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Erik Wilbers WIPO Arbitration and Mediation Center
INTRODUCTION Those who are involved in contract negotiations may know that the dispute resolution clause, and in particular the arbitration clause, is very often known also as the ‘ midnight clause’, meaning that it is the one that comes at the end of the contract negotiations, when the whole structure of the contract has been set out. I think a constant theme that has run through the programme in the past two days, including this present session, is that there are no golden solutions to reducing the cost of litigation in patenting, or avoiding litigation altogether. I found the discussion on insurance extremely interesting but there is an argument that having adequate insurance cover may, in its turn, lead to an increase in patenting costs, because those who charge the fees know they are covered by insurance. So everything has an up side and a down side. While the discussion continues on to what extent the insurance industry is willing to insure these problems that arise in patent litigation, we should nevertheless broaden our view and focus on some way to reduce the cost of litigation. In the next ten or 15 minutes I propose to run through some of the benefits that arbitration may offer as an alternative way of dispute resolution. First I will identify the characteristics of the average patent
dispute (Figure 1) with which you are, no doubt, familiar. Then I will set out what arbitration means compared to court litigation (Figure 2). I will explain briefly the services offered by the WIPO Center and our experience in the four years of our existence (Figures 3 and 4). Finally, if there is time I will share with you some work we have been doing on an internet-based system for the online filing of claims (Figure 5). PATENT DISPUTES
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Multi-jurisdictional Complex Urgent High case value Confidential
I would just comment that many patent disputes these days, given the intertwined and international character of commerce and technology, are multi-jurisdictional. The second word speaks for itself; often in a technical sense there is complexity, but also in a legal sense. Of course, there is urgency with these types of disputes because there is market penetration and market value at stake here. If you are not able to bring your patent into the market and defend it adequately within a reasonable time, that is a loss of commercial value. High case value goes without saying since markets are opening up to such an extent. The opportunities for spreading the technology that is protected by a patent are so much greater today that you stand to lose so much more if the case goes wrong. Finally, there is still a confidential character to a lot of litigation that is associated with patents – at least, a lot of the technology that is being discussed in litigation, one would actually like to keep largely confidential.
Consensual (vs unilateral option)
ARBITRATION vs LITIGATION
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One single forum (vs multitude of courts) Final award (vs appeal) Party selection of arbitrators (vs assigned judges) Neutrality in choice of rules, law, language, place (vs jurisdictionConfidentiality of existence and outcome (vs public)
International enforcement based on New
York Convention (vs separate procedures)
Inter partes validity (vs erga omnes)
Let me just sum up a few of the main characteristics. Arbitration is consensual; it is always based on prior agreement between the parties to the case. This is an agreement that may be reached beforehand, for example, in the dispute resolution clause of a licensing agreement; or after the dispute has arisen. So, in arbitration it is a consensual situation, as opposed to the unilateral option in court litigation where one party can simply take the other party to a court of competent jurisdiction without asking the permission of the other party. So prior consent is a crucial difference between arbitration and litigation. One single forum is what arbitration offers, vs a potential multitude of courts. In the European Union we are addressing the question of unifying our patent courts. Normally speaking, if a dispute is international, there is a reasonable risk that companies will find themselves in several jurisdictions, either at the same time or serially, whereas arbitration concentrates the case in one single forum that replaces all court procedures. Finally, award vs appeal – that means arbitration ends with an award, which normally is final. There are a few very limited possibilities to attack an award before a court but those are absolutely procedural and
rarely granted. With litigation there is normally the possibility of an appeal in one or two instances. Another important difference is the fact that in arbitration the parties select their decision makers, which is much less the case in the courts. One can have some influence by doing some forum shopping but usually when you finally end up in that court, the choice of judge is not yours. Increasingly, there are specialised patent courts, for example in the Netherlands, but this is not the case in all jurisdictions with which most of us are familiar. The point on neutrality – the parties are able to negotiate rules, law, language, place, etc, if they choose arbitration, whereas in litigation these are determined by the jurisdiction in question. A further important point is the confidentiality of the existence and outcome of an arbitration procedure. That applies both to the substance of the procedure but also to the fact that it exists. This could be kept confidential in arbitration, as opposed to the public nature of court litigation. On enforcement, there is the unique New York Convention with about 130 member states, which effectively guarantees the enforcement of an arbitration award outside the jurisdiction in which it has been given. This can be contrasted with a rather diffuse network of usually bilateral agreements, if any, between states, which parties must apply to through rather lengthy procedures in order to get their court decision applied outside the jurisdiction where it has been given.
