faith is a minimal standard, in the sense that the duty to act
in good faith is only breached when a party acts in bad faith;
(ii) bad faith is conduct that is contrary to community standards of
honesty, reasonableness or fairness (e.g. serious
misrepresentations of material facts);
(iii) good faith is a two way street; whether a party under a duty of
good faith has breached that duty will depend, in part, on
whether the other party conducted itself fairly.
In the US, the implied covenant of good faith and fair dealing is a
general rule recognized by states. The Superior Court of San Francisco
applied the Uniform Commercial Code in c- . /
:s
, stating that
every contract imposes upon each party a duty of good faith and fair dealing
in its performance and its enforcement.
Citing t-.. s..- u./ . u/., t
:.
, the Federal 5
th
Circuit
Court held in c// . +tc
110
that the implied obligation to execute a contract
in good faith usually modifies the express terms of the contract and should not
be used to override or contradict them. Although there is some ambiguity in
the definition of good faith, the Federal District Court held in o// .
c// s//
:::
that a mere failure to fulfill an obligation, without showing

108
Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., No. S011486, 2 Cal.4th
342 , 6 Cal.Rptr.2d 467; 826 P.2d 710 (Superior Court of San Francisco, California 1958).
109
Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., No. 732 F.2d 480, 485 (US 5th Circuit Court of
Appeals 1984).
110
Clark v. America's Favorite Chicken Co., No. 110 F. 3d 295 (US 5th Circuit Court of Appeals 1997).
111
Brill v. Catfish Shaks of America, Inc., No. 86-3345, 727 F.Supp. 1035 (US District Court,
E.D. Louisiana 1989).
72

of intent or ill will, does not constitute a breach of good faith. Failure to
show bad faith then is implied good faith. The good faith requirement makes
arbitration a perfect remedy for disputes arising out of contracts.

Trade Secrets

Undisclosed information is the subject of TRIPS Article 39, which
requires that parties to the treaty provide natural and legal persons the
possibility of preventing disclosure of information without their consent, so
long as such information:
.. /. .. / /., /. ,..
/,. . .-//, / -,. ,..//, /.
-, ../, .//. ,. ./ /. /. /
-//, ../ ./ /. /. / /- ..
/ / --./ ./.. /... .. .
/ /.. ./. .//. ., ... /. .-. /,
/. ,. /././/, / / /. /- /.., ..

Nature and Definition
In both Canada and the US, trade secrets and all forms of confidential
information may be protected by contract and tort law (Belmore & Sartorio,
2000), but protection in the US is not limited to those forms. Whereas the
Economic Espionage Act in the USA (18 U.S.C. 90) grants statutory
protection to trade secrets, in Canada there is no such legislation regarding
73

trade secrets. Trade secrets are traditionally considered ,.- rights and
not .-, although there has been some opinion regarding the American law
since t.t . c/,/.
112
that .- rights can be applied, at least in
part, to trade secrets (Chengsi, 2002).
Canadian courts favor consideration of implied good faith rules of
employment and contractual relations when deciding whether or not
misappropriation of information has occurred. Canadian law is guided by the
British case, s.,. . c,,..
:::
, wherein Lord Denning specified that
employees who receive information in confidence shall not take unfair
advantage of it, and must not make use of it without obtaining consent.
Common law protection by way of the tort of breach of confidence is often
considered unreliable, and as such many legal practitioners consider the
American system stronger for protection of trade secrets (Pinsky Law, 2010b).
The Canadian Intellectual Property Office (2011) defined trade
secrets as:
usually formulas, patterns, compilations, devices, processes, codes,
data that are specific to its owner, give him or her a business advantage
over a competitor and are kept secret or confidential.
In Canada, there is a distinction drawn between trade secrets and
confidential information in employer-employee relationships. Several

112
E.I. DuPont DeNemours & Company, Inc. v. Rolfe Christopher et al. , No. 28254, 431 F.2d 1012;
1970 U.S. App. LEXIS 8091; 167 U.S.P.Q. (BNA) 1; 167 U.S.P.Q.(BNA) 1; 166 U.S.P.Q. (BNA) 421 (US 5th
Circuit Court of Appeals 1970).
113
Seager v. Copydex Ltd. (No. 2) (British Court of Appeal 1967).
74

Canadian courts have cited a British case, t.. c//. . t./.
::
, in
considering some information merely confidential, which former employees
are under no obligation to keep secret, while other information is of a
sufficiently high degree of confidentiality so as to amount to a trade secret,
which former employees are not allowed to use or disclose.
18 USC 1839 defined trade secrets as:
// /- . ,,. / // /.. ./ .//
.- .,.., /- /.., ,. ,/
-,/ ,,- .... /-./ .., ,,,. -./.
./.. ,.. ,.... ,,- .. ././.
,//. ,//. . ././. /. .. -,/..
-.-/... ,/,//, ././/, ,,///, ,/,,///,
., /
+ /. .. /../ / /. .//. -... /..,
./ /- .. .
o /. /- .... ..,... .- ./.. ./
,./ /- /., ,..//, /. . /.,
../, .//. /.,/ ,,. -. /, /. ,.// .
the term owner, with respect to a trade secret, means the
,. ., ./- .// ,//./ /.,/ ..//.
/. /.. /. .. .. .,..

114
Faccenda Chicken Ltd. v. Fowler, No. [1986] 1 All E.R. 617 (C.A.) (British Court of Appeals
1986).
75

The American Uniform Trade Secrets Act 1(4) states more simply
that trade secret:
-. /- /.., /-./ ,. -,/
,,- .... -./. ./.. ,. /
.... ..,... .- ./.. ./ ,./
/- /., ,..//, /. . /., ../,
.//. /, ,,. -. /, /. ,. ./ /
.- ./.. /- ./.. .. .
/. ./. / .// / . .//. ... /.
.-. - ..,
Notes to the Uniform Trade Secrets Act make no distinction between
trade secrets and other types of confidential information, and point toward all
forms of confidential information being within the scope of a trade secret,
which seems to follow the TRIPS provisions. The Supreme Court of Ohio, in
+/ .
115
, followed the interpretation that confidential information
including memorized client lists, which were mentioned in t.., fall
within the definition of a trade secret.

Jurisdiction
In Canada, trade secrets and confidential information are matters of
private civil law. SCC held in t . s..
::c
that taking confidential
information does not qualify as property which can be the basis for a theft

115
Al Minor & Assoc. v. Martin, No. 881 N.E.2d 850 (Supreme Court of Ohio 2008).
116
R. v. Stewart, No. [1988] 1 S.C.R. 963 (Supreme Court of Canada 1988).
76

charge under the Criminal Code. However, the court did leave open the
possibility that fraud could exist if misappropriation leads to deprivation of
property or money. Absent of fraud or other criminal activity, provincial
superior courts hold jurisdiction over cases involving trade secrets or
confidential information. SCC held in t/. . , c.
:::
that the
Federal court is not the proper forum for a case involving such a tort.
Trade secret law in the US may be of public or private concern, and
can result in criminal penalties. For example, in ts . t
::s
, a former research
chemist with global pharmaceutical company Sanofi-Aventis was sentenced
to 18 months in prison for stealing trade secrets and making them available
for sale through Abby Pharmatech Inc., a US subsidiary of a Chinese
chemicals company (FBI, 2012).
In American private civil cases, state law is applied even in federal
courts. The Supreme Court held in t. . :-,/
119
that there is no federal
general common law and that the /. / must be the governing rule of
private right, under whatever jurisdiction private right comes to be examined.
The Circuit Court held in t/- u . +.
120
that a federal court may
hold jurisdiction under 28 U.S.C. 1338(b) if a substantial and related claim
under IP laws accompanied the claim of misappropriation.


117
MacDonald et al. v. Vapor Canada Ltd., No. [1977] 2 S.C.R. 134 (Supreme Court of Canada 1977).
118
United States of America v. Yuan Li, No. 12-cr-34 (US District Court, NJ 2012).
119
Erie Railroad Co. v. Tompkins, No. 304 U.S. 64 (US Supreme Court 1938).
120
Rohm and Haas Company v. Adco Chemical Corporation, 689 F.2d 424, No. 82-5000 (US Third
Circuit Court of Appeals 1982).
77

Civil Remedies
Injunctions may be granted in Canada based upon the springboard
principle, described in :., v. Builders Supply
:::
, whereby confidential
information is obtained from an employer and used as a springboard in a
competing enterprise. s.,. . c,,.. showed that the springboard
doctrine applies also to information which is partly public and partly
confidential, or information which, having been disclosed in confidence to
certain recipients, then falls into the public domain (see c:ots .
t,/
:::
). The story of Facebook appears to involve the springboard
principle, whereby Zuckerberg used a contracting partys idea to launch his
own success, but since Facebook was developed in the USA, no injunction
was available for the breach of contract. Injunctions granted under the
springboard principle are normally granted for such a time as it would take for
the confidential information to be obtained via lawful means.
2(a) of the US Uniform Trade Secrets Act states that:
./ /.... -,,, -, /. ... t,
,,/ /. . . /// /. .-.. ./. /.
.. .. / ... . /. /. . -, /. ...
/ ../ .//. ,.. / -. .. ./-.
--./ ..,. / /... ../. /. ..... /- /.
-,,,

121
Terrapin Ltd. v. Builders Supply Co. (Hayes) Ltd., No. *1960+ 5 R.P.C. 128 (C.A.) (1960).
122
GasTOPS Ltd. v. Forsyth, No. 98-CV-5929-000, 2009 CanLII 66153 (ON SC) (Superior Court of
Ontario, Canada 2009).
78

The length of injunction in the US varies depending on circumstances
of the case. In s/.//- . +//..//.,
:::
, the court held a plaintiff has a
right to permanent injunction extending beyond a time when the underlying
secret becomes public knowledge. The standard set in r . :
124

resembles the Canadian standard whereby the doctrine of inevitable disclosure
shall apply and an injunction shall be granted for the period of time it would
likely take for the information to become known to the public.
Damages may be awarded to plaintiffs to cover lost business
opportunities, market advantages, revenues and profits. In c:ots .
t,/, the Ontario court considered various business financial data and
estimates in calculating an award of CA$11.4 million. The American Uniform
Trade Secrets Act 3 pertains to damages, which may be awarded based upon
slightly different standards in the states. In s . :/
::
, an Appeals
court upheld an award of US$4.6 million, although the defendant did not
actually use much of the misappropriated information. A different appeals
court may have decided otherwise.

123
Shellmar Products Co. v. Allen-Qualley Co., No. 31 F.2d 293, 36 F.2d 623 (US 7th Circuit Court of
Appeals 1936).
124
Winston Research Corporation, Charles Tobias and Wayne Johnson v. Minnesota Mining and
Manufacturing Company, No. 19409, 350 F.2d 134, 146 U.S.P.Q. 422 (US 9th Circuit Court of Appeals
1965).
125
Sonoco Products Company v. Johnson, No. 23 P.3d 1287 (Colorado Court of Appeals 2001).



CHAPTER 4
ARBITRATION v. LITIGATION: LITERATURE AND CASE
Formal, binding methods of dispute resolution include arbitration and
litigation. One is private while the other is public. Both feature standardized
processes where parties may present cases and arguments, submitting
documents and evidence, leading to a third partys decision. Numerous
similarities exist between the two methods, although each is distinct and
offers users different advantages and disadvantages.

Advantages of Arbitration

Arbitration is most often found to be a lower cost, speedier means of
settling disputes. Awards are final and binding, and can be enforced by court
order under the New York Convention Concerning the Recognition and
Enforcement of Foreign Arbitral Awards. Tribunals are established on an .
/ basis where arbitrators can be selected by parties to disputes, and may be
appointed due to their knowledge and experience in particular subjects.
Decisions in arbitration are rendered as awards by private tribunals, and
unless all parties agree otherwise, or unless there is a legal requirement to
disclose, the entire procedure is confidential. The private tribunal is more
likely to consider the private interests of individuals and companies, whereas
75

judges as public servants and lay jurors may be subject to more politically-
influenced and erroneous decision making.

Time and Money
American President Abraham Lincoln once reportedly said of
litigation, the nominal winner is often a real loser in fees, expenses, and a
waste of time (Metcalf, 2008).
Considering that the average patent infringement case litigated in the
US in 2007 cost more than US$2.5 million (ibid), with little hope for future
reductions in such costs, Lincolns opinion on fees and expenses still holds
water. Discovery and expert testimony may take years to complete in the trial
process depending on the jurisdiction. Some firms have more than sufficient
financial resources to play out disputes in lengthy litigation proceedings, but
time is of the essence when patents are involved because of the limited
lifespan, both legally and in the market where new developments frequently
occur.
PWC(2008) found that between 1995 and 2007, time-to-trial in more
than 50% of 394 patent cases in 64 US districts was more than 2 years.
According to the same study, 32% of summary judgments and 43% of trial
decisions in US patent cases were appealed in the same period, leading to
more time spent resolving disputes. Despite the lower costs of US Federal
Circuit appeals compared to District Court trials (Moore, 2001), high potential
for appeal and possibilities of reversal thereafter introduce uncertainty into a
litigants strategy, and consume precious time and monetary resources.
76

Disadvantages of the finality of arbitration are discussed in the next section,
but the lack of appeal is also a primary strength of arbitration.

American Discovery!
Former Colorado Supreme Court Justice Rebecca Love Kourlis
testified to the House Judiciary Committee that the civil justice system in the
United States is too expensive and too complex; a lawsuit takes too long and
costs too much (Butterfield et al 2011)
126
, words echoing President Lincolns
from nearly 150 years prior. Kourlis gave input on the issue of discovery and
e-discovery, which have come to represent the single-most burdensome part
of litigation in the United States. In co: t/ . t.. t/
:::
, the court
admitted that the enormous burden and expense of electronic discovery are
well known.
Trouble starts with preservation long before disputes are formed. Since
z././/. . tos
::s
, American Federal Rules have been construed to require
preservation of information when litigation is reasonably anticipated. Industry
advocates have not infrequently complained of unclear preservation duties
(Pace and Zarkaras 2012). General Electric spends more than one million
dollars annually on preservation (Butterfield et al 2011), while more than 99%
of documents preserved never make it to a trial (Rader 2011).

126
Transcript available at the House website
(http://judiciary.house.gov/hearings/hear_12132011_2.html).
127
CBT Flint Partners v. Return Path, 676 F.Supp.2d 1376 (2009).
128
Zubulake v. UBS Warburg (Zubulake III), 216 F.R.D. 280 (2003); Zubulake v. UBS Warburg
(Zubulake IV), 220 F.R.D. 212 (S.D.N.Y. 2003).
77

Although FRCP1 and FRE 102 state purpose of avoiding unnecessary
cost and delay, it is often opined that Courts have failed in this regard.
Amendments to rules and court-adopted model orders on discovery likewise
fail to reduce excess burden. Discovery-related problems may lead to trial by
attrition rather than by jury (Butterfield et al 2011) or settlements driven by
legal expense rather than the merits (Rader 2012). Discovery of
electronically stored information (ESI) is frequently so involved a process that
the prospect of e-discovery alone makes arbitration a preferable DRM. In
u... r./.. . o-.
::.
, the court remarked that a discovery demand in
our courts might yield a haul of 30 million emails, few of which would be
admissible in evidence. Sadly, it appears a runaway feature of the system.
Complying with an e-discovery request cost $249,000 in r, .
co t/. t//
::
and $274,000 in z././/. ttt
:::
. A study by Lawyers for
Civil Justice (2010) found average discovery costs from 2006 to 2008 ranged
between $621,880 and $2,993,567. High-end cases in that period were found
to have had discovery costs of $2,354,868 to $9,759,900 per case. Indeed, an
e-discovery estimate of nearly $10 million was seen in t.. . r//-

:::
. Review is the most costly part of ESI production, which has been
found to rise above $200,000 per gigabyte (Pace and Zarakas 2012). A study
by the Institute for the Advancement of the American Legal System (2008)
found midsize cases generate 500 gigabytes of ESI, costing up to $3.5 million

129
Heraeus Kulzer GmbH v. Biomet, Inc., 633 F. 3d 591 (2011).
130
Wiginton v. CB Richard Ellis, 229 F.R.D. 568, 572 (2004).
131
Supra note 128.
132
Rowe Entertainment v. William Morris Agency, 205 F.R.D. 421 (2002).
78

for processing and review. Justice Kourlis explained that if a case costs 2-3
million USD in legal fees, e-discovery can easily cost another 2-3million.
In s. . c//
:::
, the court explained that discovery can disrupt
operations at multinational corporations where millions of emails are held. In
t// . o c,/
::
, the court expressed the presumption is that parties
must satisfy their own costs in replying to discovery requests, which can lead
to asymmetrical e-discovery costs. Thus, we find persuasive argument made
on behalf of large corporations whose costs are in many cases astronomical
(s. . c// 2010).
American discovery is especially challenging when the scope of a case
is international. In o.. . u///.
::
, Halliburton spent a kings
ransom on discovery producing documents contained remotely around the
globe. European litigants may find the prohibitively expensive (Yip 2012)
American discovery process unreasonably threatening to overall business
strategy. European Parliament Directive 95/46/EC on Data Privacy creates a
conflict of laws where in some cases personal data of Europeans may not be
disclosed for trial in the United States, which in the BREIN case The
Netherlands court remarked cannot be regarded as a country with an
appropriate level of protection for personal data (Frosio 2012). t . +..
Christopher X
::c
in Paris showed the impossibility of mitigating this

133
Swanson v. Citibank, 614 F.3d 400 (2010).
134
Dahl v. Bain Capital Partners, 655 F.Supp.2d 146 (2009).
135
United States ex rel. Julie McBride v. Halliburton Co., et al. Civ. Action No. 05-CV-828 (2011).
136
In re Advocat Christopher X, Chambre Criminelle *Cass. Crim.+ Paris, Dec. 12, 2007,
Juris-Data [No. 2007-332254].
79

conflict of laws, when a French attorney faced criminal charges for disclosing
European personal data at trial in the US, where he was faced with possible
sanctions if he did not disclose the data.
At face value, both the IBA Rules on the Taking of Evidence in
International Arbitration and Chartered Institute of Arbitrators Protocol for E-
Disclosure in Arbitration may appear to follow the same basic broad lines as
American Federal Rules of Civil Procedure and model orders on e-discovery,
thus leaving room open to abuse the process in a similar fashion as witnessed
in public courts. However, the institution of arbitration generally offers a less
burdensome, more equitable process through which parties may resolve
disputes as effectively as, and more efficiently than in public courts. Whether
parties follow standardized rules or draw up their own guidelines for
evidence, it is entirely likely that the privatized nature of arbitration shall
compel parties to act in a less hostile and adversarial manner than they may
otherwise in American courts.

Confidentiality
Unless otherwise agreed by the parties or unless required by law,
arbitration proceedings are entirely private and confidential. Nondisclosure
agreements and requirements often extend to the existence of the arbitration
itself. The public generally has no access to any elements of a claim or
materials relevant to proceedings. In IP cases, confidentiality is favorable
considering the value of the subject matter at dispute. Business interests are in
favor of privacy due to risks that public exposure presents. Companies may
80

also prefer to keep their disputes private because the public may interpret any
involvement in a legal dispute as an unfavorable mark on an organizations
character or credibility.
When trade secrets are included in arbitral proceedings, confidentiality
is essential. Salyer (2005) suspected that industrial espionage has been
achieved by watching trials in public courtrooms. Arbitration offers no such
threat. A public court involved in interim or confirmation and enforcement
stages may order proceedings sealed in order to preserve the confidential
nature of arbitration. In any case, unless otherwise agreed upon by parties,
courts will only make disclosures to the extent needed.

Specialized Tribunal
Between 2000 and 2007, 43% of US patent trials with damages awards
were decided by jury, with 57% decided by a judge. This is an increase from
the 1980s, when the ratio of bench to jury trials was more than 6 to 1, and in
the 1990s when the ratio was more than 3 to 1 (PWC, 2008). The increase in
jury trials is undoubtedly due to the higher success rate of jury trials when
compared to bench trials. Juries tend to award more damages than judges.
However, trial verdicts are not final. In the US, studies have shown high
reversal rates for patent cases in Circuit Courts.
Lay juries may award higher damages than arbitrators, but they also
make more mistakes because they are neither experts in law nor IP. Even
experienced judges make mistakes. Of course, arbitrators too, make mistakes
sometimes, but the chance of error is less in arbitration where tribunal
81

members are appointed based upon their expertise in law and or IP pertaining
to the dispute. Whereas lawyers often complain about the lack of expertise in
litigation of IP disputes, such complaints are very seldom made of arbitration.
International Scope
In matters relating to international trade, domestic courts do not offer
universally-accepted standards, nor is there generally potential for
extraterritorial application or enforcement of decisions rendered by secular
judicial authorities. A simple case involving manufacture and distribution of
goods across a global supply chain may require simultaneous filings in
multiple jurisdictions where there is no guarantee of uniform results. Lacking
a comprehensive system of / /.. international trade courts holding
jurisdiction down to the local level, aggrieved parties preferring litigation are
left with the onerous task of pursuing claims at various levels, in different
languages, under often entirely different systems and structures of law.
When designing and implementing a North American or other
international strategy, if companies rely on domestic courts to resolve all of
their issues, they must employ advocates in each domestic jurisdiction and
adopt a unique method for handling cases in each autonomous region where
laws and procedures may vary significantly. If disputes are resolved via
arbitration, companies can avoid overbilling at local law firms, avoid getting
home-towned, and more evenly apply a singular method and approach to
their commercial dealings.

82

Complexity of Multi-Party and Multi-Jurisdictional Claims
A unique combination of legal and technical issues makes any form of
patent litigation complex. When considering multi-jurisdictional patent
litigation, the differences in procedures and practices that exist between
jurisdictions serve to increase this complexity.
(Freshfields, Bruckhaus, & Deringer, 2011)
Lemley et al (2005) found that patent law, which is territorial by
nature, does not handle multi-user or multi-jurisdictional claims well. Where
more than one party and or more than one jurisdiction are involved in
litigation, conflicts of law arise quickly and can compromise a legal strategy.
We have already discussed various differences between American and
Canadian intellectual property systems. Further differences between those two
nations will be discussed in the following subsection. We can easily conclude
given the variations between the US and Canada two friendly neighboring
nations sharing similar histories and legal systems that vast differences exist
between most nations which severely complicate litigation, minimizing
potential successes for litigants abroad, and potentially compromising IP
protection and enforcement schemes.
Under 35 USC 271(a), direct infringement occurs when:
./... ./. ./, -/. .. //. .// .// ,
,... .. ./ /. t.. s. -, /. t..
s. , ,... .. .., /. .- / /. ,. /../
/,. /. ,.
83

Lemley et al (2005) mentioned t.. . t.
:::
and t.t .

