Arbitration of Intellectual Property Disputes

Intellectual property rights, as a general rule, are territorial in scope. IP rights such as patents, copyright, trademarks and trade secrets are more important than ever. To protect IP rights or to enforce agreements licensing those rights, litigation has always been the preferred platform to seek such issues.

advanced divider

Intellectual property rights, as a general rule, are territorial in scope. IP rights such as patents, copyright, trademarks and trade secrets are more important than ever. To protect IP rights or to enforce agreements licensing those rights, litigation has always been the preferred platform to seek such issues. This means that the right holders are subjected to proceedings in multiple jurisdictions, given that IP rights usually extend beyond a single nation’s territorial boundary. Litigations offer a wide range of challenges as they deal with foreign laws and procedures, judges of varying IP law expertise and experience, concern for national interests and the prospect of receiving a judgement that is often incapable of enforcement in other jurisdictions.1 The article analyzes the viability and desirability of arbitration as a platform for settling IP related disputes.

The existing legal frameworks governing IP conflicts are highly developed at international, regional and national levels, and they have a substantial impact on the efficacy of dispute resolution. The main challenge involving these mechanisms are political interference, lack of resources and pubic ignorance.2 Because these processes lack the capability to adjudicate problems in a just, speedy and equitable manner, the problems they encounter have a detrimental rippling impact on right holders whose IP rights have been infringed. Kenya should modify present laws to make ADR mechanisms the preferred first option in settling IP disputes. This will provide legislative and institutional systems that handle IP issues efficiently and effectively.

Arbitration ranks well as the first option in the ADR mechanism to settle IP disputes. The arbitrability of IP disputes is such that IP rights, just like other personal rights, are arbitrable in nature unless a statute provides the contrary.3 Confidentiality and flexibility provide one of the advantages of arbitration and which are crucial to IP disputes. A number of issues are involved when dealing with IP rights. Infringement disputes consist of the use of IP without the owner’s consent. Ownership disputes involve questions on the ownership of the IP. Validity disputes involve a decision on whether the IP right is legitimate or erroneous. Licensing disputes involve a breach of contract. All these different IP disputes can be solved by arbitration, provided the two conditions are met.

First, arbitration involves contracts meaning the two parties agree to arbitrate the issue. Second, the laws governing t

e jurisdiction must allow for the arbitrability of the dispute. If there is no existing arbitration agreement between the parties and the parties fail to reach a subsequent agreement on arbitration or the IP dispute is non-arbitrable, then the parties must resort to national courts to resolve the dispute.

The Kenyan Context

In Kenya, most companies have their value hinged on their IP, and successful companies rely on IP for much of their asset value.4 The Kenyan Constitution 2010 defines property as any vested or contingent right to or interest in or arising from land, goods, or intellectual property.5 According to Sihanya, IP is the acknowledgement, protection, and promotion of the mind’s labour or output.6 A number of international treaties on IP, such as Trade-Related Aspects of Intellectual Property Rights (TRIPs), are ratified in Kenya. TRIPs is to date the most detailed and robust multilateral agreement on IP and forms the basis of modern IPR in all countries, including Kenya.7 Article 2(6) of the Kenyan Constitution, 2010, affirms that any treaty ratified by Kenya shall form part of the Kenyan laws as such TRIPs is part of the Kenyan laws. To protect and promote IPR, Article 40 of the Constitution, 2010, obligates the state to protect property and Article 40(5) providing the specifics around that. The Kenyan parliament has a number of legislation passed on IP: The Industrial Property Act, 2001; The Copyrights Act, 2001; The Trademark Act, (Cap.506 of the Laws of Kenya); The Seeds and Plant Varieties Act, Cap. 236 of the Laws of Kenya, 1991; and The Anti-counterfeiting Act No.13 of 2008.

