Author’s Information

Name: Saheed Qudus Olamilekan

Institution: University of Lagos

Level: 300 Level

TOPIC:

ARBITRABILITY OF INTELLECTUAL
PROPERTY DISPUTE
Abstract

Intellectual Property (IP) rights such as patents, trademarks, trade secrets, copy rights, industrial
design rights, plant variety rights and geographical indications,1 are as strong as the means to
enforce them.2 In modern times, arbitration has increasingly become the popular option where
disputes, involving multinational companies with commercial interests in multiple jurisdictions,
have become internationally arbitral and where the concept of territoriality requires such
multinationals to register their intellectual property (IP) rights in theses jurisdiction.

This article aims to examine the concept of arbitrability of disputes involving intellectual
property (IP) rights, while also shedding more light on how different governments have
approached this issue and its legalities thereof. This article would also explore the area of
arbitration of IP disputes on the international stage while also backing it up with case studies –
specifically from the World Intellectual Property Organization (WIPO).

The Meaning and Scope of Arbitrability of IP disputes

Arbitration, as a form of alternative dispute resolution (ADR) is a way of resolving disputes,

especially the commercial ones, outside the conventional law courts. It is a contract-based form
of resolving disputes, in which the parties decision to resort to arbitration is contained in an
‘arbitration agreement ‘which stipulates that the disputes may be referred for arbitration. Such
disputes are decided upon by one or more neutral persons (the arbitration tribunal, arbitrators or
arbiters), which renders an arbitration award to compensate the injured party at the expense of
the other party. And such arbitration awards are as binding as a court judgement,3 unless the
parties to the case do not accept the decision of the arbitration tribunal as binding on them.

Intellectual Property is a fast evolving field and arbitration in IP has been widely recognized as
an effective and efficient way of resolving disputes in IP, especially the commercial disputes.
However, by their very nature and subject matter, some disputes are incapable of being resolved

1
Article 2(viii) of the Convention Establishing the World Intellectual Property Organization of 14 July 1967
(amended on 28 September 1979) .
2
South Africa: Arbitration As A Viable Option To Resolve IP Disputes In South Africa. Rogan Bruce and Marthinus
Prinsloo. https://www.mondaq.com/southafrica/arbitration-dispute-resolution/1131204/arbitration-as-a-viable-
option-to-resolve-ip-disputes-in-south-africa#:~:text=Autonomy%20%2D%20Arbitration%20allows%20parties
%20to,appropriate%20adjudicators%20for%20their%20dispute.
3
Although obtaining such an award is easier than obtaining court judgements.
via arbitration and can only be referred to the courts of law as the only available remedy.4And
whether a particular subject matter is arbitrable or not is referred to as ‘objective arbitrability'.5

Arbitrability’ simply concerns whether a type of dispute can or cannot be settled or resolved via
arbitration. It is the question of whether a particular issue in dispute is capable of resolution by
arbitration or whether that issue is reserved for determination by the national courts or another
relevant body under the relevant IP laws of that country.6 And if such disputes are not arbitrable,
this means that the arbitration tribunal is limited in its scope and jurisdiction in the matter and
such a claim must be submitted to the domestic courts for settlement.

There may be restrictions regarding the capacity of parties to enter into an arbitration agreement.
This means that certain parties may not be allowed to enter into an arbitration agreement due to
policy consideration (and may even require special authorization to do so) or may be limited due
to the scope of the subject matter.7

And the arbitrability of a dispute may vary from one country to another, firstly, due to different
policy considerations and, secondly, depending on how open the State is to arbitration.8

General Enforcement in International Statutes

The concept of arbitrability can be found in Article II, paragraph 1, of the 1958 Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which
provides that each contracting State shall recognize an agreement in writing “concerning a
subject-matter capable of settlement by arbitration.” This concept can also be found in Article 5,
paragraph (2)(a), which states that recognition and enforcement of an arbitral award may be
refused if the court where such recognition and enforcement is sought finds that “subject matter
of the difference is not capable of settlement by arbitration under the law of that country.” These
4
Overview: Arbitrability of Intellectual Property disputes in India. https://www.lexology.com/library/detail.aspx?
g=a8722b84-8c28-4620-aefb-46c23784a307
5
M A Smith, M Cousté, T Hield, R Jarvis, M Kochupillai, B Leon, JC Rasser, M Sakamoto, A Shaughnessy, J Branch,
Arbitration of Patent Infringement and Validity Issues Worldwide, Harvard Journal of Law & Technology, Vol. 1, 19,
Number 2, Spring 2006 at 305 (Smith).
6
Arbitrability of IP Disputes. Matthew R Reed, Ava R Miller, Hiroyuki Tezuka and Anne-Marie Doernenburg
Wilson Sonsini Goodrich & Rosati and Nishimura & Asahi. Published on 09 February 2021.
https://globalarbitrationreview.com/guide/the-guide-ip-arbitration/first-edition/article/arbitrability-of-ip-
disputes#footnote-137-backlink
7
Supra, 4
8
The Concept of Arbitrability in Arbitration. 16/01/2019 BY ACERIS LAW LLC.
https://www.acerislaw.com/the-concept-of-arbitrability-in-arbitration/
two articles (II & V)of the New York Convention provide for the law of arbitrability as a ground
for a court to refuse recognizing and enforcing an award. However, it is never stated which law
should govern arbitrability at the pre-award stage.9 Thus, it is simply left to discretion of the
arbitration tribunal to determine arbitrability pursuant to the law of that state where the matter
was arbitrated, in order to give force to the decision of the tribunal.