::s
, wherein no direct infringement was found in divided claim
situations. In t,. . ts t//,
::.
, the court held that without direct
infringement, indirect infringement cannot exist. Lemley et al made the
argument that in cases where there are multiple parties working together to
recreate a patented process, an American court may be reluctant to find direct
infringement under section 271(a), which the research team found may create
a right without a remedy.
Certainly the American courts have more often than not provided
remedies in divided claims dating back to :/-u. . o/ o
:
,
wherein the court decided that parties could be held jointly and severally
liable. In s/./. . u///.
::
, the district court held that infringement of
a patented process or method cannot be avoided by having another perform
one step of the process or method. Similarly, in // . rt c.
::
, the
court found that the defendant, in effect, made each of its customers its agent
in completing the infringement step, knowing full well that the infringement
step would in fact be promptly and fully completed by those customers, and

137
Faroudja Laboratories, Inc. v. Dwin Electronics, No. CIV. 97-20010 SW, 76 F. Supp. 2d 999 (US
District Court, ND California 1999).
138
E.I. DuPont De Neumours and Co. v. Monsanto Co. , No. 903 F. Supp. 680, 734-35 (US District
Court, D. Del. 1995).
139
Dynacore Holdings Corp. v. US Philips Corp., No. 03-1305, 03-1306, 363 F.3d 1263 (US Court of
Appeals 2004).
140
Thomas-Houston Electric Co. v. Ohio Brass, 80 F. 712 (US Sixth Circuit Court of Appeals 1897).
141
Shields v. Halliburton Co., No. 80-3729, 216 U.S.P.Q. 1066, 667 F.2d 1232 (US 5th Circuit Court of
Appeals 1982).
142
Mobil Oil Corporation v. WR Grace & Company, No. 14589, 367 F.Supp. 207 (US District Court of
Connecticut 1973).
84

the defendant was thus liable. This could be a useful logic in handling Bit
Torrent claims (see Karunaratne, 2012). Although courts have been reluctant
to admit, it is clear that the firm behind the software fully intends on the
software being used primarily for infringement of copyright.
Notwithstanding the American courts broader interpretations of
infringement in the bulk of divided claims, s/./. . u///. brought
about another aspect of international litigation that poses a significant threat to
the strategies of foreign litigants: ethno-linguistics and legal colloquialism.
The nose of wax from r/. . t./
::
was brought out of the chest of
analogies in s/./.. To outsiders of the American system a nose of wax
uttered by a judge or other lawyer may appear to be silly talk, yet it refers to
an important comment from the r/. case:
"Some persons seem to suppose that a claim in a patent is like a nose of
wax, which may be turned and twisted in any direction, by merely
referring to the specification, so as to make it include something more
than, or something different from, what its words express."
English-language systems have numerous such phrases that are not
easily interpreted by outsiders including French-language speakers from
Quebec. Nuances and legal slang may pose unfair and unreasonable threats to
second language speakers and foreign claimants just as any non-literal
wording in any language poses significant threats to international cases.
As globalization and corporate expansion continues throughout the 21
st

century, multijurisdictional claims and multiple language complaints will

143
White v. Dunbar (119 U.S. 47, 51, 7 S.Ct. 72, 74, 30 L.Ed. 1886).
85

probably increase in frequency. Where multinational corporations are
involved, questions relating to corporate citizenship and jurisdictional parity
similar to those asked in r.// t, . rt .t
:
could be extended to
international claims where conflicts of laws are more likely than in domestic
cases.
Arbitration can help restore equality between parties from separate
nations. By using choice-of-law provisions in arbitration clauses, parties can
negotiate on applicable laws and procedures prior to disputes. Fuller control
of the dispute resolution process allows parties to preserve their own interests
by avoiding the compulsory jurisdiction of domestic courts and secular legal
systems.
Jurisdiction
Even with harmonized trade systems under the WTO, UN and other
treaties, domestic legislation is not identical among parties to or members of a
particular agreement, nor are adjudication and enforcement. For example, in
the Epilady case, patent infringement litigation was instituted in 9 EU nations,
5 of which found infringement, 4 of which found no infringement (Wilbers,
2010).
/ . +::
:
is another example of jurisdictional
complications. Microsoft supplied foreign computer makers with a master
copy of Windows, which the foreign recipient copied and installed on
computers abroad. AT&T held a patent which Windows had the potential to

144
Wells Fargo Bank, N.A. v. WMR e-Pin, LLC, No. 09-3800, 653 F.3d 702 (US 8th Circuit Court of
Appeals 2011).
145
Microsoft v. AT&T, No. 127 S.Ct. 1746 (US Supreme Court 2007).
86

infringe. AT&T sued for infringement for foreign installations of Windows.
Lower courts in the US decided in favor of AT&T. The case was later
reversed because the copies sold abroad were not considered as having been
supplied by Microsoft.
t. . :
/
c.., t c.
:c
showed an issue relating to the
territorial principle of private international law when the plaintiff filed suit in
Canada for alleged infringement in California, USA. Preston claimed to have
had ownership over the Ewok character in the Star Wars trilogy, which
George Lucas and Lucasfilm made famous. Of the three defendants, George
Lucas, Lucasfilm Ltd. and 20
th
Century Fox Canada Ltd., only the last was
located in Canada. As a subsidiary of the larger American company, 20
th

Century Fox Canada Ltd. was not liable for greater organizational activities;
since there was no infringement alleged in Canada and no distribution by the
subsidiary, there was a lack of jurisdiction and a conflict of laws.
The territorial approach is the preferred method of resolving claims and
disputes under private international law. The European Parliaments Rome
II Regulation (2007) offers further guidance on the issues of territoriality and
conflicts of law:
+/. s t/,.-. / .//../ ,,., ,/
: :/. /. ,,///. ./ //, , /-
/,.-. / .//../ ,,., ,/ /// /. /. /. / /.
., / .// ,. /-..

146
Preston v. 20th Century Fox Canada Ltd. et al., No. 33 C.P.R. (3d) 242 (F.C.T.D.), aff d (1994), 53
C.P.R. (3d) 407 (F.C.A.) (Canadian Federal Court Trial Division, Court of Appeal 1990).
87

: t /. . / ./ //, , /-
/,.-. / ., c--., .//../ ,,., ,/ /.
/. ,,///. /// / , .. / ,.... /, /.
./.. c--., .-. /. /. /. / /. ., .// /.
/ /,.-. . --..
Secular public authorities, domestic courts, and traditional litigation
have not been time or cost efficient options for IP proprietors in various
instances internationally where uncertainty and non-uniformity are constants.
Arbitration out of contractual agreement under rules from major international
arbitral bodies such as the ICC, LCIA, UNCITRAL or WIPO offers parties
options to resolve international disputes via a singular process, in a time and
cost efficient manner, where the award may be enforced in any state party to
the New York Convention. One should note, however, in several cases there
appears to be no possible venue or avenue for cost and time efficient handling
of counterfeiting and piracy. As such, new developments are recommended
later in this dissertation.

Options for Private Organizations under International Law
International law generally pertains to states, whereas individual
persons, natural or juristic, have only limited rights (Cassese, 2005). States
may litigate disputes against other states at the ICJ under treaties referring
such disputes to the Court. States may also choose to arbitrate with another
state pursuant to provisions contained in relevant agreements such as Article
25 of the WTO Dispute Settlement Understanding.
88

If an individual or business wishes to pursue a claim against a state,
however, there is no international court which may hold jurisdiction over the
claim, and thus litigation at the international level in private-public disputes is
not an option. Although the doctrine of sovereign immunity is generally not a
defense when a dispute arises out of commercial activity, litigation against a
state in its own internal courts is most often a futile undertaking. Arbitration
offers private parties another option to resolve disputes with states under
contractual terms, bilateral or multilateral treaties like NAFTA, or the
Convention on the Settlement of Investment Disputes between States and
Nationals of Other States
147
.
Since 1972, ICSID has been overseeing arbitration of investor-state
disputes. In its first forty years, the institution handled nearly 300 cases, most
of which involved natural resources or infrastructure projects in developing
and third world nations. Multinational corporations and foreign investors may
find bias or less-than-fair procedures in public courts in such nations where
judicial systems are underfunded and there may be hostility toward wealthy
foreign parties. Alternatively, less-developed states may experience problems
with corruption if wealthy foreign parties handle disputes in public courts.
Arbitration helps balance the scales for both parties.
Arbitration under rules like those provided by ICC, LCIA,
UNCITRAL, and WIPO is truly international. There is no home court
advantage. Arbitral tribunals are required by rules to conduct proceedings

147
Text available at ICSID website
(https://icsid.worldbank.org/ICSID/ICSID/DocumentsMain.jsp).
89

with the goals of avoiding excessive delays and costs. Whereas litigation
through courts is subject to disclosure to the public, the entirety of any
arbitration proceedings, including the existence of the arbitration itself, is only
disclosed to the public upon the parties mutual agreement or when there is a
legal responsibility to disclose. Arbitral awards are final, binding, and without
appeal aside from a limited number of instances where the award may be
nullified or revoked by a judicial authority. The private, confidential, binding,
international natures of arbitration are main strengths in resolving IP disputes,
especially for private parties where there are no other options.

Recognition and Enforcement
Any party may pursue recognition and enforcement of a foreign arbitral
award before a domestic court in a state which is party to the 1958 New York
Convention
148
. Members of the treaty are required to recognize and enforce
such awards provided that the applying party supplies to the court, in
accordance with Article IV(1), an authenticated original award or certified
copy thereof, and the original arbitration agreement or certified copy thereof.
Limited grounds for refusal are laid out in Article V. Pursuant to (1)(a)
therein, recognition and enforcement of the award may be refused if a party
furnishes to the authority proof that the parties had no capacity to enter into an
arbitration agreement, or if the agreement is not valid under the law which the

148
Text available at UNICTRAL website
(http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html).
90

parties subjected it to, or under the law in the country where the award was
made.
If a party was not given proper notice of the appointment of an
arbitrator or of the arbitration, or if a party was unable to present his case,
Article V(1)(b) applies. Article V(1)(c) pertains to cases where the award does
not follow the terms of submission to arbitration, or if its scope greatly
exceeds that of the arbitration, or if it is rendered upon matters not
contemplated in arbitration. If the composition of the tribunal or procedure did
not follow the agreement of the parties, or if those were not permitted under
the law in which the arbitration took place, (V)(1)(d) may be invoked.
The authority to which an application for recognition and enforcement
has been made may further refuse such action under Article V(1)(e) if the
award has not yet become binding, or if it has been set aside or suspended in
the country in which it was made, or under the law of that country.
Article V(2)(a) provides further rights to refuse if the subject matter of
arbitration is not capable of settlement by arbitration under the law of the
country in which enforcement and recognition is sought. If recognition or
enforcement would be contrary to public policy of the country in which it is
sought, Article V(2)(b) may be used to refuse such action.
Article VII declares that the provisions of the treaty do not preclude a
partys rights under other treaties or domestic law.
Article 35 MAL pertains to recognition and enforcement, and Article
36 provides grounds for refusing recognition or enforcement. Article 36 MAL
is merely a restatement of Article V of the New York Convention.
91


Cases Pertaining to Recognition and Enforcement
CLOUT Case 401was decided before the Highest Regional Court of
Bavaria, Germany in the year 2000. A Russian claimant sought enforcement
in Germany of an award rendered in Russia against a German respondent. The
German party argued that the award was not enforceable because the Russian
party did not present an original arbitration agreement or a duly certified copy
thereof as required under Article IV(1)(b) of the NY Convention. The Court
used Article VII(1) of the NY Convention in combination with 1064(1) of
the German Code of Civil Procedure, which allowed the application without
presentation of the arbitration agreement.
The Ontario, Canada Court of Justice concluded in .-/ .
o--
:.
that a foreign award did not need to be confirmed in order to be
enforceable in Ontario. The Court based its decision on s/.. . c-
:
,
another Ontario, Canada case which showed that public policy favored
avoidance of delays and improved efficiency when parties resolved disputes
through arbitration.
Maher J. delivered the opinion for the Queens Bench for
Saskatchewan in s./., . t/
::
, where an application was made
requesting the Court to register an award and grant judgment in the amount of
CA$46,935, which amounted to double recovery from the respondent, being

149
Murmansk Trawl Fleet v. Bimman Realty Inc., O.J. No. 3018 (Ontario Court of Justice 1994).
150
Robert E. Schreter v. Gasmac Inc., CLOUT No. 2 (Ontario Court, General Division 1992).
151
Subway Franchise Systems of Canada Ltd. v. Cora Laich, No. Q.B.G. No. 482 of 2010 (Queen's
Bench of Saskatchewan 2011).
92

the award plus profits earned from ongoing operation of the Subway
franchise. Double recovery was considered contrary to public policy. The
application to recognize the award was therefore dismissed under provincial
law and Article 36(1)(b)(ii) of the MAL Convention.
In c-.., c/./ . t-,. r.
::
, the US Ninth Circuit Court stated
that manifest disregard of the law remains valid ground for vacatur of an
arbitration award under 10(a)(4) of the Federal Arbitration Act. The same
Court held in /, ../ . t,.
153
that a manifest disregard of the
law exists when it is clear from the record that the arbitrator recognized the
applicable law and then ignored it. Using that standard, the Court confirmed
part of the award and vacated part wherein the arbitrator exceeded the scope
of his power by enjoining affiliates of Comedy Club which were not related to
the dispute.

Disadvantages of Arbitration

Although arbitration has vast advantages over litigation, there are some
drawbacks too. In some instances, the disadvantage can be an advantage
depending on how a party perceives the characteristic.


152
Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277, Nos. 05-55739, 05-56100 (US Ninth
Circuit Court of Appeals 2009).
153
Michigan Mutual Insurance Company v. Unigard Security Insurance Company, No. 92-36804, 44
F.3d 826 (US 9th Circuit Court of Appeals 1995).
93

Mutual Consent Requirement
Arbitration most often arises out of a contractual agreement to refer
disputes to the procedure. In any case, both parties must voluntarily enter into
arbitration. When disputes arise, respondents often contest the validity of
arbitration agreements and the jurisdiction of the tribunal despite the fact that
they willfully and knowingly entered into a contract containing an arbitration
clause. Where there is no valid arbitration agreement, a tribunal cannot so
easily establish jurisdiction. Thus, in cases of bad faith infringement, as
previously stated, arbitration is often not a suitable option.
Copyright and trademark claims are sometimes exceptions contained
within arbitration clauses. Whereas other disputes may be referred to
arbitration, some interested parties prefer to keep certain IP disputes out of
arbitration, perhaps due to potential for punitive damages in courts of law. For
example, in +//. . t.,
:
, the US District Court in Kentucky reviewed
an arbitration clause which specifically excluded:
any dispute relating to the use or protection of any trade name, service
mark, trademark, trade dress, or trade secret, including (without
limitation) the right to apply to any court of competent jurisdiction for
appropriate injunctive relief for the infringement of any trade name,
service mark, trademark, trade dress, or trade secret.

154
Alliance Cost Containment, LLC f/k/a Starmont WIllow, LLC v. Lee Ferry and National Cost
Containment, LLC and Brett Collier and Collier
Tidmore & Associates, Inc, No. 3:11-CV-414-H (US District Court, WD Kentucky 2011).
94

Consequently, the Court dismissed the motion to compel arbitration of
exempted subject matter pertaining to trademarks. Trademark infringement
claims may result in higher damages and awards in public courts.

No Appeal
Many parties consider this a prime advantage of arbitration. However,
the finality of awards can be a disadvantage for unsuccessful parties which
may win reversals in appeals courts under similar circumstances after a first
trial loss. Arbitral awards are binding, recognizable and enforceable through
court orders, but there is no international enforcement agency ,. ., and
private parties lack the coercive powers of the state if property needs to be
retrieved. In cases where an award is rendered in favor of a private party
against a state, retrieval of the award amount can be difficult, and in the case
of a recalcitrant debtor state, virtually impossible.
For example, Venezuelas withdrawal from ICSID
155
resulted in Exxon
having no way to enforce any future award if Venezuela does not have
property within the territory of another state party to the New York
Convention which Exxon could claim via a court in that country (see Reuters,
2012).
Arbitrability Concerns
Two fundamental questions raised in IP disputes are whether or not the
IPR is valid, and if yes, if infringement has occurred. According to experts on

155
Information on Venezuelas withdrawal notice is available at the ICSID website
(https://icsid.worldbank.org).
95

the subject, questions of arbitrability, especially pertaining to patent validity,
are the biggest obstacles to more extensive use of international commercial
arbitration for the resolution of intellectual property and technology transfer
disputes (Mladen, Singer, & Vukmir, n.d.). Whether or not a particular
intellectual property dispute is arbitrable depends on domestic laws which
vary among nations that have otherwise more uniform IP legislation. An
arbitral award may not be recognized or enforced within a nation which is
party to the New York Convention if the countrys laws do not allow
arbitration of such disputes.
Some countries favor a prohibitive approach to arbitration of IP
disputes. In South Korea, IPRs have not always been recognized as
commercial matters, and enforcement of foreign arbitral awards under the
New York Convention has not always been available (ICC, 1998a). In the
Netherlands, the 1995 Patent Act significantly restricts arbitration by giving
exclusive jurisdiction over patent issues, including validity and infringement,
to the Court of First Instance in The Hague (M. Smith et al., 2006). Patent
validity is also not arbitrable in Brazil, Finland, and Italy (Adamo, 2011).
Adamo found that patent validity is not arbitrable in Canada, but Eiland
(2012) found that it is. It is undisputed is that in t.,... . t.
c/...
:c
, the Canadian Supreme Court held that disputes relating to rights
created by statute, namely copyright, are arbitrable.

156
Desputeaux v. Editions Chouette (1987) inc., 2003 SCC 17 [2003] 1 S.C.R. 178 (Supreme Court of
Canada 2003).
96

Varying opinion on separate types of IP and their mutually exclusive
arbitrability is the norm worldwide. Most countries in recent years have
favored a more inclusive standard, allowing arbitration of IP disputes in
general or subject to certain restrictions. Infringement and licensing issues are
generally arbitrable under domestic laws, whereas validity/invalidity
challenges are arbitrable with the resulting effect that awards may be binding
only . ,.; some states may not be compelled to invalidate a patent
upon an arbitral tribunals decision.
The following national policies help further illuminate this point about
the differences between nations regarding the arbitrability of IP disputes:
1. United States
In the USA, 35U.S.C.294(a) concerning voluntary arbitration permits
contracts involving any right under a patent to contain provisions requiring
arbitration of disputes relating to patent validity and infringement. Under
135(d), parties to a patent interference may submit the dispute to arbitration.
Notice of an award relating to a patent must be submitted in writing to the
Director for the award to be enforceable.
119 and 907 of the US Copyright Act provides rights for parties to
set royalty fees through arbitration. Parties to infringement disputes may settle
through arbitration under 1321. Notice of awards must be given to the
Administrator for the award to be enforceable.
2. Canada
Adamo (2011) and Eiland (2012) came to different conclusions on the
arbitrability of patent validity in Canada. Dohaney (2008) found that no cases
97

or legislation existed as of then which pinpointed the issue, but that experts
have suggested Canadian law could permit such arbitration. t.., /
: . u/
::
involved a brief question regarding the arbitrability of
patent validity, which has been the subject of disagreement among experts.
The Ontario Court cited the Federal Courts Act, which at 20 reads:
: : :/. t.../ c. / ./... ,/ .. /....
./. . ./. ..// /...
// . / //, ,,/ / , ,. / ..
/ /. ., / , ,,,/ ..-/ ../ ..,
,,,/, ./ /. -., / /. t.,.. c.
:,,,/, + .
/ // . .// .,/ -,./ ./ , ,. /
.. /.. , ., , .,. / ,,,/ ..
-/ ../ .., ,,,/. ./... ,,,/
-.. .,.,.. ... ./..
The university sought an order stating the arbitral panel, appointed
under the arbitration clause in a licensing agreement, lacked jurisdiction over
Harbinson's claim. Harbinson did not advance any action under the Patent
Act; he claimed damages under the law of contracts. The motion was
therefore dismissed as the court held that the panel was correct in determining
it had jurisdiction over the claims. The arbitrability question was left open.

157
Governing Council of the University of Toronto and the University of Toronto Innovations
Foundation v. John H. Harbinson Limited, No. 05-CV- 283673PD2 (Ontario Superior Court of Justice
2005).
98

Although Canada is certainly not as permissive of arbitration of patent
validity as the United States there being apparently no case on record to
support a claim that the law allows it, while 20(1)(b)of the Federal Courts
Act certainly seems to forbid it scholars and practicing attorneys have made
a case that the issue is arbitrable.
3. South Africa
South Africas 1978 Patents Act and later amendments 18(1) states
that no tribunal other than the commissioner shall have jurisdiction in the
first instance to hear and decide any proceeding relating to patents. In cases
involving assignment of a patent to the South African government, arbitration
may be used under 79(8) to determine what compensation the proprietor is
paid. 9A(1)(c) of the 1978 South African Copyright Act provides for
royalties to be determined in arbitration.
4. Belgium
The 1984 Belgian Patent Law Article 73.6 provides for disputes
concerning ownership, validity, infringement of patents and/or patent
licensing to be submitted to arbitration. Legal experts agree that the Uniform
Benelux Act on Trademarks and the Uniform Benelux Act on Drawing and
Models do not prohibit disputes from being referred to arbitration (ICC,
1998a).
5. France
In France, the Trade Marks Act, Article 35 states that agreements
relating to trademarks can be the subject of arbitration pursuant to Articles
2059-2060 of the Civil Code. The 1992 Intellectual Property Code Articles
99

L615-17 and L716-4 state that the jurisdiction of the First Instance Courts in
cases involving patents, marks, and industrial designs does not preclude
recourse to arbitration. However, Article L615-17 does grant the courts sole
jurisdiction over matters relating to revocation of patents. The Paris Court of
Appeals ruled in stt . ttt
158
that the private nature of arbitration prevents
the arbitration of patent validity.
6. United Kingdom
Section 44(4)(b) of the UK 1977 Patent Act allows arbitration of
licensing and contractual disputes by arbitrators appointed by the Secretary of
State. 52(3) provides for arbitration of limited disputes with order by the
Comptroller General of Patents. 3(5) of the 1988 Copyright, Designs and
Patents Act grants the courts power to refer to arbitration any disputes relating
to use of registered designs for the services of the Crown.
7. India
India is a case where opinion among practitioners is split on the
question of patent arbitrability. 103(5) of the 1970 Patents Act grants the
High Court power to refer any number of patent issues to arbitration in cases
where the government wishes to use a patented invention. However, no court
cases were found which would give practical effect to the statute. Some legal
experts say that neither infringement nor validity issues are arbitrable because
the courts have exclusive jurisdiction over patent cases, whereas others argue
that arbitral awards revoking patents may not be enforceable but awards
relating to infringement cases may be; and still more consider any issue

158
SDP v. DPF, Rev. Arb. 280, 1255 (Paris Court of Appeal 1989).
100

including validity to be arbitrable leading to . ,. effects. Licensing
issues are arbitrable and enforceable in domestic courts (M. Smith et al.,
2006).
8. Germany
The 2002 German Law to Strengthen the Contractual Position of
Authors and Performing Artists amended the Copyright Law 36 and 36(a),
granting parties rights to settle joint remuneration disputes through arbitration
in accordance with the Civil Code. Article 1030 of the German Code of Civil
Procedure authorizes arbitration of any right to which a commercial or
financial value is attached. Infringement is a private legal issue whereas
validity concerns public law (M. Smith et al., 2006). Infringement issues are
arbitrable, but patent validity issues have remained outside of the scope of
arbitration. In practice, an arbitral tribunal may decide that a party has no right
under a patent and that such a party must have the patent declared null and
void by the competent authority. Enforcement of such an award before the
authority first requires the authority nullify the patent (ICC, 1998a).
9. Japan
The Japanese Code of Civil Procedure allows for arbitration of disputes
regarding the invalidity, enforceability and infringement of patents, copyright
and trade names. Awards declaring a patent, utility model, design or
trademark invalid cannot be properly enforced without the Patent Office
declaring the right invalid (Adamo, 2011). The Japanese Patent Office Asia-
Pacific Industrial Property Center supported ADR for patent disputes,
101

mentioning advantages relating to its closed-door, specialized, speedy,
flexible, and international nature(Hayashi, 2011).
10. China
Arbitration law in the PRC allows for arbitration of contractual
disputes such as IP assignment, infringement and ownership disputes, but
patent validity is not arbitrable because it is an administrative issue (Adamo,
2011; M. Smith et al., 2006). Likewise, in Taiwan, disputes relating to the
validity of patents may not be resolved through arbitration because such
disputes are treated as administrative processes. However, other IP disputes
are capable of resolution through arbitration, such as disputes relating to
ownership rights or remuneration between employers and employees where IP
created in the course of work. Infringement disputes, royalty disputes, tort
claims, assignment and licensing disputes are also arbitrable in the Taiwan
(Chen-Huan Wu, 2004).