A final point is arbitrability. The validity of an arbitration award extends between the two parties (inter partes) whereas a court’s decision is valid erga omnes, vis-à-vis everyone. This is important because it depends on what the case is about, whether one wants to have a patent struck, so to speak, not just between the two parties but in relation to all. WIPO SERVICES
from 70 countries)
Specialised WIPO (expedited) arbitration
rules (confidentiality, experiments, experts, etc)
Database of WIPO neutrals (850 persons Advice on WIPO clauses and rules Intellectual property arbitration workshops
What does the WIPO Arbitration Center offer? We have specialised rules, arbitration rules, mediation rules, expedited arbitration rules. Those rules have been written by arbitration experts who know about IP and who have included, for example, special clauses on issues such as confidentiality, experiments, use of experts, and the like. The second point is that WIPO maintains a database of neutrals which is constantly expanding, and which happily includes a number of the competent people we see here in this room. At present it stands at 850 persons from about 70 countries. These people span a wide range of intellectual property-related areas of specialisation, which as you know can be very distinct. Our database at present holds more than 400 distinct areas of specialisation, ranging from chemical patenting, for example, to biotechnology, to internet domain names, to copyright on the internet, and so on.
The Center’s lawyers are normally engaged in advising parties on WIPO clauses and rules – how they can actually use the services, how they can write their agreements so as to use arbitration. The reality is that a lot of IP lawyers are not quite familiar with what happens in arbitration, simply because, from a legal point of view, those are two quite distinct worlds with which the practitioners are not always mutually familiar. So one or both parties come to us when they are about to conclude a contract and ask us, for example, if and how they can change the standard clause or rules to suit their own case. We advise them accordingly. Finally, on our services, we hold workshops which are interesting events because they bring together a lot of arbitrators and potential users of their services. We have one starting in Geneva tomorrow. These are two-day events and a lot of IP lawyers from many jurisdictions attend them to increase their understanding of what arbitration is about, and to assess its value. WIPO DEVELOPMENTS
Use of clauses mostly in international licensing agreements
tailored to dispute
Regular informal referrals of neutrals Collaboration on industry- or party-specific Growing interest in patent mediation:
dispute resolution schemes WIPO case example
Introduction of online dispute resolution system
Moving on to results, this has to be an interim balance since our Center is still a relative newcomer in the world of arbitration centres, with the
four years that we have been in existence, and making ourselves known through events like this. One important conclusion we have is that our experience shows that, when it comes to IP contracts, arbitration clauses are usually applied to international licensing agreements. That is the standard place where one might find an arbitration clause. There are many other agreements surrounding patenting but the international licensing agreement is where the parties use arbitration in reaching a compromise on jurisdiction. That is our experience based on the contacts we have with the lawyers who come to the Center. We have a beginning case load under our own formal rules that we administer. What we have on a very regular basis, and increasingly so, is referrals of neutrals. ‘ Neutrals’ is a fancy word for arbitrators or mediators. We regularly receive requests from parties who are preparing to get into a dispute, or who are already in a dispute and who simply want to know if we have an arbitrator who is conversant with the particular subject matter. As you know, the subject matter can be extremely specific and specialised. People who claim to be general arbitrators, simply may not always be sufficiently conversant with the substance to be able to do a good job that will satisfy an IP lawyer. Parties might ask us, for example, for someone who can speak Italian, who is neither French nor American because those are the nationalities of the two parties, and who knows everything about biotechnology patenting. We go into the database to find detailed profiles of these people, and offer them to the parties. There is one area which personally I find very interesting because it puts us in touch with industry itself. WIPO is increasingly invited to
work on solutions that are for a whole industry sector, or for certain specific parties, that go beyond just one case or one contract. Let me give you one example without naming the names. Some months ago we received an enquiry from two very large multinational companies who are at risk of infringing each other’s patents. The reason is that they make the same product and there is little other competition for them in that market. In order to stay ahead of the game, they find themselves forced to rely on the same technology. And if they do not get away with it, they think it is better to have an advanced product with some litigation going on rather than lagging behind in the technology. These companies have come to us and we have discussed with them a scheme whereby in the future they agree that they will not go to litigation in the many courts where they have often been involved, but that they will first try a process of negotiation. If that fails, they will use WIPO arbitration. This was an interesting development because it showed that companies are willing to step back from litigation, assess the cost, and basically try something different to see if it will work for them.