Under the International Centre for Settlement of Investment Disputes Convention (“ICSID
Convention”), there is no reference to the concept of arbitrability, only that the issue of
arbitrability is referred to by applying a general term of “jurisdiction” rather than arbitrability.10

As regards the Model Law, Article 1, paragraph 5, provides that the Model Law shall not affect
any other law of the state by virtue of which certain disputes may not be submitted to arbitration
or may be submitted to arbitration only according to other provisions. In addition, Article 34,
paragraph 2(b), stipulates that the arbitral award may be set aside only if, among others, the court
finds that the subject matter of the dispute is not capable of settlement by arbitration under the
law of the State.

Arbitrability of IP disputes in some jurisdictions

 United Kingdom

Under the Arbitration Acts of 1950, 1979 and 1996 of the United Kingdom, there is no statutory
recognition of IP disputes,11 however, the English courts have given a broad interpretation to the
issue of arbitrability of IP disputes.

Generally, the arbitrability of intellectual property disputes has been widely recognized
judicially.12 Trademark and copyright disputes have been adjudged to be completely arbitrable
while patent validity only has inter partes effect under the English law.

 Hong Kong

9
J. D.M. Lew et al., Comparative International Commercial Arbitration, Kluwer Law International (2003), p. 189.
10
J. Billiet et al., International Investment Arbitration, A Practical Handbook (2016), 196.
11
Although, the United Kingdom Patents Act 1977, explicitly allows for arbitration in only very limited
circumstances
12
Final Report on Intellectual Property Disputes and Arbitration, 9 ICC International Court of Arbitration Bulletin
42–43 (1998) (https://library.iccwbo.org/content/dr/COMMISSION_REPORTS/CR_0013.htm?
l1=Bulletins&l2=ICC+International+Court+of+Arbitration+Bulletin+Vol.+9%2FNo.1+-+Eng#footnote12); Maurizio
Crupi, Patent arbitration: a European comparative analysis at 58–62
On 23 June 2017, as part of its ongoing efforts to become a leading centre for arbitration, Hong
Kong issued the Arbitration (Amendment) Ordinance 2017 (the ‘Arbitration Ordinance’) to
‘clarify that disputes over IP rights may be arbitrated and that it is not contrary to the public
policy of Hong Kong to enforce arbitral awards involving IP rights.’13

 Singapore

The Intellectual Property (Dispute Resolution) Act of 2019 amended Singapore’s Arbitration Act
and the International Arbitration Act to specifically allow for the arbitration of IP disputes,
regardless of whether or not IP rights is central or merely incidental (to the the central issue) in
the dispute.

 South Africa

South African courts recognize that parties may choose arbitration as a permissible form of
dispute resolution. Some South African courts are willing to enforce arbitral awards on the same
basis as they would a judgement of a High court in South Africa.

Over the years, South African courts have increasingly become supportive of arbitration of IP
disputes and there have been several judgements pronounced by the supreme court of appeal and
the Constitutional court to back this development.14

The law governing international commercial arbitration in South Africa is the International
Arbitration Act, 2017, which applied to any international commercial disputes that the parties
have agreed to under an arbitration agreement and which related to matters which the parties are
entitled to resolve via arbitration. This act also provides for the recognition and enforcement of
arbitral awards.