Arbitration Lacks a Case Law System
Due to the private and confidential nature of arbitration, there are
insufficient cases publicly available to establish a case law system, and thus
.. . handling of issues results and over time decisions by tribunals may
not follow decisions made previously. Considering the international scope of
arbitration, precedents and rules of law of multiple jurisdictions will not be
concurrently applicable, considering also that international law does not abide
by a rule of . .. like English common law systems, effects of the
absence of such a system of precedents may be largely moot given that there
102

are publicly accessible rules of law, interpretations, and cases available
through litigation. The lack of a system of case law is another point which can
be construed as a strength of arbitration depending on the wants and needs of
participants.



CHAPTER 5
ARBITRATION LAW
Treaty and statute provide uniform guidelines for arbitration of any
dispute, regardless of the subject matter. Domestic courts in the USA and
Canada have given effect to international law and implementing statute in
numerous instances, some of which are cited in this chapter. The US and CA
have harmonized both domestic and international arbitration laws slightly
more than other areas of law reviewed in previous chapters. Blanket pro-
arbitration policies exist in both nations. Some differences are also clarified in
the following pages.

UNCITRAL Model Law on International Commercial Arbitration

In 1985, UNCITRAL adopted the Model Law
159
with the intent of
assisting nations establish more uniform arbitral procedures to meet the
specific needs of international commercial arbitration users. Research leading
to MAL found that historical domestic laws were often inappropriate for
international cases, and disparity was common between nations. Some
preexisting domestic arbitration laws dated back to the 19
th
century and
considered the arbitral process as equating to litigation, which is not entirely

159
Text available at the UNCITRAL website
(http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html).
103

incorrect in theory, but may not be the best description of the process. Other
statutes were incomplete, unrefined or otherwise outdated according to
UNCITRAL.
MAL coincides with the New York Convention and UNCITRAL
Arbitration Rules. The law was written in a way such that its provisions would
not conflict with any treaties to which adopting nations may be party.
Chapter I outlines general provisions. Chapter II pertains to the
arbitration agreement. Chapter III is regarding the composition, and Chapter
IV the jurisdiction of the arbitral tribunal. Chapter V is about the arbitral
proceedings. Chapter VI is relevant to the close of proceedings and award.
Chapter VII provides limited recourse against the award. Chapter VIII
pertains to recognition and enforcement of awards.
Article 1(3) defines arbitration as international if the parties to an
arbitration agreement have, at the time of the conclusion of that agreement,
their places of business in different States. Additionally, arbitration may be
international if the place of arbitration, the place of contract performance, or
the place of the subject matter of the dispute is situated in a State other than
where the parties have their place of business or if the subject matter relates to
more than one country.
Articles 8(1) and 9 concerning arbitration agreements, and Articles 35
and 36 concerning arbitral awards, emphasize recognition and enforcement at
the global level, regardless of where arbitration takes place.
Article 5 states clearly that no court shall intervene except where so
provided by this Law. The Model Law provides that the tribunal has full
104

control over as much of the proceedings and process as possible while not
giving it an ./ .. character. Courts may participate or intervene under
limited circumstances. Articles 11, 13, 14, 16, 27 and 34 were written with the
intent of simplifying MAL such that domestic courts worldwide could be
involved in matters relating to composition of the arbitral tribunal,
jurisdiction, and setting aside of the award.

Arbitration Law in Canada and the United States

Canadian and American arbitration laws are closely similar, but not
identical. Both jurisdictions have adopted a pro-arbitration system, but the
American FAA (Title 9 U.S.C.) was enacted prior to the Model Law and NY
Convention, whereas modern Canadian law was designed to implement the
MAL. Both the US and CA have Uniform Arbitration Acts which harmonize
lower courts with the aim of supporting the institution of arbitration, but
whereas CA and all 13 lower governments adopted MAL, only 7 American
states did the same while the US had not as of 2012. The argument against
adoption of MAL at the Federal level in the US consists of support for the
system of case law and expertise relating to the FAA.
Most provisions of the FAA do not derogate significantly from the
Model Law or conflict with the New York Convention, which was obviously
an American project as seen by its nickname. A big difference between the
FAA and MAL is the lack of provisions regarding interim orders in the FAA,
but the FAA generally serves as a .. / Model Law implementing statute.
105

Importance of Case Law
Court opinions help define the scope and function of arbitration law in
the US and Canada. Courts intervene and assist in the arbitral process
consistent with the FAA and MAL implementing statutes before, during, and
after proceedings. There are no IP-specific arbitration statutes in the US or
Canada; the FAA, Model Law, and implementing state or provincial uniform
arbitration acts have authority over all arbitrations. When involved, courts
consider arbitration a matter of law regardless of the merits or subject of
cases. In public courts, generalist judges preside over wide ranges of cases,
including related to IP and arbitration. Opinions reflect this general expertise.
Court opinions referring to IP arbitration cases include most frequently
citations of other cases relevant to issues of arbitration, but on average more
than three-fourths of those cases are not IP arbitration cases.
Complex mixtures of facts and laws are present in IP cases, whether
they go to arbitration or to public courts. Arbitrators and judges or juries
consider the same facts and generally make decisions within the same legal
framework. Arbitration is a private substitute for litigation. In theory, there
should be little variance between court opinions and arbitral awards, although
arbitration is considered more reliable due to tribunal expertise, so in IP cases
the awards may vary significantly from court decisions.
While arbitral awards are virtually never published, and the details of
IP arbitration cases generally never disclosed, cases of arbitration with IP
subject matter do appear in courts. However, those courts do not generally
make .. . reviews of cases, and they rarely discuss merits or details.
106

Confidentiality and jurisprudence concerns limit the disclosure of any details
of disputes to only those which are essential to the issues at law in courts.
The following sections discuss matters of IP and arbitration. Cases
cited in this chapter are all relevant to arbitration, and thus IP arbitration, but
not all are IP arbitration cases. As a matter of law in the court involvement
stage, the factual substance of disputes at arbitration is not often of crucial
importance to forming judicial opinion. Cases reviewed in the next pages not
consisting of IP subject matter are generally landmark rulings which establish,
affirm, or otherwise reflect some important feature of arbitration.

Availability of Cases
During the search phase, US cases were found in greater abundance
than Canadian cases, and therefore American cases are cited in greater volume
in this chapter. Cases involving international arbitration, especially those in
IP, were extremely rare in my queries and searches. Due to the limitations of
this study, domestic cases make up the near entirety of the cases in the
following sections. Territoriality in private international law holds that
domestic law and case shall be overriding guides. Hence, domestic cases are
of relevance to the topic under review. Furthermore, Canada and the USA are
economically and politically powerful worldwide, so their domestic laws and
interpretations may have broader effect and likely represent larger
international trends.
The UNCITRAL Model Law and New York Convention help
guarantee recognition and enforcement of foreign arbitral awards. NAFTA,
107

the WTO agreement and other treaties help assure national treatment and thus
equal treatment of all parties to court cases, regardless of national origin.
Cases in following sections define principles and rules of law present
in both the US and Canada. New cases, precedents and landmark decisions
will undoubtedly follow in time. Legislative changes may also occur. The
cases cited hereafter should create a full, clear picture of prominent issues of
arbitration law, including , / those related to international IP disputes.

United States Case Law

In ttoc . r///. u..
:c
, Justice Stevens, quoting c/-. .
t..:/
:c:
explained that the purpose of the FAA was to reverse
the longstanding judicial hostility to arbitration agreements that had existed at
English common law and had been adopted by American courts, and to place
arbitration agreements on the same footing as other contracts.

Origins of the FAA
The FAA is the oldest arbitration act in the world, having come from
the interwar period prior to the harmonization efforts that followed the fall of
the League of Nations and rise of the United Nations system. In 1924, upon
consideration of the FAA, the 68
th
Congress noted the need for new legislation
due to an anachronism of our American law stemming from centuries old

160
EEOC v. Waffle House, Inc., No. 99-1823, 534 US (US Supreme Court 2002).
161
Gilmer v. Interstate/Johnson Lane Corp., No. 500 US 20, 24 (1991).
108

jealousy of the English courts for their own jurisdiction. In the English case
s . +..,
:c:
, Lord Campbell explained that throughout history, the salaries
of judges relied upon fees, and thus there was great competition to get as
much as possible of litigation into Westminster Hall for the division of
spoiland they had great jealousy of arbitrations whereby Westminster Hall
was robbed of those cases (Kaufmann-Kohler, 2005)

Broad Interpretation
Since 1925, the FAA survived largely due to judicial interpretation
favoring arbitration. In c. c, . +.-
:c:
, Justice Stevens, dissenting,
remarked that there is little doubt that the Courts interpretation of the Act
has given it a scope far beyond the expectations of the Congress that enacted
it. In landmark cases / . o. / :... / t./. s/.
:c
and
/. . s/.
:c
, the Court held that it shall read agreements to
favor arbitration, but only pertaining to matters which the parties agreed to
arbitrate, which reflects the opinion from t- t . t/. c//
:cc
,
where the Court held that the purpose of Congress in 1925 was to make
arbitration agreements as enforceable as other contracts, but not more so.

162
Scott v. Avery, No. 25 L.J.Ex. 308, 313 (British Court 1855).
163
Circuit City Stores, Inc. v. Saint Clair Adams, No. 99-1379 (US Supreme Court 2001).
164
Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, No. 87-
1318, 489 U. S. 468, 478 (United States Supreme Court 1989).
165
Mastrobuono v. Shearson Lehman Hutton, Inc., No. 94-18, 514 U.S. 52 (United States Supreme
Court 1995).
166
Prima Paint Corp. v. Flood & Conklin Mfg. Co., No. 343, 388 U.S. 395 (US Supreme Court 1967).
109

Notwithstanding the pro-arbitration interpretation of the FAA, parties
may agree to limit the issues subject to arbitration (see .// . s/.
:c:
),
to arbitrate according to certain rules (see / . o. / :...
168
), and to
limit the parties to arbitration (see s/./. . +-/ t...
:c.
).

Preemptive
In s.//. . r.,
::
, the Court stated that:
In enacting 2 of the federal Act, Congress declared a national policy
favoring arbitration and withdrew the power of the states to require a
judicial forum for the resolution of claims which the contracting parties
agreed to resolve by arbitration.
The preemptive nature of the FAA was seen in Doctors Associates v.
c
:::
, when the syntactical requirements of Montana contract law held
as unenforceable an arbitration clause contained in a franchising agreement.
The US Supreme Court held that Montana's first-page notice requirement,
which governs not any contract, but specifically and solely contracts
subject to arbitration, conflicts with the FAA and is therefore displaced by
the federal measure.


167
Supra note 40.
168
Supra note 164.
169
Stolt-Nielsen S.A. v. AnimalFeeds International Corp. , No. 559 US (US Supreme Court 2010).
170
Southland Corp. v. Keating, No. 82-500, 465 U.S. 1 (US Supreme Court 1984).
171
Doctor's Associates, Inc., et al. v. Casarotto et ux., No. 95-559, 517 US 681 (US Supreme Court
1996).
110

Compelling Arbitration
Court orders compelling arbitration where agreements exist are
common. In :./ . t t
:::
, the 6
th
Circuit Court of Appeals held
that:
Before compelling an unwilling party to arbitrate, the court must
engage in a limited review to determine whether the dispute is
arbitrable; meaning that a valid agreement to arbitrate exists between
the parties and that the specific dispute falls within the substantive
scope of that agreement.
There are limited exceptions where a written arbitration agreement may
not be needed. For example, in /../ +/,/ . c,/.,.
:::
, a
royalties licensing dispute involving an unauthorized assignment of rights by
the licensee, the California court compelled arbitration involving the signatory
and a non-signatory party.
Another exception to the agreement requirement is s./ s/ t/
. s./ c..
::
and related cases:
courts have compelled arbitration of claims against a non-signatory
who is either a parent or successor corporation to a signatory party to
an agreement containing an arbitration clauseholding that where the
original signatory to a license agreement was later acquired and
became a part of the parent corporation and there was a nexus between

172
Javitch v. First Union Securities, Inc., No. 315 F.3d 619 (US 6th Circuit Court of Appeals 2003).
173
Molecular Analytical Systems v. Ciphergen Biosystems, Inc., No. 186 Cal.App.4th 696, 111 Cal.
Rptr. 3d 876 (California Sixth District Court of Appeals 2010).
174
Sunkist Soft Drinks v. Sunkist Growers, Inc., 10 F.3d 753 (US 11th Cir.1993).
111

the plaintiff's claims and the license agreement, the plaintiff was
equitably estopped from avoiding arbitration with the parent
corporation. (see t, . / t. c-,.
::
)
In a 1983 agreement, Philips Corporation USA licensed patents to a
company called "GI". Microchip Technology, Inc. claimed to be the successor
of that license because it was spun off from a wholly owned subsidiary of
GI. The 1983 agreement contained an arbitration clause, under which Philips
commenced action in 2002. Microchip refused to arbitrate. Philips then
simultaneously argued that Microchip was not a party to the 1983 agreement
and motioned to compel arbitration under the agreement. Microchip's motion
to stay arbitration was granted, and Philips' motion to compel was denied.
In /, :./ . ts t//,
::c
, the Federal Circuit Court affirmed
the District Courts refusal to compel arbitration. The District did not decide
on arbitrability or applicability of the 1983 agreement. Citing +:: .
c--. r/.
:::
the Circuit held that unless the parties clearly and
unmistakably provide otherwise, the question of whether the parties agreed to
arbitrate is to be decided by the court, not the arbitrator.
In its conclusion, the Circuit held:
the arbitration clause under the 1983 agreement has not expired, but
that the District Court must determine whether Microchip is a

175
Epix v. Marsh & McLennan Companies, 982 A. 2d 1194 (NJ: Appellate Div. 2009).
176
Microchip Technology Inc. v. US Philips Corp., 367 F. 3d 1350 (US Court of Appeals, Federal Circuit
2004).
177
AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89
L.Ed.2d 648 (1986)
112

successor party to GI under the 1983 agreement before compelling
arbitration under that agreement. The District Court's decision denying
Philips' motion to compel arbitration is AFFIRMED.
The strong federal policy favoring arbitration pursuant to the FAA
was argued in a motion by Samsung to compel arbitration in +,.. .
s-.,
::s
. In that case, a 2000 agreement containing an arbitration clause
was replaced by a 2006 agreement not containing an arbitration clause. The
District Court denied the motion to compel arbitration based upon the
replacement of the earlier agreement. Although the Circuit Court agreed with
Agere that the 2006 agreement superseded the 2000 agreement, the Court
reversed the Districts decision and ordered the question of arbitrability to be
decided by an arbitrator.
Claims were considered severable in ttr . t.
::.
, wherein claims
of copyright infringement and of fraud were made. The arbitration agreement
between the parties stated that any claims except those relating to copyright
were to be settled in Arizona. The Court stayed all claims, citing t.. .
t.
:s
, and ordered the parties to arbitrate the fraud claim.
The US District Court in New Jersey dismissed a motion to compel
arbitration in t,/ :./ . s,
:s:
, finding that the court did not have

178
Agere Systems, Inc. v. Samsung Electronics Company Ltd. , No. 560 F.3d 337 (US 5th Circuit Court
of Appeals 2009).
179
DRK Photo v. Pearson Education, Inc. and John Doe Printers 1-10, No. CV 11-8097-PCT-PGR (US
District Court of Arizona 2011).
180
McLeod v. Ford Motor Co., EDCV 04-1255VAPSGLX, 2005 WL 376334, *2 (C.D. Cal. April 14, 2005).
181
Digital Technology Licensing LLC v. Sprint Nextel Corporation, Sprint Spectrum LP and Sprint
Spectrum Equipment Company LP v. Sanyo North America Corporation, Kyocera
113

jurisdiction to compel arbitration in another forum, namely New York. State
courts may decide similarly on the issue of ordering arbitration outside of
their state. For example, in +//., c . c/..
:s:
, the Supreme Court of
Kentucky held that a Kentucky court does not have jurisdiction to enforce an
arbitration agreement under the state arbitration statute unless the arbitration
is to take place in Kentucky.
A Court may refuse to compel arbitration where a claim can be
resolved without reference to the contract or relationship, thus placing such a
claim outside of the scope of the arbitration agreement. For example, in ct
. r/
:s:
, the 6
th
Circuit Court found that direct and contributory copyright
infringement and illegal importation of infringing copies of software were not
arbitrable in the case because they were not contemplated by the arbitration
clause, and because they could be resolved without referencing the agreement.

Separability
9 U.S.C. 4 grants a party right to seek a US District Court referral to
arbitration where an agreement exists and one party fails to arbitrate. The
FAA has been interpreted to imply that arbitration clauses in contracts are
separable from the contracts. Contracts may be invalid while the arbitration

Communications, Inc., and Palm Inc., No. 07-5432 (SRC) (US District Court of New Jersey
2011).
182
Alley Cat, LLC (d/b/a Kidzlife Pediatrics), et al. v. Hon. A.C. McKay Chauvin et al., No. 274 S.W.3d
451 (Supreme Court of Kentucky 2009).
183
NCR Corporation v. Korala Associates Ltd. , No. 512 F.3d 807 (US 6th Circuit Court of Appeals
2008).
114

clause is still considered valid. In t- t . t/. c//, the
Supreme Court upheld the view of the 2
nd
Circuit Court of Appeals:
except where the parties otherwise intend, arbitration clauses as a
matter of federal law are separable from the contracts in which they are
embedded, and that where no claim is made that fraud was directed to
the arbitration clause itself, a broad arbitration clause will be held to
encompass arbitration of the claim that the contract itself was induced
by fraud.
Dissent in t- t thought the majority opinion ./ .. the
Congress, considering the arbitration clause under review inseparable from
the contract, using the test from ts . o.//./.- s../
:s
, which held:
Whether a number of promises constitute one contract or more than
one is to be determined by inquiring whether the parties assented to all
the promises as a single whole, so that there would have been no
bargain whatever, if any promise or set of promises were struck out.

Kompetenz-Kompetenz
The Supreme Court recognized the power of an arbitral tribunal to rule
on its own jurisdiction in t o, . r,/
:s
. Citing some cases
mentioned previously in this section, it was held in t o, that the
court should give considerable leeway to the arbitrator, setting aside his or her
decision only in certain narrow circumstances such as those referred to in 9

184
United States v. Bethlehem Steel Corporation et al. , No. 8, 315 US 289 (US Supreme Court 1942).
185
First Options of Chicago, Inc. v. Manuel Kaplan, et ux. and MK Investments, Inc., No. 94-560, 514
US 938 (US Supreme Court 1995).
115

U.S.C. 10. Justice Breyer, delivering the t o, opinion for the
unanimous court stated plainly that arbitration is simply a matter of contract
between parties; it is a way to resolve those disputes but only those disputes
that the parties have agreed to submit to arbitration. The Court then agreed
with the petitioner, that a court must defer to an arbitrators arbitrability
decision when the parties submitted that matter to arbitration.
In s//.-/.,. . o/. u.,/.
:sc
, the First District Court of Appeals
in Texas decided the trial court should have compelled arbitration on an issue
which Baker Hughes contended must be resolved before a mediator. The
question of whether a panel of arbitrators had jurisdiction over a sub-issue
was considered one to be answered by the panel itself. Both AAA rules and
agreements relevant to the dispute concluded the panel had jurisdiction to rule
on its own jurisdiction. The Court of Appeals affirmed the /-,...
/-,... principle by reversing the trial courts order.

Employment Contracts
Prior to c. c, . +.-, there was disagreement among the
Courts of Appeals regarding the exclusion of certain employment contracts
under the FAA 1. The 9
th
Circuit Court construed the language of the FAA as
excluding all contracts of employment, whereas all other Courts of Appeals
interpreted 9 U.S.C. 1 as exempting only contracts of employment in fields
of transportation, and no other employment contracts. The Supreme Court

186
Schlumberger Technology Corporation v. Baker Hughes Incorporated, No. 01-11-00562-CV (Texas
First District Court of Appeals 2011).
116

held in c. c, that the FAA could be applied to other contracts of
employment, and that the exemption was confined only to transportation
workers. Thus, there are no likely obstacles to arbitrability of IP assignment
issues stemming from employment agreements.

Class Action Arbitration
Class issues are of fundamental importance to franchise agreements.
Class-action arbitration options for internet copyright infringement cases will
be discussed in Chapters 7and 9. Class arbitration is also of significance in
numerous licensing agreements. California law and cases from California
have been salient on issues of class-arbitration.
California courts may have shifted their views on certain aspects of
arbitration after a milestone arbitration case. In the US Supreme Court case,
s.//. . r.,, 31512 of Californias Franchise Investment Law was
held to violate the Supremacy Clause when California courts interpreted it to
refuse enforcement of arbitration agreements. Questions as to the
permissibility of class-action arbitration under the FAA were left open in
s.//..
In t.. o/ . s.,. c. / t +,./.
:s:
, the California
Supreme Court held that a class action waiver in a consumer contract was
unenforceable because it was unconscionable, whereby a party with
superior bargaining power could deliberately cheat large numbers of

187
Discover Bank v. Superior Court of Los Angeles, No. S113725, 30 Cal.Rptr.3d 76, 36 Cal.4th 148,
113 P.3d 1100 (California Supreme Court 2005).
117

consumers out of individually small sums of moneythen the waiver
becomes in practice the exemption of the party from responsibility for its own
fraud or willful injury to the person or property of another. The California
Court further held that the FAA did not conflict with the applicable of
California law in favor of class arbitration.
Consistent with the t.. opinion, in t+co . s.,. c.
:ss
,
the California State Supreme Court ordered the Superior Court to strike as
unconscionable any provisions in arbitration clauses attached to franchise
agreements which prohibit class actions from being handled in the arbitration
forum. The unconscionability doctrine became such an integral part of
California law pertaining to form contracts or contracts of adhesion such
as franchising agreements, that the dissent from the US 9
th
Circuit Court of
Appeals in ,-, . /c.,
:s.
foresaw a case at the Federal Supreme
Court level dealing with questions of unconscionability.
In +:: . c.,
:.
, Scalias US Supreme Court found that
t.. interfered with arbitration, stating that although [t..] does not
require class wide arbitration, it allows any party to a consumer contract to
demand it . ,and faced with inevitable class arbitration, companies
would have less incentive to continue resolving potentially duplicative claims
on an individual basis.