Another trend is that we see a growing interest in mediation. I think that is probably the case outside intellectual property as well. Mediation is probably seen as a trendy word. I think continental lawyers may have a slight prejudice against it, but the up side is that it really does not cost the parties very much to try it. Basically, it is a negotiated solution, assisted by a mediator who is a neutral without power to enforce a decision. In fact, the first case under the WIPO rules was such a patent mediation whereby the parties had been in different courts, litigating quite complex patent situations, for about two years. The costs were mounting and they decided they had to do something about it. We appointed a mediator who actually managed to narrow the issues between them and establish a range of the liability. That was a good step forward for the parties which did not cost very much. As I said earlier, we have been doing some work on developing an online dispute resolution system (Figure 5).
Tracks conventional model
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Online instead of physical process Using internet, like e-commerce does Communication and organisation tool For parties, panel, dispute resolution Increasing use also at court level
provider, and others (e.g. experts)
It sounds a bit like waving a magic wand – you file something on the internet and then out comes an automatic decision. Of course, it is not like that. What it really does is to track the conventional model of
dispute resolution, in the sense that you have parties exchanging pleadings, with decision makers who check those pleadings and then come to a decision, either on the basis of a hearing, or without a hearing. The difference is that the process is conducted online, as much as possible but not necessarily exclusively, instead of physically with meetings and paper. It uses the internet in the same way as electronic commerce. It is simply a communication and organisation tool, nothing less and nothing more than that. It is just using the internet in order to facilitate communication between parties, between the panellists, with the dispute resolution centre, and it also organises the case. It is interesting to note that such systems are increasingly being used at the court level. So how does this online model function (Figure 6). We have a database which runs at WIPO. Someone who has a case would connect with the database, receive a user name and a password, and can then use the database to submit a claim. The web site will have certain electronic forms on which the claimant can enter information about its identity, the identity of the other party, the grounds for the claim, the remedies sought, and certain payment information of the fees that may apply.
Actors connect with central database
through web site dispute resolution provider
types of files
Actors can submit documents, including all
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System logs and stores submissions in categories
Actors receive automatic notifications of
Actors have privileged, secure view of submissions Parties can pay fees and deposits by credit card online Other options can be added (e.g. video conferencing)
Actors can submit documents, including all types of files. For example, if the claimant wants to attach to his statement of claim, certain scanned evidence, or certain other files, or even video-taped witness testimony, this is all possible. It can all be submitted into this same system. When the applicable fee has been cleared (and this is also by credit card payment online) the system sends an automatic notification by e-mail to the respondent saying: a case has been filed against you; go to the web site, here is your confidential user name and password, and that is where you can find the claim. The respondent will then find an electronic form to submit a reply. The panel is appointed; the panel also gets confidential and privileged access to the system, and starts to issue instructions to the parties by submitting them into the database, with automatic notifications going out to all the parties. It is quite a simple system as far as that is concerned. The nice thing is that it not only brings procedures up to speed with the means of communication nowadays, but it also organises the case meaning that it becomes quite easy for a party to look on screen at all the evidence, all the documents that have been filed in the case. OTHER DEVELOPMENTS Let me just say one more thing that might be of interest. Earlier in today’s programme there was supposed to be a presentation about the
National Patent Board, which is a development in the United States, set up about two years ago in response to the perceived excessive level of costs in patent litigation. The National Patent Board really entails a move away from the courts, a sort of first layer, whereby parties try a more informal, non-binding procedure. They make a submission to a panel of experts, sometimes retired patent judges, who will then give a rather rapid decision, with only limited discovery. That decision will not be binding but it is hoped that because of the expert level that is expected for such decisions, it will take on an authority of its own. Parties are free to take the case to court but the party who takes the case to court – the losing party – will have to pay the entire cost of the National Patent Board procedure. So there is an incentive built into the procedure to stick within this system. The way it works in terms of parties being attached to the system, is that corporations (for now mostly in the United States because this is mostly about US patents) sign up and pledge to use the National Patent Board if they have a dispute with another member. I believe the National Patent Board today stands at something like 40 corporate members, some of them big names. We will follow this development with considerable interest. It is an interesting hybrid between taking on board some of the substantive laws and procedures of a court, with some of the ideas of arbitration, the consensual character of an arbitration. It is an attempt that we will monitor closely; who knows, it might even get some following in Europe as ideas are developed for what the EPO is going to do. Finally, if you have any more questions about our online system, just check out our web site: http://arbiter.wipo.int