CASE STUDIES15:

Copyright Arbitration
13
Hong Kong Arbitration (Amendment) Ordinance 2017; Teo and Hanusch
(https://globalarbitrationnews.com/new-arbitration-provisions-confirm-ip-disputes-arbitrable-hong-kong)
14
South Africa: Arbitration As A Viable Option To Resolve IP Disputes In South Africa. Published on 12 November
2021, by Rogan Bruce and Marthinus Prinsloo, Smit & Van Wyk.
https://www.mondaq.com/southafrica/arbitration-dispute-resolution/1131204/arbitration-as-a-viable-option-to-
resolve-ip-disputes-in-south-africa#:~:text=Autonomy%20%2D%20Arbitration%20allows%20parties
%20to,appropriate%20adjudicators%20for%20their%20dispute.
15
The case studies are directly from the World Intellectual Property Organization (WIPO) Website.
  A WIPO Arbitration of an IT/Telecom Dispute:

An Asian company and a European software developer negotiated to form a joint venture
company and entered into a license agreement to provide a mobile payment service in a number
of Asian countries. Prior to the joint venture’s formation, a dispute arose between them
concerning performance of the license agreement. The Asian company submitted a request for
arbitration under the WIPO Arbitration Rules on the basis of the license agreement, and also
obtained an interim order freezing the European developer’s bank account from a court based in
the European developer’s domicile (Article 46(d) of the WIPO Arbitration Rules).

In the WIPO arbitration, the European developer requested the arbitrator to issue an interim
award ordering the Asian company to discharge the freezing order, to refrain from initiating any
further action in court without prior consent of the arbitrator and to provide a bank guarantee in
order to secure payment of the European developer’s counterclaim. The arbitrator, while
declining to undertake action in direct relation to the court case, ordered the Asian company to
provide a bank guarantee in favor of the European developer. The Asian company provided the
bank guarantee as ordered.

At the suggestion of the arbitrator and with the consent of the parties, having reviewed the
further pleadings in the case, the arbitrator convened a conciliation conference in Geneva
(Switzerland), at which he communicated to the parties his provisional conclusions on the matter
referred to arbitration. No written record was provided to the parties of the views so
communicated. Although the parties did not immediately settle the case, they were able to do so
after further discussions in the weeks that followed. The European developer agreed to pay a
certain amount and to return the bank guarantee to the Asian company, which in turn agreed to
transfer relevant intellectual property rights to the developer.

Patent Arbitration

A French biotech company, holder of several process patents for the extraction and purification
of a compound with medical uses, entered into a license and development agreement with a large
pharmaceutical company. The pharmaceutical company had considerable expertise in the
medical application of the substance related to the patents held by the biotech company. The
parties included in their contract a clause stating that all disputes arising out of their agreement
would be resolved by a sole arbitrator under the WIPO Arbitration Rules.

Several years after the signing of the agreement, the biotech company terminated the contract,
alleging that the pharmaceutical company had deliberately delayed the development of the
biotech compound. The biotech company filed a request for arbitration claiming substantial
damages.

The Center proposed a number of candidates with considerable expertise of biotech/pharma

disputes, one of whom was chosen by the parties. Having received the parties’ written
submissions, the arbitrator held a three-day hearing in Geneva (Switzerland) for the examination
of witnesses. This not only served for the presentation of evidence but also allowed the parties to
re-establish a dialogue. In the course of the hearing, the arbitrator began to think that the biotech
company was not entitled to terminate the contract and that it would be in the interest of the
parties to continue to cooperate towards the development of the biotech compound.

On the last day of the hearing, the parties accepted the arbitrator’s suggestion that they should
hold a private meeting. As a result of that meeting, the parties agreed to settle their dispute and
continued to cooperate towards the development and commercialization of the biotech
compound.

Non – Patent/Copyright Arbitration

 A WIPO Expedited Arbitration relating to an Artistic Production Finance Agreement

A producer of artistic performances entered into an agreement with an insurance company to

finance arbitration proceedings. The finance agreement includes a WIPO expedited arbitration
clause. The producer brought arbitration proceedings against an Asian entity in Singapore. The
producer claimed the costs of the Singapore arbitration under its finance agreement. Faced with
the financing company’s apparent refusal to make such payment, the producer filed WIPO
expedited arbitration proceedings indicating that, as a result of the deadline imposed by the
arbitral tribunal in Singapore, it required that a final award be issued within six weeks after the
commencement of the WIPO expedited arbitration. Following consultations with the parties, the
WIPO Center appointed a sole arbitrator. After a one-day hearing in Frankfurt (Germany), the
sole arbitrator issued a timely arbitral award within five weeks.
Conclusion

In conclusion, the issue of arbitrability of IP disputes has continued to linger on for

years now. And it is a fact that arbitration in intellectual property is a viable option
for countries of the world, considering the rapid pace at which emerging
technologies have continued to shape the world and the intellectual property law
field. Therefore, there are no questions whatsoever, as to whether or not,
arbitration in IP should in the future, still continue to be a viable option for
individuals. For this reason, it is only desirable that countries make available to
their citizens the option to seek arbitration as a mode of alternative dispute
resolution.