188
IAMCO v. Superior Court, 34 Cal. Rptr. 3d 659 (Cal: Court of Appeal, 4th Appellate Dist., 1st Div.
2005).
189
Connie Nagrampa v. MailCoups, Inc., 469 F.3d 1257 (Ninth Circuit Ct. of Appeals 2006)
190
AT&T Mobility LLC v. Concepcion et ux., No. 09893, 563 US (US Supreme Court 2011).
118

In s/./. . +-/t..., the Federal Supreme Court held that
an arbitration panel exceeded its power under FAA 10(a)(4) by imposing
class procedures on parties who had not agreed to authorize class arbitration.
Thus, unless consensual, class arbitration has been held inconsistent with the
FAA.
Justice Scalia, delivering the opinion of the court in +::, remarked
that:
the switch from bilateral to class arbitration sacrifices the principle
advantage of arbitration its informality and makes the process
slower, more costly, and more likely to generate procedural morass
than final judgment.
Scalia presented a comparison of bilateral and class arbitration, using
data gathered online from AAA, which offers class arbitration services. For
the period between January and August 2007, the average AAA consumer
arbitration took six months for disposition on merits, four months for
arbitrations based upon documents only. Of 162 class arbitration cases
handled around the year 2009, median and mean time from filing to
settlement, withdrawal, or dismissal in class action cases at AAA were 583
days and 630 days, respectively. None of the 162 cases resulted in awards
based upon merits. Class arbitration took about three and a half times longer.
c/- o/ . +tco
:.:
showed the 9
th
Circuit Courts initiative to hold
an arbitration clause invalid if it deprives a party to a distributorship
agreement of statutorily granted rights in this case, those under the

191
Graham Oil v. ARCO Products Co., 43 F. 3d 1244 (US Court of Appeals, 9th Circuit 1994).
119

Petroleum Marketing Practices Act. Given that the AAA conducts class
arbitration proceedings, which is clearly a right, the law does not prevent
parties from voluntarily engaging in such arbitration, but without consent, the
law has been against it.

Recognition & Enforcement or Refusal Thereof
Three cases relating to IP and arbitration help clarify this issue.
1. Famous oldies songs were the subject of copyright arbitration
and subsequent court involvement in t//., . r.
:.:
. Solomon Linda
composed "Mbube", which was assigned to Gallo Africa in 1952. Gallo
registered "Mbube" in the US. In 1980, after renewal, Gallo's widow assigned
all rights to Folkways.
In 1951 Campbell adapted "Mbube" into "Wimoweh", which was
assigned to Folkways, which registered in the US in 1952. In 1979, the term
was renewed to Campbell and assigned to Folkways.
In 1961, Songwriters (Weiss and others) adapted "Wimoweh" into
"The Lion Sleeps Tonight which was published by Token, which registered
in the US in 1961 and licensed for recording and performance. In 1961,
Folkways told Token that the Lion version infringed "Wimoweh". Token
ceded rights to Folkways; Songwriters entered into agreements transferring
rights to Folkways. Folkways registered the Lion version in the US in 1961.
In 1989, the original term of the Lion version expired; Songwriters
claimed rights for the renewal term. Folkways refused. Songwriters filed for

192
Folkways Music Publishers, Inc. v. Weiss, 989 F. 2d 108 (US Court of Appeals, 2nd Circuit 1993).
120

arbitration in 1990 under the 1961 agreement. Songwriters claimed all rights
to the renewal term. Folkways filed for copyright infringement in the District
and asked for stay of arbitration. The District granted Songwriters' demand for
arbitration and denied Folkway's motion.
The arbitration panel awarded Songwriters rights to the renewal term,
but the issues of the underlying works - Mbube and Wimoweh - were not
discussed.
Folkways moved to vacate the award. The Court confirmed the award,
which precluded infringement of the underlying works. The Circuit Court
later affirmed the District Courts decision and confirmed the award.
2. Royalties, numerous licensing, name-use, and other creative
rights are implicit in any American professional athletes contract and dispute.
to t/,. . c..,
:.:
was an anomalous case heard by the Supreme Court
which covered a broad range of post-award actions available and not available
to courts. In this case, an arbitral award was rendered against Garvey, who
moved in the Federal District to vacate the award. The District Court denied
the motion, but the 9
th
Circuit reversed and remanded with directions to vacate
the award, stating the arbitrator dispensed his own brand of industrial
justice which the Supreme Court held in s.././. . t.,. r/../
c
:.
was adequate reason for courts to refuse enforcement of awards.

193
Major League Baseball Players Association v. Steve Garvey, No. 00-1210, 532 U.S. 504 (US
Supreme Court 2001).
194
United Steelworkers of America v. Enterprise Wheel & Car Corp. , No. 538, 363 US 593 (US
Supreme Court 1960).
121

The District Court remanded the case to the arbitration panel, and
Garvey appealed again. The Court of Appeals reversed the District Court and
directed it to remand the case to the arbitration panel with instructions to enter
an award for Garvey; the Court thereby usurped the power of the arbitral
tribunal.
The Supreme Court held previously, and reiterated in t. c/ .
t.. . r/.
:.
, that if an award is rendered due to an arbitrators
error, misinterpretation of facts, or misconstruing facts, there is still no cause
for a court to overturn the decision of the arbitrator. It was written in
t,../. .
:.c
that the courts are not authorized to reconsider the
merits of an award even though the parties may allege that the award rests on
errors of fact or on misinterpretation of contract. decided that even
when the award may be vacated, the proper remedy is to remand the case to
further arbitral proceedings although Justice Stevens, dissenting in c..,,
opined such a remedy is limited only to cases involving an arbitrators
procedural errors.
Consistent with , the Court again in c.., held that even in a
case of affirmative misconduct, the court must not settle the merits of an
arbitration on its own judicial standards because that would effectively
terminate the agreement which parties willingly entered into prior to
commencing arbitration. The Court of Appeals did err in directing the

195
Eastern Associated Coal Corp. v. United Mine Workers of America, District 17, et al., No. 99-1038,
531 US 57 (US Supreme Court 2000).
196
United Paperworkers International Union, AFL-CIA, et al. v. Misco, Inc., No. 86-651, 484 US 29
(US Supreme Court 1987).
122

judgment to be entered in Garveys favor. The Supreme Court, in reviewing
the application of law by the Circuit Court, considered the action nothing
short of baffling.
Justice Stevens concluded that he found the majoritys lack of interest
in the Circuit Courts reasoning a troubling departure from [the Supreme
Courts] normal practice. One should consider Justice Stevens desire for
further inquiry into the psychology of the Court of Appeals somewhat
lethargic considering that the law is remarkably clear in that an arbitral
tribunal alone has the power to decide who wins and who loses in awards.
3. r-/. . . t// .
:.:
involved infringement of
recording legend Barry Manilows sheet music. Kamakazi sued Robbins in
the SDNY for infringement. Robbins defended that it licensed the music, thus
abrogating federal jurisdiction over the alleged breach of contract law, and
sought arbitration. The Judge compelled arbitration. The arbitrator awarded
Kamakazi an injunction, fine and fees.
Robbins argued in the Circuit Court that the Federal court had no
jurisdiction over the contractual issue. Robbins also contended that public
policy prohibited submission of copyright claims to arbitration, but no case
was known by the court supporting such an argument. Robbins motion to
vacate was denied and the award was confirmed.


197
Kamakazi Music Corp. v. Robbins Music Corp., 684 F. 2d 228 (US Court of Appeals, 2nd Circuit
1982).
123

Arbitrability
In this subsection, two types of arbitrability issues will be examined:
(1) those based upon public policy grounds where there is a question
aboutwhether or not arbitration is a suitable forum for decision on an
issue; and
(2) those based upon issues relating to the existence and validity of an
agreement to arbitrate.
s.., t.., t . t.-//.. t.
:.s
dealt with the question of
the arbitrability of copyright.
In 1979, the Post granted an exclusive license to Rumbleseat for
manufacture of porcelain dolls based on Norman Rockwell paintings. The
Post later cancelled the license, but Rumbleseat continued to make the dolls.
The licensing agreement contained both an arbitration clause and an
agreement wherein the licensee waived rights to challenge the validity of the
copyrights.
In 1983, the Post gave notice of cancellation of the license as per the
agreement. In 1984, after Rumbleseat did not cease manufacture of the dolls,
the Post filed for arbitration. The parties engaged in preliminaries, but
Rumbleseat said it would try to enjoin the Post from arbitration, which
prompted the Post in 1985 to sue in the District Court on copyright violations.
In the District, the Post sought an injunction preventing Rumbleseat
from leaving arbitration. The District treated the request as a motion to

198
Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F. 2d 1191 (US Court of Appeals, 7th
Circuit 1987).
124

compel arbitration, and ordered the case to arbitration. The arbitrators
awarded copyright injunction and damages, but did not state grounds for the
award. The District court confirmed and certified its order for an immediate
appeal under Rule 54(b) of the Federal Rules of Civil Procedure.
The Circuit discussed jurisdictional matters. [G]iven the complaint's
heavy emphasis on arbitration, it might have been advisable for the district
judge to inquire at the outset whether the Post was serious about its copyright
claims or was instead making a federal law tail wag a state law dog. Citing
the FAA as the .. / basis for the Post's request for order to arbitrate, the
Circuit remarked that the parties sloppiness about jurisdiction is
inexcusable, but not fatal.
The Circuit held that a no-contest clause in a copyright licensing
agreement is enforceable while also holding in a novel decision that the
federal law does not prohibit arbitration of copyright validity.
As previously mentioned in Chapter 4, patent validity is arbitrable in
the United States. An exception is when parties to a settlement waive rights to
challenge validity. In t/.t . ctt
:..
, the Circuit Court affirmed the
Districts confirmation of an arbitral award in favor of Flex-Foot
(Springlite). The award found literal infringement by Springlite. Springlite
wanted to argue invalidity as a defense. The District Court held that Springlite
was estopped from challenging the validity and enforceability of the patent
due to prior agreements wherein Springlite waived rights to contest validity.

199
Flex-Foot v. CRP, 238 F. 3d 1362 (US Court of Appeals, Federal Circuit 2001).
125

Springlite argued in the Circuit that the District Court erred in its
confirmation because the arbitrators did not make a full claim construction.
The District court deferred to arbitrators under 9U.S.C. 10, which the Circuit
did not find in error.
The Circuit reviewed issues from t. . +./
:
, stating that prior to
that case, a licensee operating under a license agreement was estopped from
denying the validity of the licensed patent in a suit for royalties under the
agreement. But there was no promise not to challenge validity in the t.
case. Furthermore, ..--.. . c.../ held that validity is contestable
by licensees so long as they continue paying royalties through the process of
challenge.
Citing both u.-.. . s,.,./
::
and t. . u//
::
, the Circuit
discussed the strong public interest in enforcing settlements. Whereas the
District found Springlite was collaterally estopped, the Circuit held that
Springlite was contractually estopped from challenging the validity and
enforceability of the patents, and affirmed the District Courts decision.
In July 2001, Qualcomm licensed patents to Nokia on a non-exclusive
basis. The agreement contained an arbitration clause. In November 2005,
Qualcomm sued Nokia for infringement in the US District of Southern
California. Nokia then initiated arbitration in December 2005. The District

200
Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969).
201
Hemstreet v. Spiegel, Inc., 851 F.2d 348, 7 USPQ2d 1502 (Fed.Cir. 1988).
202
Foster v. Hallco Mfg. Co., 947 F.2d 469, 20 USPQ2d 1241 (Fed.Cir.1991).
126

denied Nokias motions to stay and to dismiss, holding that the patents
accused of infringement were not those contained in the licensing agreement.
./-- . /
::
in the Circuit Court of Appeals dealt with
procedural error on the part of the District Court.
The District court made determinations based upon arbitrability, when
the parties clearly intended to delegate arbitrability questions to the arbitral
tribunal. As such, the District applied the wrong standard. The question at
issue was whether the licensing agreement and its arbitration clause could be
held to contemplate other infringement issues. The Circuit vacated the
decision and remanded it to the District for further inquiry regarding the prior
intentions of the parties to arbitrate the then-instant infringement.

Inconsistencies in American Courts
Judge Newman, dissenting in ./-- . /, would have
affirmed the judgment of the district court, which seems the more appropriate
course considering the plain facts. The 9
th
Circuits decision then was
seemingly in spite of the fact that none contested that the patents allegedly
infringed were not part of the licensing agreement, and thus any connection
thereto would be wholly implicit. It should not be overlooked that this
decision in the 9
th
Circuit seems to contradict :./ . t t
:
if the 6
th

Circuit Court of Appeals was referencing an explicit agreement only when it
required a District to review whether a valid agreement to arbitrate exists

203
Qualcomm Inc. v. Nokia Corp., 466 F. 3d 1366 (US Court of Appeals, Federal Circuit 2006).
204
Supra note 172.
127

between the parties and that the specific dispute falls within the substantive
scope of that agreement.
The 9
th
Circuits decision in ./-- . / also disregarded
Justice Breyers opinion from t o, . r,/, wherein he stated that
arbitration is a way to resolve those disputes but only those disputes that
the parties have agreed to submit to arbitration. The facts presented in the
./-- opinion suggested that the parties did not agree to submit to
arbitration claims of infringement on patents not contained in the licensing
agreement. Those other claims of infringement perhaps would have been
more appropriately litigated under statute.
In most cases, the broad grants of authority to the FAA and the
institution of arbitration lead to decisions in favor of arbitration. In some cases
that strong disposition in favor of arbitration appears to objectively defeat the
purposes of a strong contract law. A prime example was the aforementioned
+,.. . s-.,, wherein an expired agreement was used to compel
arbitration at a time when the valid agreement did not contain an arbitration
clause.
Such discrepancies between courts in the US are a weakness of the
FAA system as will be briefly discussed in Chapter 9. It appears that the
Model Law systems may provide more uniform decision-making and
application of rules of law than the FAA system. However, it is unlikely that
the United States will be a suitable fit for the Model Law.

128

Canadian Case Law

The British Canada Act was passed in 1982, at which time Schedule B
The Constitution Act took effect, providing Canada full(er) independence
as a sovereign nation. Canada was thereafter in 1986 the first nation to adopt
the UNCITRAL Model Law on International Commercial Arbitration, along
with 10 Canadian provinces including Quebec. By 2011 in Canada, arbitration
of commercial disputes was at least as popular as litigation, if not more so
(Schafler, 2011).
In s.../ . :ttts
:
, all nine members of the Supreme Court of
Canada both the majority and minority positively endorsed arbitration as a
dispute resolution mechanism. LeBel, Deschamps, Abella and Charron JJ, the
dissent in s.../, reflected the pro-arbitration attitudes of courts in Canada
very clearly when they remarked:
Access to justice in Canada no longer means access just to the public
court system. Historically, judges were reluctant to relinquish their
grasp on dispute resolution, and they even viewed alternative dispute
resolution as antithetical to the parties interests. This era is gone.

Before the Model Law
As the dissent remarked in s.../, prior to the Model Law system,
courts were not often supportive of arbitration. Throughout the majority of the

205
Michelle Seidel v. TELUS Communications, Inc., No. 33154, 1 S.C.R. 531 (Supreme Court of
Canada 2011).
129

20
th
century, until around the time of the Canada Act, arbitration law in
Canada was modeled primarily on the English Arbitration Act of 1889, and in
Quebec upon the Code of Civil Procedure, which followed French civil law.
There was no federal statute on arbitration, but instead each province had its
own law that applied to both domestic and international commercial and non-
commercial arbitration (Biukovic, 1999).
Quebecs French origins presented significant problems for
international and inter-provincial parties to arbitration prior to adoption of the
Model Law system of uniform arbitration. The Napoleonic Codes, particularly
the 1806 c.. .. t.... c./. and 1807 c.. .. c--.., restricted
arbitration. In most cases, arbitration was limited to disputes which had
already arisen, by way of compromisdarbitrage, since arbitration agreements
directed at disputes which had not yet come into existence were prohibited (de
la Hosseraye, de Giovanni, & Huard-Bourgois, 2012). One can imagine that
many parties to disputes would have preferred to decline to arbitrate after the
dispute arose, rather than submit to the procedure in good faith.
English law through the late 19
th
and majority of the 20
th
century in
Canada was perhaps no friendlier to arbitration than French law when
compared to 21
st
century standards. Neither principles of
separability/severability nor /-,.../-,... were generally recognized
by English law. In the SCC case s/.s.,/. . .,/
:c
, Anglin J.
remarked that a stay of litigation may be refused by a court if the sole matter
to be dealt with by the arbitrators were a question of law. Commentators

206
Stokes-Stephens Oil Co. v. McNaught, No. 57 S.C.R. 549 (Supreme Court of Canada 1918).
130

point out that during the same period, virtually anything relating to contractual
obligations could have been considered an issue of law, and thus the court
could have refused to stay proceedings and hold jurisdiction over the dispute
at will.
Through the colonial era in Canada, cases involving arbitration were
most frequently dealt with at the provincial level where the profit-motive
previously mentioned by Lord Campbell in s . +.., (1855) most
influenced judicial officials to deny stays so as to keep a large market share in
the dispute resolution services industry. Supervisory powers of courts relating
to the doctrine of misconduct and error in law on the fact of the award gave
further interference with the independence of arbitrators at times when a clear
definition of error was difficult to ascertain(Biukovic, 1999). Abuses of
discretion were commonplace in both the French and English systems, which
is part of why UNICTRAL offered the Model Law and why Canada became
the first nation to adopt it.

Compelling Arbitration
Canadian courts show preference for broad interpretation of arbitration
clauses similar to American courts. Court orders compelling arbitration are
available under both the Model Law and FAA, and are essential for the
institution of arbitration regardless of the subject matter of disputes.
Numerous instances of court stays of proceedings and referral to arbitration
are available in Canadian court records. A few examples follow.
131

+. t. . u..
::
originated as a trademark licensing dispute.
Justice Davies in the Supreme Court of British Columbia considered whether
or not it was appropriate to forward the parties to arbitration under the
relevant agreement, which Hinze argued she was not a party to. Upon
reviewing t. c.,. . t//.,
:s
and c.// c. . +/.-
:.
,
Davies found that the determination of whether Hinze was a party to the
agreement was a matter within the jurisdiction of the arbitral tribunal, and so
ordered parties to arbitration.
Delivering the opinion in :. t. . r. ://.,
::
, Weiler J.A.
acknowledged that as a general rule, the enforceability of an arbitration
clause should be decided by the arbitrator. The Ontario Court of Appeal held
that the application judge erred in failing to find that referral to arbitration
would be the best for arbitration purposes and referred the parties to an
arbitrator.
tc r, . tc c-,..
:::
involved a franchise licensing
agreement in the province of Ontario. Under Ontario's Arthur Wishart Act, in
certain circumstances a franchisee may rescind a franchise agreement and
obtain its investment plus damages. In this case, the Canadian franchisee
entered into a 5-year agreement in 2000, which was renewed in 2005. In 2007,

207
Aradia Fitness Canada Inc. v. Dawn M. Hinze Consulting Ltd., No. S081818 (Supreme Court of
British Columbia 2008).
208
Prince George (City) v. McElhanney Engineering Services, No. 9 B.C.L.R. (3d) 368, [1995] W.W.R.
503 (B.C.C.A) (British Columbia Court of Appeals 1995).
209
Gulf Canada Resources Ltd. v. Arochem International Ltd., No. 66 B.C.L.R. (2d) 113 (B.C.C.A.)
(British Columbia Court of Appeals 1992).
210
Jean Estate v. Wires Jolley LLP, No. C48730 (Court of Appeal for Ontario 2009).
211
MDG Kingston Inc. v. MDG Computers Canada Inc., No. C47526 (Ontario Court of Appeal 2008).
132

the franchisee rescinded the agreement due to non-delivery of a disclosure
document required under 5 of the Wishart Act, and claimed damages.
MDG franchisor moved to stay pending arbitration; MDG franchisee
cross-motioned for summary judgment for rescission of the second agreement.
MDG franchisor claimed exemption under 5(7)(f) of the Wishart Act, due to
the second agreement being a renewal without material changes. MDG
franchisee claimed material changes. The motion judge compared the two
agreements, found changes, and held the franchisor was not entitled to
exemption or reliance upon arbitration. The judge dismissed the motion to
stay and granted summary judgment in favor of the franchisee.
The applicability of the arbitration agreement under such circumstances
as tc r, . tc c. was a novel question. The court of appeal
held that the motion judge erred in failing to stay the action, and forwarded
the case to the arbitrator.
Theatrical assets were involved in an international dispute in t, .
r., o.
:::
. A California court compelled arbitration prior to the filing in
Canada. The Ontario Court of Appeal reversed a lower courts decision and
stayed the action in Canada, pending the arbitration in California.

Separability & Kompetenz-Kompetenz
Article 16(1) of the UNCITRAL Model Law addresses the issues of
separability and /-,.../-,...; Canadian statutes follow. In t.//

212
Dancap Productions Inc. v. Key Brand Entertainment, Inc., No. C49360 (Court of Appeal for
Ontario 2009).
133

c-,.. . t .. --..
:::
, the SCC affirmed both principles,
citing the Quebec Civil Code 2642 regarding separability and t.,... .
t. c/... (2003) in which the Supreme Court implicitly adopted
the /-,.../-,... principle. In t,. . .//
::
, the SCC cited t.//,
which recalled the Court was unanimous in finding that under art. 940.1
C.C.P., arbitrators have jurisdiction to rule on their own jurisdiction (the
competence-competence principle).
Employment Contracts
In o./ . u./ t../.
::
, the Alberta Court of Queens Bench
decided that an employment contract did not create a commercial relationship
of the variety falling under the MAL implementing statute. Unlike the
American case which held that only employment contracts in the
transportation sector were exempt, this Canadian case does not limit the scope
of exclusion of employment contracts. No SCC or other court decision on this
matter was found. This may have significant implications for IP assignment
clauses in employment contracts.

Class Action Arbitration
As previously stated, class action options are of immeasurable
importance for persons subject to form contracts, such as franchising and

213
Dell Computer Corp. v. Union des consommateurs, No. 2 S.C.R. 801, 2007 SCC 34 (Supreme Court
of Canada 2007).
214
Rogers Wireless Inc. v. Muroff, No. 2 S.C.R. 921, 2007 SCC 35 (Supreme Court of Canada 2007).
215
Borowski v. Heinrich Fiedler Perforiertechnik GmbH, No. W.W.R. 623 (Alberta Court of Queen's
Bench 1994).
134

distribution agreements, which generally relate to trademark and other IP
licensing. Questions on class actions and arbitration have been the subject of
several SCC cases in the 21
st
century.
In o// . c. t..,
::c
, class-wide arbitration was not
considered excessively inefficient nor chaotic to the extent that the SCC
denied its value altogether, which Scalias US Supreme Court ostensibly did
in +::. However, in o// the SCC made clear again that arbitration
requires voluntary submission of disputes by all parties, and thus class actions
in franchise or adhesion contracts are not likely practicable, so the same
outcome was achieved by a different approach. Elsewhere on the SCC docket,
motions to revoke the exclusive statutory right of jurisdiction provided to
private arbitrators were denied, while the Court also considered a partys
statutory right to access justice, that is, to engage in class actions via courts.
In s.../ . :ttts
:::
, a class action waiver was found inseparable from
the arbitration clause in a contract of adhesion. While the class action waiver
was rendered void by 3 of the BPCPA, the arbitration clause was held valid
enough that the Court upheld a stay, in part, and suggested that claims not
related to the class action could proceed in arbitration pursuant to 15 of the
British Columbia Commercial Arbitration Act. The SCC majority quoted the
Ontario Court of Appeal, which found that preference for arbitration is often
nothing more than a guise to avoid liability for widespread low-value wrongs

216
Bisaillon v. Concordia University, No. 30363, 2006 SCC 19, [2006] 1 S.C.R. 666 (Supreme Court of
Canada 2006).
217
Michelle Seidel v. TELUS Communications, Inc., No. 33154, 1 S.C.R. 531 (Supreme Court of
Canada 2011).
135

that cannot be litigated individually but when aggregated form the subject of a
viable class proceeding, echoing the same sentiment from Californias
t.. o/ . s.,. c. / t +,./.
::s
.
Seidel was allowed to proceed with her pursuit for certification of a
class action under legislation. The arbitration clause was considered partially
abusive in that it barred Seidel from accessing judicial remedies such as class
action. American jurisprudence like that seen in Californias t.. .
s.,. c. and at the Federal level in +:: . c., was
considered, although the SCC did not consider it necessary to decide whether
or not a class action waiver was unconscionable, relying instead on it being
inseparable from the clause as a whole, which was rendered void by 3 of the
BPCPA.
The dissent in s.../ opined that a claim that could potentially
proceed either by way of arbitration or class action must first be submitted to
arbitration. Dissenters further stated that the decision pointed toward an
undercurrent of hostility towards arbitration.
Bill 48, the Act to amend the Consumer Protection Act and the Act
respecting the collection of certain debts, in Quebec, assented into law as of
December 14, 2006. Like the BPCPA 3, Bill 48 2 prohibits:
, ,./ / //,. /. .-. ./. .,..
/ / . /. .-.rs right to go before a court, in
,./ /, ,//, /. .-. /- /,, /

218
Discover Bank v. Superior Court of Los Angeles, No. S113725, 30 Cal.Rptr.3d 76, 36 Cal.4th 148,
113 P.3d 1100 (California Supreme Court 2005).
136

/ ..,.. /. .-. / /. ,/ /. -.-/. / ,.,
/,, /
Both t.// . t .. --..
::.
and t,. r./. .
.//
::
contemplated non-retroactivity of Bill 48 in finding that disputes
which arose out of circumstances that occurred prior to the law entering into
force were referable to arbitration.
::s:: o t. . ::c: o t . .. .
c. t. s...
221
is also a significant case in analysis of class-action
issues pertaining to franchise agreements. The general disposition of Canadian
courts has been to consider class-action arbitration inefficient and
counterproductive to the goals of arbitration, preferring instead to keep class
actions in the public courts. This weak resistance to the procedure reflects the
quantitative data provided by Scalia in +:: . c., regarding AAA
class arbitration cases. Whereas preference for arbitration first and in many
cases only is seen in the USA, in Canada due to statutory differences,
companies have less potential to require parties to waive rights to class
actions.


219
Dell Computer Corp. v. Union des consommateurs, No. 2 S.C.R. 801, 2007 SCC 34 (Supreme Court
of Canada 2007).
220
Rogers Wireless Inc. v. Muroff, No. 2 S.C.R. 921, 2007 SCC 35 (Supreme Court of Canada 2007).
221
2038724 Ontario Ltd and 2036250 Ontario Inc. v. Quizno's and Gordon Food Service, No.
06-CV-311330CP (Ontario Superior Court of Justice 2008).
137

Post-Award Court Involvement
On limited grounds, the court may intervene in the post-award stage.
Awards may be modified, set aside, recognized and enforced, or vacated
under Articles 33-36 of the Model Law. These post-award issues transcend
the various subject matters of arbitration, and impact the institution of
arbitration as a whole.
In +.//. t//. . ./ t-../
:::
, the Ontario court was
asked to modify an award. Avalanche, Visual, and Mallory were parties to a
court-ordered arbitration to resolve ownership of copyright and licensing
rights to source programs and codes. The arbitrator awarded Mallory
ownership of copyright and trade secrets in Jet Letter Source Code, among
other rights. The arbitrator issued an injunction prohibiting Avalanche from
exercising any right to the works.
Mallory later requested the court add to the injunction two parties
which were not parties to the arbitration. The two parties were former
employees of Avalanche. The court held it did not have jurisdiction to make
such an addition to the award because the parties were not named by the
arbitrator and because they were no longer employees of Avalanche. The
court mentioned that if Mallory's rights were infringed, then he was entitled to
take legal action.
The most common post-award motions deal with issues of recognition,
enforcement, and setting aside awards. Both Canada and the US have shown

222
Avalanche Effects Inc. v. Visual Frameworks Inc., Gene Mallory, Jet Letter LLC, Thomas
Crooks, Ralf Stabel, No. 05-CV-30988 (Ontario Superior Court of Justice 2007).
138

favor, with minimal variance between them, for recognizing and enforcing
awards.
The Ontario Superior Court of Justice heard a motion to vacate in
x. c. . tt :./
:::
. MPI previously developed software and
licensed to Xerox. In 2001, MPI initiated arbitration under a 1994 agreement,
claiming non-payment of royalties and breach of copyright for a piece of
software developed by Xerox which MPI considered a mere upgrade of the
MPIs software.
The arbitral panel awarded MPI royalties of over US$50 million plus
interest; delivery of software; over US$38 million in damages plus interest;
reimbursement of the costs of a KPMG audit nearly US$200,000 plus
interest.
Xerox claimed the panel exceeded its jurisdiction when it: (1) added
the French corporate parent as a party to the proceeding although the parent
was not a party to the 1994 agreement; (2) awarded to MPI US damages
although the panel found that MPI US did not own copyright and such a claim
was not agreed to be referred to the panel in the 2002 agreement; (3) awarded
retroactive upgrade royalties, which exceeded the relief permitted under the
1994 agreement.
In the conclusion of the x. . tt opinion, Campbell J. stated that
principles binding on the court give deference to and strong support for what
commences as a consensual process. The motion to vacate was dismissed.

223
Xerox Canada Ltd. v. MPI Technologies Inc., 2006 CanLII 41006 (Ontario Superior Court of Justice
2006).
139

. / + / u.// c. t/./
::

contained questions similar to those in the American t,../. .
and t.,.. o./// . c..,, concerning standards of review of
awards on the grounds of correctness. In , the Manitoba provincial
court reviewed an award using reasonableness as a governing standard. The
provincial court of appeal held that correctness, and not reasonableness, was
the governing standard of review. The Supreme Court decided that
reasonableness is the applicable standard, and restored the arbitrators award.
Fish J., delivering the opinion of the court in , remarked that
arbitrators are not required to apply legal principles in the same rigid manner
as courts. The adapted form of application of law and broad grant of authority
to arbitrators are central to maintaining the informal nature of arbitration,
which parties generally prefer. If arbitrators were held to the exact same
standards as judges, then there would be little advantage to arbitration over
litigation.
Abella J., delivering the opinion in ../../. . t/.
Nurses Uni . ../../. . t/.
::
, made clear that arbitration
allows the parties to the agreement to resolve disputes as quickly as possible
knowing that there is the relieving prospect not of judicial review, once again
showing no bias for the informal, time and cost efficient means of dispute
resolution.

224
Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, No.
33795, 2011 SCC 59, [2011] 3 S.C.R. 616 (Supreme Court of Canada 2011).
225
Newfoundland and Labrador Nurses' Union v. Newfoundland and Labrador (Treasury Board), No.
33659, 2011 SCC 62 (CanLII), [2011] 3 SCR 708 (Supreme Court of Canada 2011).
140

Review is available to some limited extent, and in t.-. . ..
o../
226
, the SCC laid out the reasonableness standard:
Reasonableness is a deferential standard animated by the principle
that underlies the development of the two previous standards of
reasonableness: certain questions that come before administrative
tribunals do not lend themselves to one specific, particular result.
Instead, they may give rise to a number of possible, reasonable
conclusions. Tribunals have a margin of appreciation within the range
of acceptable and rational solutions. A court conducting a review for
reasonableness inquires into the qualities that make a decision
reasonable, referring both to the process of articulating the reasons and
to outcomes. In judicial review, reasonableness is concerned mostly
with the existence of justification, transparency and intelligibility
within the decision-making process. But it is also concerned with
whether the decision falls within a range of possible, acceptable
outcomes which are defensible in respect of the facts and law.
Regarding the matter of setting aside an award on the grounds of
misconduct on the part of an arbitrator, t/.. . .,.
:::
has staying
power in its consideration of the issue despite its pre-Model Law date. The
SCC held that:
misconduct will not be inferred in the absence of positive evidence of
the clearest characterthere must be clear evidence of a corrupt act

226
Dunsmuir v. New Brunswick, No. 31459, 1 S.C.R. 190, 2008 SCC 9 (Supreme Court of Canada
2008).
227
Doberer v. Megaw, No. 34 S.C.R. 125 (Supreme Court of Canada 1903).
141

and corruption mere suspicion is not sufficientwhenever the
conduct of arbitrators is sought to be impeached the court should look
with a jealous and scrutinizing eye through the evidence adduced for
that purpose
Arbitrability of Validity
Whether or not the law permits a particular dispute to be resolved via
arbitration is an issue of special importance to IP disputes. Whereas other
disputes have been considered arbitrable for many decades, IP has been more
of a laggard in gaining permission to arbitrate claims. As previously stated, in
t.,... . t. c/..., the SCC held that copyright disputes are
arbitrable. Copyright, trademark, licensing, franchising and other IP-related
disputes are more often arbitrable worldwide than patent disputes. Prior to
entering into arbitration agreements, parties to disputes must take into
consideration domestic law in the nations where arbitration takes place and in
those where recognition and enforcement of arbitral awards is to be sought.
Arbitrability concerns limits the extent to which arbitration is appropriate for
validity disputes in most nations. Where patents are concerned, arbitrability
issues may force parties into litigation.





CHAPTER 6
RULES OF ARBITRATION
The arbitration process is generally uniform, and rules typically adhere
to an international norm, although each set of rules is unique and may include
variations, . /, in terminology, or of time limits, or regarding fees and
costs when compared to other rules. Rules utilize both static time limits
(which can be extended) and laches to keep processes moving efficiently and
to maintain equity. There are both implied and explicit duties of fairness,
transparency, and good faith for arbitrators and parties to disputes.
ICC
228
and LCIA
229
rules share more similarities than any other two
within the group under review. UNCITRAL rules
230
stand out when compared
to ICC, LCIA, and WIPO rules because UNCITRAL does not have a fixed
physical location, a Court, a Registrar, a Secretariat or Secretary-General.
WIPO
231
is an institution which specializes in IP, and its arbitration rules
feature additional articles and language specifically for arbitration of IP
disputes whereas ICC, LCIA, and UNCITRAL rules are broader in scope.
UNCITRAL rules were designed to be a bare minimum standard for

228
ICC Rules available at the Courts website (http://www.iccwbo.org/Products-and-
Services/Arbitration-and-ADR/Arbitration/ICC-Rules-of-Arbitration/).
229
LCIA Rules available at the Courts website
(http://www.lcia.org/Dispute_Resolution_Services/LCIA_Arbitration_Rules.aspx).
230
UNCITRAL Rules available at the Commissions website
(http://www.uncitral.org/uncitral/uncitral_texts/arbitration.html).
231
WIPO Rules available at the Centers website (http://www.wipo.int/amc/en/arbitration/rules/).
140

international arbitration, and may have provided the basic framework for
other rules.

Request for or Notice of Arbitration

Arbitration is initiated by a single party. UNCITRAL rules call for a
notice whereas ICC, LCIA, and WIPO rules call for a request to
commence arbitration. Requests and notices must be accompanied by other
information such as:
1. Names, addresses and other contact info of all parties, description
of all parties and legal representatives if known;
2. Description of the claim or dispute;
3. Statement on relief or remedy sought (not explicitly required by
LCIA);
4. Copies of relevant agreements, in particular, arbitration agreements,
although legal instruments and other documents may also
accompany;
5. Comments on details of the arbitral tribunal and proceedings (i.e.
number of arbitrators, nominations of arbitrator(s), preferences
relating to seat of arbitration if not WIPO, and language of
arbitration).
For practical purposes under all rules reviewed herein, arbitration is
considered to commence when one party makes the request or notice,
141

although the start of proceedings is dependent upon receipt of advances on
costs and fees.

Table 1Articles Relevant to the Request or Notice

Answer or Response to the Request for or Notice of Arbitration
\
In all four sets of Rules, the Respondent has to reply within30 days of
receipt of the request for or notice of arbitration. LCIA and UNCITRAL
Rules call for the Respondent to send a Response whereas ICC and WIPO
Rules refer to an Answer. Responses or Answers contain comments on any
elements of the Request or Notice, including:
1. Name and contact details;
2. Nature and circumstances of the dispute;
3. Relief or remedy sought;
4. Seat or language of arbitration or rules of law proposed;
5. Anything regarding the constitution of the Tribunal or nominees.
Article 4.2 of UNCITRAL Rules provides options to:
1. Contest jurisdiction;
2. Propose an appointing authority;
3. Propose appointment of a sole arbitrator;
ICC LCIA UNCITRAL WIPO
Article 4 Article 1 Article 3 Articles 6-8
142

4. Notify appointment of an arbitrator;
5. Make counterclaims and give brief explanations of amounts
involved and relief or remedy sought, or propose a set-off;
6. Notify a party other than the claimant of arbitration.

Table 2Articles Relevant to the Response

Case Pertaining to the Notice and Response
s/-,. . t./.
:::
dealt with the question of whether or not notice
of arbitration was given to the respondent. Lelovic Co., an Ontario, Canada
importer of products from Polish state trading company Skorimpex, objected
to enforcement of the award. The case was heard before the Ontario, Canada
Court of Justice. Skorimpex and the arbitrators submitted that notices were
sent to Lelovic Co. at three addresses, and that Skorimpex made reasonable
inquiry as to Lelovics address and had used all known addresses, thus
arbitration was allowed to proceed in the absence of the respondent. The
Canadian court agreed that Article 3 of MAL was satisfied.




232
Skorimpex Foreign Trade Co. v. Lelovic Co., No. O.J. 641, CLOUT No. 34 (Ontario, Canada Court of
Justice 1991).
ICC LCIA UNCITRAL WIPO
Article 5 Article 2 Article 4 Article 12
143

Appointment, Number and Nationality of Arbitrators

Appointment processes vary slightly among the four sets of rules under
review. Arbitration under UNCITRAL Rules requires the designation of an
appointing authority, which the ICC, LCIA, and WIPO fixed offices serve
as under their respective rules. WIPO and ICC Rules are the most similar in
procedural methods relating to the constitution of the arbitral tribunal.
All rules allow for party nomination of arbitrators, but LCIA Rules
state in Article 5.5 that the LCIA Court alone is empowered to appoint
arbitrators, an indication not made in so many words in other rules, although
other rules require confirmation or acquiescence of party nominations by the
authority prior to appointment.
All rules under review herein allow for either one or three arbitrators.
Article 10(2) of UNCITRAL Rules refers to a number of arbitrators
other than one or three, which leaves open the option of more than three, or
two arbitrators, however the model arbitration clause for contracts included
in the Annex of UNCITRAL Rules (see Appendix) states only one or three
as the preferred number of arbitrators.
Article 14(a) of WIPO Rule states that The Tribunal shall consist of
such number of arbitrators as has been agreed by the parties. All mentions of
the Tribunal in WIPO Rules make reference only to one or three arbitrators.
For the purposes of comparison and analysis, it shall be henceforth
determined under all four sets of rules that the tribunal is generally established
with either one or three arbitrators. The odd number assures no tie votes.
144

If there are three arbitrators, the chairman (ICC) or presiding
arbitrator (LCIA, UNCITRAL, WIPO) may be appointed by the authority or
by the other two arbitrators. Except under UNCITRAL Rules, and unless
parties otherwise agree, rules explicitly state that the chairman or presiding
arbitrator is of a nationality other than those of the parties. The explicit
nationality requirement contemplates inherent conflicts of interest, and
provide for fairer, more equitable treatment of parties.

Table 3 Articles Relevant to the Composition of the Tribunal

Cases Pertaining to the Composition of the Tribunal
:c . s./.
:::
involved a contest to the validity of the arbitration
agreement based upon inclusion therein of a tribunal composed of three
arbitrators, which the respondent considered a violation of the parties right to
determine the number of arbitrators. The Supreme Court of India upheld the
validity of the arbitration clause considering that an odd number of arbitrators
were to be appointed, and the clause referred only to the default number of
arbitrators mentioned in Article 10(2) of the MAL.

233
MMTC v. Sterlite Industries (India) Ltd., No. 10 S.C. 390 (Supreme Court of India 1996)
ICC LCIA UNCITRAL WIPO
Articles 4,
5, 8-10
Articles 1,
2, 5-9
Articles 3, 4,
6-10
Articles 9,
15-20
145

In c/ o. s/,,, . -.
::
, the High Court of
Hong Kong supported MAL Article 11(4)(a), ordering the party which had its
arbitrator appointed by the court to pay the other partys expenses relating to
application to the court for appointment.

Seat, Language, and Applicable Rules of Law

Under all four sets of Rules, parties may agree on a particular seat of
arbitration, and tribunals may deliberate anywhere they find convenient or
appropriate. Absent an agreement on the seat of arbitration, the location will
be decided by the tribunal (UNCITRAL), the Court (ICC), or will be referred
to the default location at the institution (LCIA & WIPO).
ICC, LCIA, and WIPO Rules refer first to the language of the
arbitration agreement or contract in which the arbitration agreement is present
when deciding the language of the arbitration. UNCITRAL Rules call for the
tribunal to decide on the language of arbitration. Parties may agree to a
language of their choice, although such rights under UNCITRAL Rules are
less explicit than in ICC, LCIA, and WIPO Rules. Explicit provisions on
choice of language foresee multiple languages among parties and grant
slightly more control over the process.
In all four sets of rules, parties are free to agree on rules of law to be
applied by the tribunal. All rules include reference to the tribunals potential

234
China Ocean Shipping Company v. Mitrans Maritime Panama S.A., No. 3033, CLOUT No. 4 (High
Court of Hong Kong 1993).
146

to decide as . .. . / or -//. -,.. only where parties have
expressly agreed to authorize the tribunal to do so. LCIA and WIPO Rules
consider the default law governing the proceedings as the arbitration law of
the seat of arbitration. Considering the London and Swiss law are oriented
toward international commercial matters, these default locations help ensure
enforceability of awards.
All four sets of rules state that the tribunal decides having due regard to
the terms of the contract; ICC, UNCITRAL, and WIPO Rules add that the
tribunal takes into account trade usages pertaining to the contract. Mentions of
the contract in rules keep the tribunal fixed to the facts and conditions at issue.

Table 4 Articles Relevant to the Seat, Language, and Rules of Law

Case Pertaining to the Seat, Language, and Rules of Law
CLOUT Cases 374
235
and 408
236
from Oberlandesgericht Dsseldorf,
Germany concerned questions regarding the place of arbitration during a
transitional period in German arbitration law. The former German arbitration
law was in effect until December 1997, and the newer law took effect after the
arbitration proceedings commenced, so the court made its determination under

235
CLOUT Case 374, No. 6 Sch 02/99, CLOUT No. 33 (Oberlandesgericht Dsseldorf 2000).
236
CLOUT Case 408, No. 6 Sch 02/99, CLOUT No. 35 (Oberlandesgericht Dsseldorf 2000).
ICC LCIA UNCITRAL WIPO
Articles
14, 16, 17
Articles
16-17
Articles 18,
19, 35
Articles
39, 40, 59
147

the older law. The sole arbitrator rendered an award from his home in
Dsseldorf, Germany and mentioned his address, but the place of arbitration
was not specified as required by 1043 of the German Code of Civil
Procedure or Article 20 from MAL. The court did not find that parties agreed
upon the place of arbitration. No formal agreement was signed, but under the
draft arbitration agreements between the parties, the dispute was intended to
be settled under Chapter 12 of the Swiss Federal Statute of Private
International Law. Considering the circumstances, the court found the place of
arbitration was the actual physical location where the arbitration took place -
Zurich, Switzerland. 1025(1) of the German Code of Civil Procedure stated
that provisions on arbitration only applied if the place of arbitration was in
Germany. Accordingly, the court found that it was a foreign arbitral award
and declined its own jurisdiction over any motion to set aside the award.

Statements of Claims, Case and Defense

Whereas the LCIA Rules require a Claimant to communicate a
Statement of Case, which UNICITRAL and WIPO Rules call a Statement
of Claim, ICC Rules contain no such procedure by name. Statements of case
or claim may include:
1. Names and contact details of parties;
2. Statement of facts supporting the claim;
3. Points at issue;
4. Relief or remedy sought;
148

5. Legal grounds or arguments supporting the claims;
6. Copy of any contract or other legal instrument out of or in relation
to which the dispute arises;
7. Annex including arbitration agreement;
8. Documents or other evidence relied upon by the claimant or
references thereto.
In LCIA, UNCITRAL, and WIPO arbitrations, the Respondent follows
the Statement of Claim or Case with a Statement of Defense or Defence.
Statements of defense include the same documents and exhibits found in the
statements of claim or case.
ICC Rules call for submission of documents relevant to the arbitration
in the Request and Answer, which the Tribunal later uses in addition to other
documents it requests from, and those provided by, the Respondent and
Claimant during the drawing up of Terms of References, a part of the
process unique to ICC Rules.
ICC Terms of Reference include:
1. Full names and descriptions of parties;
2. Addresses of parties which may be contacted during arbitration;
3. Summary of parties claims and relief sought, including amounts
claimed or counterclaimed;
4. List of issues to be determined;
5. Full names, descriptions and addresses of the arbitrators;
6. Place of arbitration
7. Particulars regarding applicable procedural rules.
149

This initial phase of organizing the procedure helps define the scope
and limits of future proceedings. Discovery may be tailored to meet specific
needs or points at issue, and thus through this submission of information,
parties can control the length and cost of their proceedings.

Table 5 Articles Relevant to Statements

Case Pertaining to Statements
In o/ s,.- . t.,
:::
, the Ontario, Canada Court of Justice held
that an application to the court for provisional relief did not qualify as a first
statement in the arbitration process under Article 8(1) or 23(1) MAL.
Accordingly, the court ordered the parties to arbitration pursuant to their
agreement.

Challenge of Arbitrators, Revocation and Replacement Thereof

Arbitrators may be challenged in accordance with the four sets of rules
under examination. If an arbitrator has become .. .. or .. / unable to

237
Bab Systems, Inc. v. McLurg, No. RE 4622/94, CLOUT No. 8 (Ontario Court, General Division
1994).
ICC LCIA UNCITRAL WIPO
Article 18 Article 15 Articles 20,
22
Articles
41, 42, 43,
44, 47
150

fulfill, or fails to fulfill his or her duties, then that arbitrator may be released.
Challenges may also be made on the basis of justifiable doubt as to the
impartiality or independence of arbitrators. If an arbitrator from a three-
member tribunal fails to participate, depending on the stage of proceedings
and party comments, each set of rules allows for the tribunal to continue with
only two arbitrators. This helps prevent wasted time and money.
Procedures for challenge, removal, and reappointment of arbitrators are
generally uniform throughout the four sets of rules. UNCITRAL Rules are
again unique in that there is no fixed Court or Center. ICC Rules provide for a
different time schedule than LCIA, UNCITRAL, and WIPO Rules. In any
case, this feature provides parties with greater security and adds integrity to
the process.

Table 6 Articles Relevant to Challenge and Replacement of Arbitrators

Cases Pertaining to Challenge and Replacement of Arbitrators
The Supreme Court of Justice in Ontario, Canada contemplated the
courts role in appointing a substitute arbitrator in .,/, . r.
::s
, wherein
the court cited the relevant provincial arbitration statute which authorizes the

238
Murphy v. Wise et al., No. 2010 ONSC 5185, 06-CV-6750 (Supreme Court of Justice of Ontario, CA
2010).
ICC LCIA UNCITRAL WIPO
Articles
11, 12
Articles
10-12
Articles 12-15 Articles
24-35
151

court to appoint such an arbitrator if certain conditions are satisfied. t. .
t.
239
was mentioned as an example of a case where court appointment was
denied because an arbitration clause specified that arbitration was to be
referred only to a named arbitrator, who was later disqualified. The answer to
the legal question asked was that a court could appoint an arbitrator unless the
parties agreed to submit the dispute only to a named arbitrator, as was the case
in t. . t..
Impartiality

Arbitrators are expected to remain impartial and independent
throughout the entire process. Conflicts of interest and issues of impartiality
or independence may give rise to challenges of arbitrators. If any conflicts of
interest exist which may give rise to justifiable doubt as to the impartiality or
independence of the arbitrator(s), such circumstances must be disclosed by the
arbitrator. This aspect of the rules and procedures helps assure external
validity of decisions and enforceability of awards. All four sets of rules
reviewed herein contain provisions relating to disclosures of conflicts of
interest and arbitrator independence.
ICC rules mention a statement of independence which is required for
the Secretary General to confirm arbitrators. LCIA rules call for a declaration
to the same effect. UNCITRAL rules offer model statements of independence
in the annex (see Appendix). WIPO rules make reference to a written
notification which is required whether or not any conflicts exist. These clauses

239
Litz v. Litz [1997] 30 B.L.R. (2d) 96; a ffd 129 Man. R. (2d) 121 (Man. C.A.) (1997).
152

show foresight in preparing for unethical maneuvering by any and all persons
involved in the process. Written submissions may serve as an estoppel
certificate if later circumstances require.

Table 7 Articles Relevant to Impartiality

Cases Pertaining to Impartiality
+.. . .
:
mentioned the 2009 addition to Montanas
Uniform Arbitration Act 27-5-116 the Fairness in Arbitration Act
which requires persons proposed, nominated, or appointed to
./. ./ ,, // -. / ./. .. ,. .. /
/. / .../,, ,./ // / .. /.. .//.
../ / /. ,. ../. /. //. ../ -,/
/
While the Montana Fairness in Arbitration Act states that failure to
disclose a conflict of interest is sufficient grounds for a court to vacate an
award, t . rto
::
showed that without amendment to the Minnesota
Uniform Arbitration Act, failure to disclose conflicts of interest is not in itself
sufficient for a court to vacate an award. In cases involving international
commercial arbitration, the FAA would supersede any state law, making

240
Dick Anderson Construction, Inc. v. Monroe Construction Company, LLC, No. 221 P.3d 675 (2009),
2009 MT 416, 353 Mont. 534 (Supreme Court of Montana 2009).
241
Itron, Inc. v. WEB Construction, Inc., No. A08-0442 (Court of Appeals of Minnesota 2009).
ICC LCIA UNCITRAL WIPO
Articles 7, 9 Article 5 Article 11 Article 22
153

enforcement possible without a statement unless corruption or malfeasance
was found. Statements are recommended in every case.
Contests to Jurisdiction and Validity of Arbitral Agreement

In all rules, the tribunal itself has power to rule on matters concerning
its own jurisdiction and regarding the validity of the arbitration agreement.
Any party may raise a plea regarding jurisdiction or the validity of the
arbitration agreement. This part of the system is a safeguard against unwanted
arbitration; it ensures parties agree to arbitrate, and keeps the subject matters
of arbitration with agreed upon limits.

Table 8 Articles Relevant to Jurisdiction and Validity of the Agreement

Cases Pertaining to Jurisdiction and Validity of the Agreement
The Canadian British Columbia Supreme Court heard an issue relating
to the arbitration agreement as per MAL Article 8(1) in c./
c--./ . t.. :./././
::
. The court held that the scope of
agreements and validity thereof are determined by the arbitral tribunal, which
has power to decide on its own jurisdiction under MAL Article 16.

242
Continental Commercial Systems Corp. v. Davies Telecheck International, Inc., No. [1995] B.C.J.
No. 2440, CLOUT No. 32 (British Columbia Supreme Court 1995).
ICC LCIA UNCITRAL WIPO
Article 6 Article 23 Article 23 Articles
36, 59
154

tc+o . :,/
::
was heard before the Superior Court of Quebec
following a contest regarding the tribunals competence to decide on matters
of immunity. The Court refused to intervene on the basis of MAL Article 5
and dismissed the case, ruling that the tribunal alone was competent to decide
on such matters according to Article 16 MAL.
In s/. t./
:
, Skandia applied to the Bermuda court
seeking an order to stop Al Amana, a company in Bermuda, from pursuing
legal proceedings against Skandia and others in Kuwait. The Supreme Court
of Bermuda applied Article 7(1) MAL, using ,- /. evidence, and held
that an arbitration agreement existed between the companies, although Al
Amana challenged the arbitration clause under Article 7(2) MAL. The Court
held that any challenge to the existence, validity and scope of an arbitration
agreement was to be first determined by the arbitral tribunal under MAL
Article 16(3). Accordingly, the Supreme Court granted the injunction
restraining Al Amana from continuing proceedings against Skandia and its
affiliates in Kuwait.
In c../ t-, c/ . t// s/..
:
, the Florida court of appeal
reversed an order compelling arbitration because the reference to arbitration
was on the manufacturers website, whereas the orders for the goods did not
contain an agreement to arbitrate.

243
International Civil Aviation Organization (ICAO) v. Tripal Systems Pty. Ltd., CLOUT No. 13 (Cour
suprieure du Qubec 1994).
244
Skandia International Insurance Company and Mercantile & General Reinsurance Company and
various others, CLOUT No. 9 (The Supreme Court of Bermuda 1994).
245
General Impact Glass & Windows Corp. v. Rollac Shutter of Texas, Inc. , No. 3D08-1468 (Florida
3rd District Court of Appeal 2009).
155

Rules on Evidence, Experts and Witnesses

The arbitral tribunal determines the admissibility, relevance,
materiality and weight of evidence provided in the form of written documents
or oral testimonies. Tribunals may require parties to produce documents or
other evidence to support their claims. Under ICC, LCIA, and WIPO Rules
the tribunal may appoint experts on specific issues, which gives them an
advantage over UNCITRAL rules for IP cases.
LCIA and WIPO Rules grant explicit powers to the arbitral tribunal to
conduct inspections of sites or immoveable properties, which offer advantages
in IP cases where R&D facilities, laboratories or other production sites are
involved. ICC and WIPO Rules clearly contemplate IP issues with references
to confidential information and provide measures for protecting trade secrets
from becoming disclosed. WIPO Rules are the most specialized for
intellectual property disputes, and as such, technical issues relating to
evidence are elaborated in more thorough detail than in other sets of rules.
In any case, the rules on taking evidence are more restrictive than the
full discovery in public court trials. Control over discovery procedures and
limits on discovery for the sake of saving time and expenses are primary
strengths of the arbitral system, but it does not necessarily mean that a
stubborn party cannot stall and increase costs. Discretion among the tribunal
will ultimately determine the amount of discovery allowed or needed.


156

Table 9 Articles Relevant to Taking Evidence, Experts and Witnesses

Cases Pertaining to Taking Evidence, Experts and Witnesses
The Federal Court of Canada noted it had a mandate to assist in matters
of evidence, under Article 27 MAL, in t./,/ t./ . t.
:c
. In
/// . t,. o./..
::
, the High Court of Hong Kong held it had
jurisdiction to grant subpoenas in order to assist tribunals in taking evidence
under MAL Article 27. t . c, :/
:s
in Canada showed
that an arbitral tribunal has no power to compel witnesses to testify, and
failure of an applicant to seek judicial assistance under Article 27 MAL
cannot be attributed to the tribunal.
7 of the FAA extends subpoena rights to arbitrators whereupon
application to a District Court, contempt may be used to punish noncompliant
parties. The California Supreme Court discussed issues relating to discovery
in arbitration in +-... . t.. u.//
:.
. Parties to arbitration are

246
Delphi Petroleum Inc. v. Derin Shipping and Training Ltd., CLOUT No. 4 (Federal Court of Canada,
Trial Division 1993).
247
Vibroflotation A.G. v. Express Builders Co. Ltd., No. 1994 No. MP 1230 (High Court of Hong Kong
1994).
248
In re Corporacion Transnacional de Inversiones, S.A. de C.V. et al. and STET International, S.p.A. et
al., No. 45 O.R. (3d) 183, CLOUT No. 34 (Canada Superior Court of Justice 1999).
249
Marybeth Armedariz v. Foundation Health Psychcare Services, Inc., 6 P.3d 669, 24 Cal.4th 83, 99
Cal.Rptr.2d 745 (CA Supreme Ct. 2000).
ICC LCIA UNCITRAL WIPO
Article 20 Articles
20-22
Article 27 Articles 48-
52, 54, 55
157

entitled to adequate discovery but it is agreed that this may be something
less than the full panoply of discovery undergone in public courts. Citing
c/-. . t..:/, the CA Supreme Court stated that limited
discovery is an important component of the simplicity, informality, and
expedition of arbitration.

Conduct of Hearings and Closure of Proceedings

Each of the four sets of rules under review provide for the tribunal to
decide the case on the basis of written statements and documents alone or by
including hearings at the request of a party or on the tribunals own initiative.
Time periods for advance notice of dates and time of hearing are not fixed in
any of the set of rules. Instead the language of the rules provides for the
tribunal to notify parties giving adequate or reasonable time beforehand
for parties to prepare. Discretion is again an important part of keeping the
process moving quickly.
LCIA, UNCITRAL, and WIPO Rules contain provisions in Articles
relating to hearings that all such meetings and hearings are held -., or
in private. ICC Arbitration Rules and internal rules contain Articles pertaining
to confidentiality in sufficient amount to conclude that those ICC Rules
equate to the privacy standards laid down by the other three sets of rules under
review. The privacy aspect of these rules accommodates parties which desire
to keep their disputes and any details thereof out of the public eye. This point
offers great advantages for businesses.
158

ICC, UNCITRAL, and WIPO Rules are consistent on the issue of
closing proceedings, which occurs after both parties have had adequate
opportunity to present their arguments fully, when neither party has anything
more to offer, and when the tribunal is satisfied that cases have been fully
submitted. LCIA Rules do not contain any specific provisions relating to the
process of closing proceedings, although numerous references to conclusion
of proceedings are made in other Articles. For the purposes of this research, it
is assumed that LCIA Rules follow the same general format as other rules,
and reference to such closure or conclusion following other guidelines on
statements and hearings implies a similar method for closing proceedings.
Once proceedings are closed, no further evidence or claim may be
submitted. Proceedings may not be reopened unless, under exceptional
circumstances, the tribunal authorizes further action, which must occur prior
to the rendering of the final award. This finality offers advantages in IP cases
which so often go to appeals if decided in public courts. However, it also
creates room for unchangeable error.

Table 10 Articles Relevant to Hearings and Closing Proceedings

ICC LCIA UNCITRAL WIPO
Article
20, 21, 22
Article 14, 18, 19, No Explicit
Provision on Closing
Article 17,
28, 31
Articles
53, 57
159


Cases Pertaining to Hearings and Closing Proceedings
t . c, :/ before the Canadian Supreme Court
of Justice involved multiple MAL provisions relating to the conduct and
closure of proceedings. According to the Court, the purpose of Article 18
MAL was to protect parties from an unfair tribunal, and not from the partys
own failures or strategic choices. The Supreme Court further noted that a
party which refuses to participate in arbitration forfeits its opportunity to be
heard, and may not use such forfeiture as valid argument in attempts to set
aside awards after they have been rendered.

Interim Measures

At the request of a party, the tribunal has the authority and power to
issue interim or conservatory measures which may take the form of an award.
The tribunal may require a party applying for such interim measures to
provide security on the interim award. All four sets of rules grant parties
rights to apply to judicial authorities for interim measures without violating
the arbitration agreement.
As UNCITRAL Rules state, interim measures may be issued to:
1. maintain or restore status quo;
2. prevent current or imminent harm;
3. protect the impartiality of the arbitral process;
4. preserve assets out of which an award may be paid;
160

5. preserve evidence relevant and material to the dispute.
Whereas ICC and WIPO Rules contain short explanations of interim
measures, with WIPO Rules containing terminology more suitable for IP
disputes, LCIA Rules provide the most detail on the nature and scope of such
measures, paying close attention to specifics relating to security and costs.
UNCITRAL Rules provide the lengthiest discussion of the conditions
required to support the issuance of an interim measure.

Table 11 Articles Relevant to Interim Measures

Cases Pertaining to Interim Measures
In +: c-,.. c-/u . t: s,.- t (1995), the Ontario,
Canada Court of Justice was asked to grant interim measures of protection
under Article 9 MAL. The Court held that interim measures could be ordered
by the arbitral tribunal under Article 17 MAL, which would be enforceable in
domestic courts pursuant Article 9 MAL.
Although the FAA does not explicitly provide for interim measures,
which has been considered a cause for inconsistent judgments in US Courts
(Eiland, 2012), the US 9
th
Circuit Court of Appeals held in :, :. .
c./ :. (2010) that:
a district court may issue interim injunctive relief on arbitrable claims
if interim relief is necessary to preserve the status quo and the
meaningfulness of the arbitration process.
ICC LCIA UNCITRAL WIPO
Article 23 Article 25 Article 26 Article 46
161

Similarly, in o.. . .
:
, the 2
nd
Circuit held that entertaining an
application for a preliminary injunction in aid of arbitration is consistent with
the court's powers. However, there may be some confusion about the source
of jurisdiction, considering that in .// t,/ . u..,
251
the 8
th
Circuit
held the FAA alone did not grant courts such powers absent contractual or
other agreement.

Awards

Rules relating to awards are uniform except for time limits and other
details relating to handling of awards. Awards are made by a majority of
arbitrators when there are three or by the sole arbitrator. If one arbitrator of a
three-member tribunal refuses or fails to sign or take part in deliberations, the
presiding arbitrator or chairman alone makes the award, stating reasons for the
lack of an arbitrators signature. Final awards contain reasons except under
WIPO Rules if parties agree otherwise and if law supports non-disclosure of
reasons. Parties which reach a settlement may request a consent award that
need not contain reasons.
Awards are final and binding. Parties irrevocably waive their rights to
appeal awards in judicial courts upon entering into arbitration. Parties
undertake to comply with and carry out awards without delay under all four

250
Borden, Inc. v. Meiji Milk Products Co., Ltd., 919 F. 2d 822 (US 2nd Circuit Court of
Appeals 1990).
251
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ivan HOVEY, Richard Kadry, Bruce Markey and Lynn
Erickson, 726 F.2d 1286 (US 8th Circuit Court of Appeals 1984).
162

sets of rules. The lack of appeal offers advantages to winners in IP suits, but it
is not entirely decided whether it is a strength or weakness of the arbitral
process in patent suits when compared to the public courts, where reversal
rates are high.

Table 12 Articles Relevant to the Award

Cases Pertaining to the Award
The Federal Court of Canada, Trial Division dismissed a motion to set
aside an award on the grounds that the award included only two of three
arbitrators signatures in t-, . ://../
::
. The Court held that Article
31(1) MAL was satisfied because the reason for the missing signature was
formally given by the president of the tribunal. The Court further accepted
application for homologation of the award.
The Quebec, Canada Superior Court, in ., s- .
+/,-
::
, held if arbitrators express themselves as commercial men and not
as lawyers, such expression does not abrogate an award. The Court found that
Article 31(2) MAL was satisfied in that reasons for the award were expressly

252
D. Frampton & Co. Ltd. v. Sylvio Thibeault and Navigation Harvey & Frres Inc., No. T-723-86,
CLOUT No. 1 (Federal Court of Canada, Trial Division 1988).
253
Navigation Sonamar Inc. v. Algoma Steamships Limited and others, CLOUT No. 1 (Cour
suprieure du Qubec 1987).
ICC LCIA UNCITRAL WIPO
Articles
24-28
Article 26 Article 34 Articles
60-65
163

stated and implicit in the award, regardless of how the arbitrators expressed
themselves.
The US District Court in Minnesota refused to vacate or confirm a
partial award in cor. . t.....,
:
because it [did] not award
anything to anyone. Judge Schiltz remarked that it [was] difficult to
understand how the [award could] be considered an award at all. Citing
z./. . t./
:
, Schiltz stated that final awards require specific action,
which would be required to confirm such an order.

Post-Award

International arbitral awards may be enforced under the 1958 New
York Convention, which provides limited exceptions in Article V where a
judicial authority may refuse such recognition and enforcement. The potential
to vacate an award is a crucial right in establishing arbitration as a suitable
substitute for litigation. Although rules of arbitration and general practices
within the legal profession help direct the works toward fair and balanced
decisions, no institution or profession is impervious to corruption.
In any case, if either party had legal capacity to enter into arbitration,
and if the arbitration was allowed under the laws of the seat, if each party was
notified of the establishment of the tribunal, if the tribunals constitution

254
COKeM International, Ltd. v. Riverdeep, Inc., No. 06-CV-3331 (PJS/RLE), 06-CV-3359 (PJS/RLE) (US
District Court of Minnesota 2008).
255
Zeiler v. Deitsch, 500 F.3d 157, 169 & n.11 (2d Cir.) (2007).
164

followed the format agreed upon by the parties, and if each party had an
opportunity to present a case, if the award follows the subject matter of the
arbitration, and if the award has been rendered and was within the laws of the
country where the enforcement is sought, then a party has no possible
recourse against the award.
No set of rules reviewed herein features any revocation or nullification
clause. Such matters are not of concern to the tribunals which have no
jurisdiction to vacate their awards. Correction of awards is possible under all
sets of rules. ICC and UNCITRAL Rules allow interpretation of awards,
which may be advantageous in multilingual cases. LCIA, UNCITRAL, and
WIPO Rules provide options for making additional awards.

Table 13 Articles Relevant to Post-Award Actions

Cases Pertaining to Post-Award Actions
Numerous cases involving application for setting aside an award under
Article 34 MAL have been heard before domestic courts, a few of which are
included in this section.
In ... . ,, s../
:c
, the British Columbia, Canada Court of
Appeal noted the then-worldwide trend toward restricting the scope of judicial

256
Quintette Coal Limited v. Nippon Steel Corp. et al., CLOUT No. 1 (British Columbia Court of
Appeal 1990).
ICC LCIA UNCITRAL WIPO
Article 29 Article 27 Articles 37-39 Article 66
165

intervention into commercial arbitration. Lower courts affirmed the award
against Quintette, which appealed to set aside the award relying on Articles 5
and 34 MAL. The Court of Appeal upheld the lower courts decision, finding
that Article 34(2)(a)(iii) MAL prevented such intervention.
In z-//.. t/., . ,
::
, the Zimbabwean Harare High
Court considered an award to be contrary to public policy if it undermined the
system of international arbitration, and such a case would likely include fraud,
corruption, bribery or serious procedural errors. The court decided that a
computational error in the award did not so negatively affect the institution of
arbitration, nor consist of more egregious types of errors. As such, the court
found that Article 33 MAL provides for parties to request corrections of such
errors, and that errors of this minor nature did not qualify the award to be set
aside under Article 34.

Costs and Fees

In all arbitration proceedings, there are fees and costs associated with
the tribunal, the Court, Center, or appointing authority as each case may have
it, and other things. Under ICC, LCIA, and WIPO Rules the Court or Center
fixes the costs whereas the tribunal decides on costs under UNCITRAL Rules.
Each set of rules provides for deposits on costs by each party prior to opening
proceedings. Time limits and procedures vary among the four sets of rules.

257
Zimbabwe Electricity Supply Commission v. Genius Joel Maposa, No. HH-231-98, CLOUT No. 25
(Harare High Court 1998).
166


Table 14 Articles Relevant to Costs and Fees

Case Pertaining to Costs and Fees
..- . s/.,/...//. c/./
:s
dealt with questions relating to a
AAA proceeding wherein the arbitrator terminated the arbitration due to
nonpayment of fees. According to the court, such termination of arbitration
for nonpayment of fees does not constitute an arbitration award.

Confidentiality

The four sets of rules under review contain provisions for non-disclosure of
proceedings and awards. WIPO Rules have the most detailed and IP-specific
rules regarding such non-disclosure. ICC internal rules and statutes address
the issue of confidentiality. In general, if parties do not agree to disclose,
information regarding the arbitration may not be disclosed unless there is a
legal obligation to do so. The importance of confidentiality cannot be
understated in IP cases, where nondisclosure alone is sufficient reason for a
party to choose arbitration over litigation.

258
Medcom Contracting Services, Inc. v. Shepherdsville Christian Church Disciples of Christ, Inc., No.
290 S.W.3d 681, 685 (Kentucky Court of Appeals 2009).
ICC LCIA UNCITRAL WIPO
Articles
30, 31
Articles 24,
28
Article 40-43 Articles
67-72
167


ICC Rules
Article 6 of the Statutes of the International Court of Arbitration, found
in Appendix I of the rules states that the work of the Court in general is of a
confidential nature.
Appendix II, concerning the Internal Rules of the International Court of
Arbitration states in Article 1(3) that any documents drawn up by or submitted
to the Court in the course of proceedings are held confidential, to be disclosed
only to members of the Court, the Secretariat, and persons authorized by the
Chairman to attend Court sessions. Article 1(4) therein states that the
Chairman or Secretary General of the Court may allow researchers to access
parts of Awards and other documents, although in a limited form such that the
integrity and confidentiality of the arbitration proceedings may be protected.
Under Article 1(5), any such research shall be authorized upon condition that
a researcher agrees to respect the confidentiality of the material, and any
publication relating to review of such materials must first be submitted for
approval to the Secretary General of the Court. Documents or other records
may be destroyed under Article 1(7) unless a party or arbitrator requests
otherwise in writing within a period of time determined by the Secretariat.

LCIA Rules
Article 30 concerning confidentiality states that unless parties agree in
writing to the contrary, parties undertake to keep confidential all awards,
documents, and materials relating to the arbitration. This requirement does not
168

pertain to cases where a party is required to disclose any part of proceedings
by legal duty, or in pursuit of enforcement or challenge of an award before a
/ /.. judicial authority. Tribunal members are required to refrain from
disclosing content of deliberations under Article 30.2. The LCIA Court does
not publish any part of an award without prior written consent of all parties
and the Tribunal in accordance with Article 30.3.

UNCITRAL Rules
An award may be made public in whole or in part under Article 34(5)
with consent of all parties and when disclosure is required by legal duty or
before a competent judicial authority.

WIPO Rules
In accordance with Article 73, no information regarding the existence
of arbitration is unilaterally disclosed save for a court challenge or
enforcement action, or when a party has a legal duty to disclose. In such cases
where disclosure is legally required, only the minimum amount of information
may be disclosed and all details of such disclosure must be communicated to
all other parties.
Article 74 requires that all documents, witness testimonies and other
evidence are kept confidential. The award is kept confidential under Article
75 and may only be disclosed if parties consent, or if a national court or other
judicial authority orders, or if legal requirement is imposed.
169

The Center and arbitrator(s) maintain the confidentiality of arbitration
and shall not describe or disclose to the public any information relating to the
specifics of arbitration except where required by law. The Center may publish
aggregate statistical data relating to its activities insofar as such information
does not include particular circumstances of any dispute or otherwise violate
the general confidentiality rules.


Table 15 Articles Relevant to Confidentiality

ICC LCIA UNCITRAL WIPO
Article 6 of
Appendix 1,
Article 10 of
Appendix 2
Article 30 Article 34 Articles
73-76




CHAPTER 7
ODR AND THE FUTURE OF ARBITRATION
The internet has the potential to open up an entirely new field for
arbitration workers and users. Broadband connections, multi-gigabyte high-
speed file transfer and storage capabilities, videoconferencing technologies,
and layered encryption security systems make it possible for parties and
tribunals to conduct all phases of arbitration proceedings, from notice/request
to award, without ever meeting in the same physical location. Cost and time
efficiencies can again be improved by utilizing state of the art communication
media of the time. Where current and future innovations in information
technology can take arbitration is up to users and practitioners, but the
possibilities are virtually unlimited.
In 2002-03, UNECE organized a forum on ODR leading to a
UN/CEFACT draft recommendation on ODR. The recommendation found
advantages of ODR include its fast, inexpensive, and user-friendly nature.
Potential problems included security, confidentiality and privacy,
accreditation, rules of procedure and process, applicable law, and
enforceability.
Considering the many questions raised by a thorough inquiry regarding
expansion and adoption of ODR, the UN Centre made various
recommendations to governments. Promotion of ODR in business-to-business
and business-to-consumer sectors were recommended. Governments were
advised to refrain from adopting rules hindering ODR, such as accreditation
171

requirements for ODR providers. Self-regulatory instruments, codes of
conduct and trust-mark schemes were preferred to state regulation.
Governments were encouraged to provide dispute settlement options under
national law that highlighted out-of-court arrangements, including via
electronic means. Enhanced cooperation between private and public
institutions was considered beneficial to establishment and expansion of ODR
facilities and procedures. A positive outlook was presented regarding the
future of ODR (UN/CEFACT, 2003).
Internet entrepreneurs have already taken initiative on ODR. For
example, eBay instituted a system for ODR in association with SquareTrade,
which eBay said is a new, unbiased method that can help [users] resolve
disputes that may arise involving eBay transactions. Both the ICC and WIPO
have also pursued electronic opportunities and facilitate ODR procedures.

ICC DOCDEX and NetCase

ICCs DOCDEX system is a means of resolving dispute related to
letters of credit
259
. DOCDEX requires that communications are made via
teletransmission or other expeditious means. Hearings are entirely ruled out
(Connerty, 2006).
No prior agreement between parties is needed for a decision. The
process is initiated with a request for decision, to which the responding party

259
Rules are available at the ICC website (http://www.iccwbo.org/Products-and-
Services/Arbitration-and-ADR/DOCDEX/DOCDEX-Rules/).
172

has 30 days to reply. If the respondent does not reply, it does not receive a
decision, but a partys non-participation does not preclude the rendering of a
decision.
A three-person panel is appointed after initiation and has 30 days to
render a decision following receipt of documents. Experts are professionals
from the banking sector, selected from a list furnished to the ICC International
Centre for Expertise from the ICC Banking Technique and Practice
Commission. A technical adviser personally reviews each decision to ensure it
is rendered within the scope of the rules. The claimant should pay fees, which
as of 2012 were estimated as never higher than US$10,000.
The process usually takes 60 days. Article 1.4 of DOCDEX Rules
specifies that unless otherwise agreed, decisions are not binding on parties
(ICC, 2012).
In 2005, ICC launched NetCase, which allows arbitrations to be
conducted online via a centralized secure system. NetCase emerged from
ICCs already state-of-the-art IT and case management system, which allows
the Secretariat to follow all of the arbitrations it oversees. NetCase is available
for no additional charge to parties of arbitrations. The system provides details
of parties and arbitrators, the procedural calendar and a current financial
statement. Documents can be stored and sorted by date, author or title.
Participants can exchange views in an online forum. Of course a sophisticated
encryption system and password protection help keep the network secure and
information confidential (ICC, 2005b, 2008)
260
.

260
NetCase is available at www.iccnetcase.org.
173

WIPO ODR

WIPOs ODR facility offers a means of efficient resolution of disputes
arising out of registration and use of internet domain names. In conjunction
with ICANN, WIPO provides rules on UDRP
261
.
Similar to trademark and trade name disputes, domain name disputes
result from identical or confusingly similar names. A complainant has rights
over domain names which are identical or similar to those registered to the
party.
Paragraph 3(b) of ICANN UDRP Policy states that a receipt of an
order from a court or arbitral tribunal is cause for cancellations, transfers and
changes of registered domain names. Thus, such disputes are arbitrable.
WIPO UDRP ODR cases are often concluded within roughly 2 months
of the date of a complaint. Rules require a decision to be rendered within 14
days of appointment of an expert panel.

UDRP Cases

The following examples illustrate the speed and efficiency of the
UDRP process. These cases show the unscrupulousness of internet infringers,
and the brazen mindset with which they abuse the online system. Commercial
internet infringers appear to consider themselves as very intelligent, but their

261
Rules are available at the ICANN website (http://www.icann.org/en/help/dndr/udrp/rules).
174

arguments are simple, and actions easily categorized as malicious or
egregious. The cases are straightforward and easy to resolve.
In s/ +s+ . ,.t,./..
:c:
, a complaint was filed with the
WIPO Arbitration and Mediation Center on February 10, 2003 regarding
domain names statoil-gas.com and statoilgas.com. A sole panelist was
appointed on April 4, leading to a decision by April 18. The case reaffirmed
principles established in :./ . ./. /-//.
:c:
, which decided
bad faith infringement was not limited to positive action, but also included
passive holding of a domain name. Offering to sell domain names for
exorbitant amounts also amounted to bad faith use according to rrt .
o-
264
.
Ten domain names containing the words Pepsi and Mountain Dew
were the subject of t., . c/
:c
. A complaint was filed on January 15,
2004. Amended and re-amended complaints were filed on February 4 and
March 25. A sole panelist was appointed on March 19, leading to a decision
by April 2. The process was delayed due to modifications of the complaint,
but it was still concluded within 3 months (Connerty, 2006).
Cyber-squatter Henry Chan was the respondent in another Pepsi case in
2005 wherein bad faith was further exhibited by missing contact information

262
Statoil ASA v. MagneEspelund, No. Case No. D2003-0097 (WIPO Arbitration and Mediation
Center 2003).
263
Telstra Corporation Limited v. Nuclear Marshmallows, No. Case No. D2000-0003 (WIPO
Arbitration and Mediation Center 2000).
264
World Wrestling Federation Entertainment, Inc. v. Michael Bosman, No. Case No. D99-0001
(WIPO Arbitration and Mediation Center 2000).
265
PepsiCo, Inc. v. Henry Chan, No. Case No. D2004-0033 (WIPO Arbitration and Mediation Center
2004).
175

in the Whois record relating to pepsiemployment.com. In t., . tt.
:cc
,
eleven domain names containing Pepsi, a world-famous brand, and a
descriptive word or short phrase were transferred to the complainant.
s, r/.// r/ . r/t
:c:
previously showed that addition of
a descriptive word to a world-famous mark does not detract from the overall
impression of the mark. +ot . u//-
:cs
established that the addition of
short phrases to a well-known mark is still confusingly similar to the mark
alone. c/.. . r-///
:c.
found that use or absence of punctuation marks
does not alter the dominant features of a mark, and does not make a mark
somehow different. t/-. t/. . t/,..
::
decided that the use of
misspelled variations of famous marks or names does not abrogate the rights
of the owner of the famous mark or name to take action against the adaptation
or mutilated form of the mark or name.
Merely knowing how to use the computer does not automatically
indicate a level of sophistication, which we see these copycats and squatters
lacking, regardless of their coding abilities. If an expansion of ODR facilities
and framework were to occur, swift and comprehensive control of online
copyright could be maintained, thus solving various legal and ethical
questions previously covered. While domain names and trademarks

266
PepsiCo, Inc. v. LaPorte Holdings, Inc. and Pepsiemployment.com a/k/a Henry Chan, No. Case No.
D2005-0087 (WIPO Arbitration and Mediation Center 2005).
267
Sony Kabushiki Kaisha v. KilInja, WIPO Case No.D2000-1409 (2000).
268
America Online, Inc. v. Chris Hoffman, WIPO Case No. D2001-1184 (2001).
269
Chernow Communications, Inc. v. Jonathan D. Kimball, ICANN Case No. D2000-0119 (WIPO 2000).
270
Ultimate Electronics, Inc. v. Phayze, Inc, WIPO Case No.D2002-0851 (2002).
176

thereunder are protectable with UDRP, copyright is now in need of urgent
attention before its existence becomes more threatened.

Future of ODR

ODR can potentially supplement other public or private means of
resolving a variety disputes including those involving IP. ODRs uses in
private matters are of the greatest importance, whereas it is less practical for
administration of public law. In an era of globalization, when time is of the
essence and decisions are urgently required, ODR can provide a mutually-
beneficial alternative to traditional litigation and other dispute resolution
methods.
Bad-faith internet copyright infringement could potentially be referred
to compulsory ODR proceedings similar to UDRP cases. If a multilateral
treaty were concluded supporting broader use of such a system, states could
be relied upon to establish compulsory jurisdiction of a public-private
sponsored ODR facility and process designed specifically to resolve royalty
and infringement disputes where both public and private interests are present.
Class arbitration proceedings would be a suitable option for online
infringement, where internet entrepreneurs knowingly cheat large numbers of
individuals out of royalty payments which are small individually but
accumulate often to millions of US dollars in short term operations.
Similar to issues discussed in Californias t.. . s.,. c.
case and Canadas s.../ . :ttts, individual DMCA take-downs can be
177

little more than a charade whereby liability for widespread low-value wrongs
is avoided and infringement proliferates on websites featuring DMCA
compliance policy pages. Online media piracy remains largely unchecked due
to inefficient remedies for rights owners and holders. With compulsory ODR,
a character such as Kim Dotcom could be referred to such a procedure where
a decision would be binding, of a similar nature to a sentence in a criminal
trial, but where injured parties could receive damages and public funds could
be conserved. At very least, control of infringing pages could be transferred to
owners of copyright if an expanded UDRP model were utilized.
International and domestic class arbitration can also help resolve other
disputes, such as those involving franchise and licensing agreements. In the
developing and third worlds, newfound freedoms to associate and participate
in legal processes can provide franchisees and licensees options to gather
together, to defend and represent one another in class actions. Class
arbitration can help establish and maintain balance between the more
powerful franchisor/licensor and the less powerful franchisee/licensee. ODR
could facilitate dispute resolution across multinational franchise networks.
Binding resolutions are essential at the request of one, both or all
parties considering the need for risk-management in financial expenditures.
Non-binding decisions may result in waste of legal and administrative funds.
However, without acquiescence by defendants to submit to arbitration, under
the present system there would be no possible way to enforce arbitral awards.
Legislative changes and/or convocation of international treaties in favor of a
178

compulsory ODR system are probably in the distant future if possible at all.
Nonetheless, opportunity is abundant.




CHAPTER 8
DISCUSSION
Our litigation system is too costly, too painful, too destructive, and
too inefficient for a truly civilized people. US Chief Justice Warren Burger

Advantage: Arbitration

Chief US Circuit Court Judge Rader (2011) said to the Eastern District
of Texas Judicial Conference, the greatest weakness of the US court system
is its expense. Rader included in the written form of his speech a copy of the
e-discovery model order, which stated that excessive e-discover, including
disproportionate, overbroad email production requests, carry staggering time
and production costs that have a debilitating effect on litigation. According
to Raders information, about 0.0074% of documents produced in e-discovery
actually make their way onto trial exhibit lists.
Needless to say, said Rader, if we cannot control the cost,
complexity, and complications of patent litigation, the litigants that we serve
will simply find a better way, or a better place, to resolve their disputes. The
inability of the bench and bar to control discovery time and expenses in patent
cases has undoubtedly created broad opportunities for arbitrators worldwide.
Google general counsel Kent Walker told the Wall Street Journal
(2012) that patent lawsuits can cost about US$5 million per patent to defend
179

in the US. Tindell(2009) found that patentees won about 58% of suits while
alleged infringers, such as Google in the Oracle case which prompted
Walkers comments, won about 42% between 1983 and 1999.
I think youve seen a lot of patent cases filed lately, and most of them
have not resulted in successful outcomes for plaintiffs, said Walker. That
may send a message to those who might want to do these things in the future.
The message seems to be clear: its probably better to take it to arbitration.

Discretion

In the winner take all world of domestic litigation, judicial discretion is
an important factor in any case. To err is human, and abuses of discretion
do happen in courts. The US 9
th
Circuit Court of Appeals has a standard of
review which finds a District Court abuses its discretion when it (a) does not
apply the correct law or rests its decision on a clearly erroneous finding of
material fact, (b) rules in an irrational manner, (c) makes an error of law, (d)
erroneously interprets a law, (e) rests its decision on an inaccurate view of the
law, or (f) makes a decision for which the record contains no support
271
.
In t// . oust
:::
, the reviewing American court stated:

271
Ninth Circuit definitions are available at the Courts website
(http://cdn.ca9.uscourts.gov/datastore/uploads/guides/stand_of_review/I_Definitions.html).
272
Rabkin v. Oregon Health Sciences Univ., No. 350 F.3d 967, 977 (US 9th Circuit 2003).
180

An abuse of discretion is a plain error, discretion exercised to an end
not justified by the evidence, a judgment that is clearly against the
logic and effect of the facts as are found.
But not all errors are considered abuse. In cc/ . :,
:::
,
the US 2
nd
Circuit held:
Upon review, if an error is found which did not actually form the basis
for the determination whether the injunction issued or not, no abuse of
discretion will have occurred because such an error will be deemed
harmless.
Private arbitrators are appointed and referred based upon their
qualifications and competence as exhibited in prior arbitral proceedings and
related work. While many judges may receive lifetime appointments and
benefit from constitutional independence, arbitrators are held to a different
standard. Although errors and misinterpretations of law may not be appealed
after awards, arbitrators who render awards erroneously, or who abuse certain
powers even in the slightest amount may be excluded from the market of
professional arbitration. The institution of arbitration, by virtue of its private
and businesslike nature, provides parties with more personalized service than
judicial authorities which hold blanket jurisdiction.
Gray (2004) mentioned that the mere legal error doctrine holds unfair
the sanctioning of a judge for not being infallible while making hundreds of
decisions often under pressure. Gray also commented on the inability of
judicial conduct commissions to sanction judges, even after appellate

273
Coca-cola Company v. Tropicana Products, Inc., No. 690 F.2d 312 (US 2nd Circuit Court 1982).
181

reversals. While judges may be given freedom to err and not be held
accountable, arbitrators may be put out of the practice fairly easily. Serious
cases of arbitrator misconduct can be brought to public courts, and awards
may be vacated in certain circumstances, so there are checks available.
Arbitrators have more to lose than judges when errors are made, ..
,/., and thus accuracy and reliability are likelier in arbitration when
compared to litigation.

Subjectivity

Somewhat ironically, closed-mindedness is rampant in the legal field.
Judges and courts often disagree, where each party generally holds firm that
its own analysis, beliefs, and points are superior to all others, at least ..
High appeals and reversal rates show reluctance to accept the initial opinions
of courts, which err as much as 33% of the time in US patents cases (Moore,
2001). True compromise and objectivity are not the norm.
Subjective interpretation is cemented into the foundation of the
American legal system, and it is safe to say that the rest of the worlds courts
function on a similar sliding scale that allows for broad judicial power even in
civil matters. stc . c/..
::
and u- . +,/./
275
held that abuse of
discretion may only be found when the district court makes a determination
which falls outside of a broad range of permissible conclusions. The terms

274
SEC v. Coldicutt, No. 2258 F.3d 939, 941 (US 9th Circuit Court of Appeals 2001).
275
Harman v. Apfel, No. 211 F.3d 1172, 1175 (US 9th Circuit Court of Appeals 2000).
182

broad and narrow frequently used by courts leave some room for
further argument and individual interpretation of what is or is not within such
a vague range.
Within and between nations, there exist longstanding semantic
arguments over vague terms such as reasonable. Reasonable is a word
found quite often in legal literature, and a word which forms the basis of
many court decisions. The words reasonable, unreasonable, reasonably,
and unreasonably are used 4 times in ICC arbitration rules, 7 times in LCIA
rules, 10 times in UNCITRAL rules, 6 times in WIPO rules, 31 times in the
WTO TRIPS Agreement, 7 times in the Berne Convention, and once in the
Paris Convention.
Legitimate is another word which may be subjectively defined.
Legitimate is found 11 times in the TRIPS Agreement, once in the Berne
Convention, and once in the Paris Convention. Surely, what is reasonable or
legitimate to one person is not necessarily so to another person. For
example in t . u--.-.
::c
, a Washington State petty court judge was
reprimanded for making improper threats of life imprisonment to defendants,
which the judge considered reasonable exercise of [his] judicial
independence (Gray, 2004). Clearly the Supreme Court of Washington, in its
. / decision, did not consider the judges words proper or reasonable.
Nonetheless, our legal systems rely upon the phenomenon of presence of

276
IN RE: the Disciplinary Proceeding Against A. Eugene Hammermaster, Municipal Court Judge, No.
JD#15 (Supreme Court of Washington 1999).
183

common perceptions and uniformity as implied also by Article 38(c) of the
Statute of the International Court of Justice.
Due to the generally overwhelming presence of conflicts of law,
uncorrected error or misinterpretation, varying interpretation and application
of laws within and among nations, there are virtually zero general principles
of law recognized by civilized nations absolutely in theory and practice. Nor
is there any clear view of what a civilized nation is, nor even a globally-
accepted example of a small group of civilized nations.
Legal scholars, advisers, advocates, and adjudicators have dissected
words, contorted dictionary definitions and applied the whole gamut of
analogies and metaphors in the English language alone insomuch that
scientific facts are disputed on philosophical or methodological grounds.
Considering that in the English language in the United States alone, there is
likely to be a counterpoint to any given point, perhaps for no other reason than
simply because it is possible to make an argument, disorder among nations is
one of few constants in law and politics.
Arbitration offers parties the advantage of choosing the seat and
applicable law of the proceedings, thereby helping minimize potential niche
interpretations and decisions. Appointment of arbitrators also helps parties
reduce their risks of receiving unfavorable treatment. Arbitrators are not
subject to the daily strains and stressors of the public courts. IP arbitrators do
not work with as broad a range of cases as judges, so arbitrators to IP disputes
can focus their full attention on the specific matters at hand rather than having
to cross back and forth through the divisions of criminal and civil law over
184

weeks of proceedings. Subjectivity is not by definition avoidable entirely, but
its negative effects can be mitigated by choosing arbitration.

Disharmony

Despite multilateral treaties such as TRIPS, the harmonization of patent
office procedure and decision-making has not been effectively achieved. A
review of 1990-1995 application outcomes from the Trilateral Offices
USPTO, JPO, and EPO showed that only 37.7% of patents granted by the
USPTO were granted by the EPO and JPO (Jensen, Palangkaraya, & Webster,
2006).
In June 2010, the European Commission document discussed problems
relating to their then-stalled introduction of a European Community patent,
more recently known as a unitary patent, which was first proposed in 1997,
which the European Council in 2000 called for without delay. Document
SEC (2010) 796 stated:
The lack of an EU patent entails a fragmented system for patent
protection in the EU. Patent proprietors appear to refrain from seeking
EU-wide patent coverage due mainly to the high costs and complexity
of validating European patents in several Member States.
The 1973 European Patent Convention (EPC), to which all EU
Member States are Contracting States, established centralized search,
examination and grant of patents, and technically the European patent via
the EPC has the same legal effect as a national patent in the EU, but the EPC
185

patent does not automatically take effect in most EU nations; it must be
validated separately in the country. National laws may require the patentee to
file with the national office a translation into the official national language, or
pay a publication fee, or go through different formalities relating to copies,
forms, etc. Through 2011, the EU Council agreed on draft regulations on the
unitary patent for Europe, and 25 EU member states not including Italy or
Spain agreed upon enhanced cooperation, but by 2012 the single patent was
still not a reality in Europe the worlds most successful multinational
political and economic union. Considering the slow progress in the EU,
disharmony worldwide should come as no surprise.
If a party is lucky and or well-represented enough to obtain a grant of
IP in multiple jurisdictions, infringement claims in multiple jurisdictions can
easily become another weakness of the international system. As seen in the
famous Epilady case in Europe, different courts may decide differently.
Where case law is central to decision-making in courts, prior decisions may
adversely affect litigation for decade, even when prior decisions consist of
fundamental errors or misinterpretation.
Choice-of-law and seat options in arbitration proceedings and the truly
international scope of arbitration offer solutions to the territoriality problem.
Whereas . . c.
277
in the US left little hope of extraterritorial
jurisdiction over IP, wherever the NY Convention is recognized there can still
be multi-jurisdictional action. In international disputes, arbitration is an
effective substitute for litigation, and in arbitration there is no need to file

277
Jan Voda, MD v. Cordis Corporation, No. 05-1238 (US Circuit Court of Appeals 2007).
186

simultaneous suits and risk varying results in separate jurisdictions. In
general, all plaintiffs and defendants in all jurisdictions can reach a settlement
to a dispute in one process through arbitration.

Specialization

US Circuit Court chief judge Rader (2011) said that in the long run
our US judicial system is really competing with the world, which includes
public courts and private arbitral tribunals. The competition has a lot to offer
considering that corporate lawyers and judges on the US Federal Circuit and
Supreme Court have indicated that juries may not be adequately qualified to
make decisions in patent cases (Tindell, 2009). Although Rader said that less
than 4% of all patent cases reach the trial stage and many of those trials do not
employ a jury, and despite the fact that juries in the Tindell study found both
infringement and willful infringement more often than judges, many patent
lawyers consistently find lay-juries are a hassle.
Dumbing-down the technical details in IP or even business cases is
unattractive to many practitioners. In jurisdictions like Canada, where a judge
presides over patent trials, there is still often a question of expertise that
complicates matters of fact and law. When technical jargon and scientific
detail are essential to arguing a case, its fairly easy to understand why parties
to suits would prefer a specialized tribunal over a lay-jury or generalist court
judge. Arbitration offers parties rights to appoint and challenge tribunal
members on the basis of their expertise and experience relating to the subject
187

matter of disputes, and thus arbitration offers parties to disputes potential to
improve the accuracy and reliability of decisions.

Preserving the Relationship

Arbitrations informality and privacy allows parties to accept the
presence of and resolve a dispute without it becoming a public affair. In
private, parties can avoid exposure and interference from media and
spectators. The voluntary and candid process allows parties ability to express
themselves, to handle issues and resolve conflicts cooperatively, where the
differences of parties are not magnified and problems are not exacerbated by
public meddling.
Licensees and licensors, especially, can resolve their disputes and
continue their relationships via the friendlier, more civil approach. Depending
on the jurisdiction, a broad range of topics may be arbitrable, and thus parties
to arbitration may be able to resolve differences which could otherwise be
damaging to their relationships. The arbitral system does not impose the same
unhealthy tax on innovation and free markets that litigation may. By not
burning bridges, future opportunities are kept in greater abundance.









CHAPTER 9
CONCLUSIONS
Obviously, IP proprietors, licensors and licensees, and parties to
disputes must decide for themselves which method of dispute resolution is
best for them. Serious investors, innovators, researchers, developers,
shareholders and stakeholders in the IP economy should question whether or
not the public courts can focus sufficient attention on wholly private issues.
Can courts and judges, as public institutions and servants, disregard
even momentarily other aspects of public policy, such as national security,
foreign policy and violent crime, and concentrate entirely on issues related to
private commerce? If the answer is yes, then can those public venues
provide services which are tailored to the specific needs of private
businesspeople? Can public servants fully appeal to the senses of private
capitalists, who do not generally enjoy the long arm of the law, nor big
government, nor expansive powers of the state? If yes to all of the above,
then can the courts offer IP expertise which litigants prefer?
It is likely that neither the government nor its employees can fully
appeal to the private sector in general. In fact, given evidence in literature, the
private sector would probably prefer a private court in general if one were
available. Arbitration is as close to a privately owned and operated justice
system as we can find. Arbitration keeps the state from gaining a true
monopoly over binding dispute resolution. For the sake of competition alone,
arbitration is an essential piece of our legal systems. Arbitration was once
189

despised by public officials whose incomes were threatened by private dispute
settlement, but even judges in English common law systems came to accept
the benefits of arbitration. One reason is consistent criticism from the bar
regarding the lack of expertise on the bench and in juries.
Benefits of arbitration over litigation are well-known, especially in
American patent cases where costs are on average at least 62% higher than in
other cases (Rader, 2011). Arbitration is typically cheaper and faster than
litigation. Arbitral awards have multijurisdictional validity under treaty and
implementing statute. Arbitral tribunals are more specialized in matters
pertaining to IP, and with WIPOs Arbitration and Mediation Centre, there is
at least one venue that specializes in IP ADR.
The single major limitation arbitration has is its voluntary submission
requirement, but that only rules out some cases today, such as those where
bad faith infringement is present. Courts can always be expected to compel
parties to enter into litigation upon the request of only one party. It has not
been suggested here that arbitration will or should gain a monopoly in dispute
resolution. Litigation is clearly a permanent option.
Considering the aforementioned strengths and opportunities associated
with arbitration, which significantly threatens a weakening system of IP
litigation, in my opinion, there is no reason whatsoever to enter into litigation
where and when arbitration may be utilized instead. Arbitration is established,
tested and proven effective; its reputation is well-known and largely
undisputed. Due to its past, present, and future successes, strengths and
opportunities, in my opinion, arbitration is a superior service.
190

Recommendations

Judge Rader (2011) remarked that if he were to sum up all of the
opinions of legal academics that he has heard over the years on the state of
patent litigation, in two words it would be: criticism bonanza. Rader added
that from his perspective, the patent litigation system needs improvement!
These comments may have broad implications extending to the majority of
the American legal system, leaving room for calls for wide-ranging changes to
the system, from minor tweaks to major overhauls. Due to those inefficiencies
and shortcomings of litigation, arbitration is recommended as often as
possible. Changes to public policy which continue to make arbitration easier,
faster, and more acceptable are also recommended.
All recommendations made in this section, like all pieces of advice and
suggestions offered throughout the body of this dissertation, are merely ideas
intended to inspire thought and keep in mind the need for dynamic action. We
can plainly deduce from the factual circumstances, wherein we find numerous
unresolved disputes, that few real options are available. Both States and
private parties undoubtedly brainstorm on the topic of IPR protection and
potential remedies, and the lack of cure for the commercial infringement
ailment implies that conventional avenues have been exhausted. Industries
and governments best minds have been on this job for many years, yet still
persistent violations are found without intense solution in sight, thus it would
be vain to believe that a lone researcher would be able to surmise some aspect
of the problem overlooked by all other authors or propound some miraculous
191

answer that eluded experts prior to such opinion on the matter.
Notwithstanding these probabilities relating to being the first to think of some
idea, research leading to this dissertation showed a lack of discussion on
certain problems, making it apparent that recommendations herein are original
and without precedent.
c. of my personal limitations as a researcher in law and social
sciences,
, the complex nature of our political, social, economic and legal
orders in the present tense,
+.. / /. / that our future is not yet written,
r/ /.// /././ that human beings shall create such future both
collectively and individually,
+.,, that my words are neither binding nor without opposition,
t.//, opinions, criticisms and suggestions of various authors, cases
and reports mentioned in this dissertation,
t..-.. to continue analysis and discussion on the subjects of IP
and international dispute resolution,
t..-.. / to further the pursuit of more effective and efficient
dispute resolution processes,
t.., to help create more robust protection and enforcement of
IPRs in practice,
t,, ,./ . to the academic construct of the current piece
of research,
192

t .,././/, ... /.,/ to contemplate in formulation of new and
amended IPR strategies. These ideas relate to /. /... rather than /. /
and are submitted with the ./. ,./ of making only those changes
which may be necessary to improve efficiency and increase access to civil
justice. As previously mentioned, a Congress heard opinion on the high
expense, high complexity and resulting low accessibility of the American civil
justice system (Butterfield et al, 2011). In my opinion, these issues with
public courts make arbitration the best default DRM, but one would be remiss
if one did not make recommendations for the courts simply because of
opinion favoring arbitration. Comprehensive improvements include evolution
of both public and private dispute resolution systems so that all parties can
more easily, swiftly and affordably achieve their goals.

Increase Cooperation and Uniformity
Databases of published awards, user-friendly keyword searchable case
law and article databases will improve dissemination of information. ICSID,
UNCITRAL or WIPO should have the funding and political will to develop
such an online library of arbitration materials.
Wherever possible, governmental branches and agencies should
attempt to motivate a more international and progressive policy on
arbitrability of IP disputes. Arbitration of patent validity needs to be
discussed, debated, and seriously considered in jurisdictions where it is
currently unavailable. Where manifest disregards of laws exist in arbitral
awards, they may be vacated. There are options for courts, including those not
193

from the common law tradition, to refuse recognition of erroneous patent
invalidity awards.

Contemplate IP Arbitration in Contracts
Considering the strong disposition among courts to deny applications
requesting arbitration to be compelled where the arbitration clause specifically
excludes the subject matter of the dispute in question, and considering the
same strong disposition of courts to vacate awards which contemplate issues
that parties did not agree to arbitrate, arbitration clauses should be written
with the intent of directing as many issues as possible to arbitration. Clauses
should contemplate issues relating to tort, statute, and contract, such as royalty
schedules and payments, licensing restrictions, non-competition covenants,
and infringements of various natures. Clear and explicit references to a
method of calculating damages, or choice of penalty schedule for breach and
infringement should be included.
WIPO is clearly the arbitration institution best equipped to handle
technical IP disputes. International licensing agreements, complex technology
transfer, patent research and development agreements might be best written
by referring disputes to WIPO. If WIPO is unappealing, unless there is some
special reason for preferring an . / tribunal under UNCITRAL rules, IP
disputes are probably best referred to a fixed court such as ICC, which can
oversee the process, ensuring integrity and competency. Where multiple
forms of IP are involved, parties to agreements may desire to refer one or
more parts of a multifaceted dispute to one institution while sending other
194

parts to another institution, based upon perceptions of expertise and
convenience.

Take a New Approach to Disputes
Bringing disputes to a close with binding resolution can be a costly and
time consuming endeavor regardless of the means. Arbitration is more likely
to yield faster and cheaper decisions, but in certain cases there are chances for
parties to stall and drive up the costs toward those found in litigation. To
avoid the costly delays, firms should design and implement dispute avoidance
and management strategies. Engineers and project managers, for example,
often prefer informal non-adjudicative methods of ADR such as negotiation
and mediation (Cheung & Suen, 2002).
Negotiations may be conducted between parties at any time and
location, online or via telephone, or by any other means of communication.
Good offices, conciliation, and mediation services are offered by various
ADR institutions. Appointment of a neutral expert in non-binding dispute
mitigation procedures may be enough to resolve differences quickly and less
formally. These less formal techniques may provide the best options for
international disputes so long as parties involved are willing and able to
accept and comply.

Focus on Commercial and Organizational Infringers Online
Non-commercial, private and domestic use may be the most common
form of infringement online in terms of numbers of file transmissions, but
195

those cases do not demonstrate the same type of bad-faith as internet
companies which setup shop primarily or exclusively for the purpose of
facilitating unauthorized reproduction and distribution of copyright works.
International pursuit of individual, non-commercial infringement is
impossible due to fair use exceptions written into copyright statutes. Even if
fair use arguments were held invalid for these private noncommercial cases,
there are millions and more individual users infringing online every day.
Prosecuting or seeking damages against millions of individuals is yet another
impossible goal.
As seen in the RIAA mass litigations, and soon expected in the
BitTorrent mass lawsuits (Karunaratne, 2012), issues of improper joinder
seriously limit the extent to which injured parties may claim damages against
infringing individuals . -.. One may consider a possible solution is to
compel internet users into adhesion contracts through ISPs, whereby users
agree to be referred to arbitration if they violate service terms including
copyright infringement policies. However, this type of compulsory
submission to a contract would probably be held unconscionable as it would
potentially infringe upon consumer rights. The brightest legal minds in the
American world have yet to solve the riddle of online infringement, thus
suggesting a revised approach is necessary.
While copyright infringing companies (i.e. cyberlockers, torrent sites,
P2P networks) are in abundance, with new sites consistently opening, the total
number of organizational commercial infringers is but a small fraction of the
total number of users. Keeping the number of targets at a manageable level
196

raises the probability of achieving serious internet regulation, making the full
eradication of online infringement a possibility whereas it is not when the
individual is considered the primary infringer. Such an adjusted approach
would require major changes in the American system, but this focus on supply
and infrastructure rather than demand and tertiary consumption is probably a
better way to attack internet piracy. As for a mechanism, the DMCA
takedown system is well-intentioned in theory, but far too slow and inefficient
with its one-at-a-time effects. A new platform for resolution of complaints
similar to the UDRP system is recommended.

Compulsory ODR for Internet Infringement
Other authors have recommended compulsory arbitration of all IP
disputes in general (e.g. Kingston, 2001), though such a proposal appears
unrealistic considering opinions in favor of litigation and against arbitration.
Comprehensive and expedient legislative support for compulsory arbitration
against the companies in internet infringement cases is recommended. UDRP
procedures can serve as a model for other copyright and trademark
infringement disputes.
If legislative support for monetary damages awards in compulsory
arbitration is too difficult to gain, then at very least ownership rights over
content and control rights over web pages can be awarded. Entire websites
and infringing pages can be removed or transferred and awards can be
rendered in tribunals via ICANN and WIPO, which have the most specialized
personnel and procedures to handle such disputes. Or, perhaps we are at a
197

stage in development where new international bodies may rise and take
initiative toward overseeing the internet. With its newfound global power and
alternative views on internet controls, China could help on this issue.

International Class Action Arbitration
Class-wide arbitration for several types of international cases is
recommended. The most obvious variety of case that can benefit from such a
procedure is internet piracy, where large numbers of individuals and corporate
persons are injured by single internet companies, affiliated internet
organizations, and networks of autonomous or quasi-affiliated infringers. As
previously discussed in the Future of ODR section in Chapter 7, franchise
and licensing disputes involving large numbers of parties can be resolved via
class arbitration, whether online or by conventional means.
Domestic courts are urged to allow class arbitration and hold waivers
to it as unconscionable, although it is simultaneously apparent that class
arbitration is a protracted, experimental procedure as evidenced by the AAA
statistics previously mentioned in +:: . c.,.In the domestic
jurisdiction, public courts are more appropriate than arbitration as forum for
class actions. There are, unfortunately, no / /.. international remedies
available for parties to contracts of adhesion, and no international court proper
to certify an international class action. An evolved system of arbitration one
with some compulsory jurisdiction can help provide remedies supporting
rights.
198

Piracy and Counterfeiting in NAFTA
Regarding piracy and counterfeiting, to the extent that it is possible at
the present time, prolonged pursuit of relief against criminal, commercial
infringement is recommended. Considering that recent Special 301 lists
included Canada and Mexico
278
, it is recommended the United States initiate
dispute settlement procedures against both Canada and Mexico for failure to
provide minimum standards of protection under the NAFTA Agreement, or
alternatively request dispute settlement through the WTO. Taking into
account the aforementioned failures on behalf of the US to effectively enforce
anti-piracy laws online
279
, State-to-State dispute settlement may not yield
significant results. Therefore, private parties are advised to take action
designed to motivate States to more resolutely enforce IPRs in the market.
On the private investor side, MPAA, RIAA, NABA members and other
major creative industry companies should take any feasible course to move
against Mexico and one or both of the other NAFTA member states to
arbitrate claims of .. / expropriation (Article 1110), failure to provide
minimum standards of treatment as per Article 1104-1105, failure on Article
1102 concerning national treatment, and failure to perform treaty obligations
under Chapter 17 on intellectual property. Claims of .. / expropriation

278
Recent Special 301 reports available at USTR website (http://www.ustr.gov/about-us/press-
office/reports-and-publications/2013/2013-special-301-report).
279
U.S. Court statistics Table D-2 shows an 11.5% decrease in criminal copyright cases handled
between 2008 and 2012, with only 54 in 2012. Supplementary data is available at the Courts
website (http://www.uscourts.gov/Statistics/FederalJudicialCaseloadStatistics.aspx).
199

are generally unsuccessful, but there is still some merit to them in my opinion.
Article 1105(1) claims, while facing significant challenges, are more likely to
provide remedies for injured parties.
As part of an ongoing business and legal strategy, American media
companies should consider assigning certain copyrights to Canadian or
Mexican subsidiaries for the purposes of arbitrating against the United States
for failure to provide sufficient internet download and piracy controls. Issues
such as, . /, transfer pricing may effectively prohibit such a business
decision, but if a Mexican subsidiary was the legal owner of a film or song or
album and it could be shown that the US failed to protect against the illegal
download and online infringement of such material, then the Mexican juristic
person could claim an investor-state dispute.
Considering that Canada and Mexico are not members of the ICSID
Convention, consent to arbitration under NAFTA Article 1122 cannot be
established. The United States would undoubtedly submit complaints as to
jurisdiction, which would be difficult to overcome, but such an arbitral
procedure could provide remedies for injured parties where no other recourse
against rampant infringement is available. Insomuch as it is a viable option,
arbitration is a way around state sovereign immunity which poses trouble in
trying to litigate against the US government from within US Courts.

Harmonize US State and Federal Districts
Finally, government reform in the USA is strongly recommended, at
the state and federal level, designed to create greater efficiency and harmony
200

among and within the multiple jurisdictions. More uniform legislation,
enforcement, and adjudication are needed in the nation-state. Although there
is no good reason for any state to be backwards and in the dark in the
communication age, we find vast discrepancies throughout legal and
governmental systems in the USA to the extent that it is remarkably different
from and behind other developed nations in many areas. States rights are
necessary, but they appear to unreasonably complicate interstate and
international commercial matters legally.
Issues of judicial candor and subordination to federal jurisprudence
result when contradictions between courts exist both horizontally and
vertically. For example, in t . rto, the Minnesota Court of Appeals
declined to adopt the doctrine of manifest disregard of the law, which
contradicted both the US 9
th
Circuit Courts opinion in c-.., c/./ .
t-,. r. and failed to implement 10(a)(4) of the FAA. Although no
manifest disregard for the law was found in t, the courts refusal to apply
the FAA by any name suggests lack of common purpose and goals among the
courts.
Whereas Canada is the worlds second biggest country geographically,
with roughly 10% of the population of the US in a slightly bigger territory
which is split up into 13 jurisdictions 10 provinces and 3 territories the 50
American states are more populated and smaller in size on average (CIA,
201

2012)
280
. American states should be expected to cooperate and work together
more.
Considering the higher densities of populations in the USA, closer
proximity of district offices and other factors relating to efficiency, with the
aim of applying principles of equality among citizens of each state as
expressed in Article IV Section 2 of the United States Constitution, it is
recommended that state courts and federal districts be allowed to compel
arbitration in other domestic districts, and enforce arbitration clauses which
call for arbitration in other states, especially in cases like t,/ :./ .
s,, where the districts are essentially within walking distance of each
other. This entails amendment of 9 U.S.C. 4 and/or 28 U.S.C. 1391(b).

Further Study

Because high speed internet is a relatively new development which
enables globalized access to sovereign government documents, research
articles, business and trade publications, international studies are likewise a
bourgeoning field in academia. Arbitration has been endorsed by Supreme
Court judges and litigators worldwide. Developed and developing nations
alike have enacted arbitration statutes and implemented the NY Convention
and or Model Law. As trade expands and border restrictions continue to be
relaxed, new and more elaborate opportunities for study will follow.

280
More information available at the Agencys Factbook website
(https://www.cia.gov/library/publications/the-world-factbook).
202

Case studies and statutory reviews were commonly found in the
research phase of this dissertation, but quantitative or mixed-methods
statistical studies showing how cost and time effective arbitration is from
more mathematical perspective were very uncommon. The private aspects of
arbitral proceedings may hinder in-depth study of awards and specific details
of cases. Considering the response from a PCA representative about how
details from arbitration cases are seldom disclosed to the public, arbitral
institutions will be integral to any such statistical study, and non-disclosure
agreements will be needed to assure the confidentiality of any details relating
to any one case or group of cases.
Further study is required to determine the arbitrability of IP validity in
Canada. Experts disagreed in scholarly and trade articles. The Federal Courts
Act appears to grant jurisdiction over such matters to the Federal Courts.
However, it seems unlikely that attorneys and other authors have simply
posited entirely erroneous claims that validity is arbitrable in Canada.
An international public-private partnered inquiry should be made into
the possibility of establishing an international internet arbitral procedure to
which infringement disputes may be referred. ICANN and WIPO should be
involved in analysis and testing. If damages are possible in awards from any
arbitral body with compulsory jurisdiction over internet copyright and
trademark infringement cases, then further study will be required to determine
the actual losses to companies and individuals resulting from piracy.
The future of IP arbitration is very promising, and then so is the future
of academic and commercial study relating to the role of arbitration in IP
203

dispute settlement. Naturally, legal professionals advocates, adjudicators,
scholars, and advisers will capitalize on new and growing opportunities.
More quantitative studies are strongly recommended to further prove certain
positions are fact, rather than mere opinion. Judicial and professional opinion
intermixed with a small quantitative dataset swayed the vote of this author,
but others are more reluctant to give credit to private tribunals. Winning over
the majority and more is a challenge which arbitrators and proponents of the
privatized system should take up with joy and spirit.
























APPENDIX












205

UNCITRAL Model Arbitration Clause
Any dispute, controversy or claim arising out of or relating to this
contract, or the breach, termination or invalidity thereof, shall be settled
by arbitration in accordance with the UNCITRAL Arbitration Rules.
. Parties should consider adding:
(a) The appointing authority shall be ... [name of institution or
person];
(b) The number of arbitrators shall be ... [one or three];
(c) The place of arbitration shall be ... [town and country];
(d) The language to be used in the arbitral proceedings shall be...

WIPO Model Arbitration Clause

Any dispute, controversy or claim arising under, out of or relating to
this contract and any subsequent amendments of this contract, including,
without limitation, its formation, validity, binding effect, interpretation,
performance, breach or termination, as well as non-contractual claims, shall
be referred to and finally determined by arbitration in accordance with the
WIPO Arbitration Rules. The arbitral tribunal shall consist of [three
arbitrators] [a sole arbitrator]. The placeof arbitration shall be [specify place].
The language to be used in the arbitral proceedings shall be [specify
language]. The dispute, controversy or claimshall be decided in accordance
with the law of [specify jurisdiction].
206


UNCITRAL Model Statements of Independence

.-. ./.
I am impartial and independent of each of the parties and intend to
remain so. To the best of my knowledge, there are no circumstances, past or
present, likely to give rise to justifiable doubts as to my impartiality or
independence. I shall promptly notify the parties and the other arbitrators of
30any such circumstances that may subsequently come to my attention during
this arbitration.
c.-. ./.
I am impartial and independent of each of the parties and intend to
remain so. Attached is a statement made pursuant to article 11 of the
UNCITRAL Arbitration Rules of (a) my past and present professional,
business and other relationships with the parties and (b) any other relevant
circumstances. [Include statement.] I confirm that those circumstances do not
affect my independence and impartiality. I shall promptly notify the parties
and the other arbitrators of any such further relationships or circumstances
that may subsequently come to my attention during this arbitration.
. Any party may consider requesting from the arbitrator the
following addition to the statement of independence:
I confirm, on the basis of the information presently available to me,
that I can devote the time necessary to conduct this arbitration diligently,
efficiently and in accordance with the time limits in the Rules.




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VITAE

Name Adam Richard Tanielian
Date of Birth May 26, 1978
Place of Birth Royal Oak, Michigan, USA
Education 2002 Bachelor of Science
Michigan Technological University
2010 Master of Business Administration
Institute of International Studies, Ramkhamhaeng
University
Current Position Math and English Teacher, Klongyaiwittayakom, Trat