Despite the existence of these laws, infringement of IP still occurs. The challenge has been the enforcement of these laws and the capacity of the laws to protect inventors from theft and exploitation. Over the years, courts have been the preferred mechanism for setting IP disputes, but their ability to deliver justice has come under scrutiny. Complaints, especially on delivery of a fair ruling or one that seems fair, delays in proceedings and conclusion of cases and the high cost involved have been raised. The backlog of cases in the judiciary has not helped matters in the expedition of cases, and this means that inventors have sought ADR mechanisms to resolve disputes. The granting of IPR such as patents has in the past raised arbitrability issues because national authorities grant them. As such, the argument was that such rights need to be settled ‘publicly, but currently, it is acceptable that, like other disputes relating to private rights, IPR disputes are arbitrable.8 Because arbitration is mainly dependent on party consent, every right that a party can dispose of through settlement should be susceptible to being the subject of arbitration. Some of the IP disputes cannot be litigated, and courts are reluctant to hear them, and as such, arbitration provides an efficient mechanism for solving them. Disputes to do with domain rights are such examples that exist under a largely part private regime as opposed to governmental in nature.9 Patents and trademarks are IPRs created by national laws and may vary across countries, but copyrights are uniform across countries because of the Berne Convention, a copyright treaty law applicable to most countries.

Advantages of Arbitration for IP disputes

IP disputes are cross-border issues that involve multiple jurisdictions. This means that Arbitration offers advantages over litigation.

  1. Neutral forum. One of the main advantages and desirable feature of arbitration is its neutrality. Most of the arbitration institutions have a policy that ensures a presiding arbitrator is of different nationality from the parties involved. This is a desirable feature in IP related disputes because it usually involves companies from different countries. It entirely instrumental because parties may find political favours in national courts, especially if the dispute is in a party’s country of origin.
  2. Single forum. Arbitration allows you to centralize dispute settlement in one location and create an easily enforceable award across multiple jurisdictions. This is cost-efficient, saves time and removes the risk of conflicting outcomes in different forums.
  3. Ability to select arbitrators with expertise on IPR. The ability to select arbitrators with particular knowledge or technical expertise in arbitration provides a substantial benefit over litigation in national courts. It assures parties that at least their chosen co-arbitrator has the appropriate technical skill, which national courts cannot guarantee. A number of arbitration institutions have created panels arbitrators specifically suited for IP disputes.
  4. Confidentiality. This one desirable feature of arbitration. As a default, most arbitral rules require secrecy of the arbitral proceedings, pleadings, evidence, and all documents generated in the arbitral processes. However, secrecy is the default position of common law and legislation in several key arbitral seats. This quite vital because IP disputes are pretty sensitive in nature.
  5. Symmetrical risk for licensors. Arbitration eliminates the potential of a validity judgment influencing other parties, posing an asymmetrical risk for licensors and licensees.11 In most cases, a licensee will seek to defend itself against a claim for nonpayment of royalties by claiming invalidity. If the defence is successful, the patent is null and void as to all licensees. In other words, by seeking to collect royalties from a single licensee, the licensor jeopardizes payments from all licensees, creating an asymmetrical risk. An invalidity finding in arbitration solely binds the parties to the arbitration; therefore, the licensor’s revenues from other licensees are not jeopardized.
  6. Enforceability of awards across jurisdictions. Arbitral awards, unlike court verdicts, are easily enforced across countries in 165 nations and territories under the United Nations Convention on the acknowledgement and ratification of Foreign Arbitral Awards (the New York Convention). Cross-border court judgements are restricted to bilateral or regional treaties and reciprocity or political organizations (for example, the Commonwealth). Insofar as judgements are recognized and enforced, the term “enforcement” refers to the act of enforcing a decision that is virtually typically confined to monetary awards. This is a serious constraint in intellectual property disputes since injunctive remedy is sometimes the most important or only relevant sort of remedies available to rights holders.

Conclusion

In cross-border IP and IP-related issues, arbitration has a lot to offer. It enables more efficient and perhaps higher-quality dispute resolution, with the option of maintaining much-needed anonymity while simultaneously providing greater worldwide enforceability of judgements, including vital injunctive relief. Intellectual property rights are becoming increasingly essential, and they are becoming the topic of cross-border conflicts. For a variety of reasons, litigation is often a sub-optimal method of resolving cross-border issues; this is especially true in IP and IP-related issues, as rights holders frequently seek injunctive relief. Arbitration, when opposed to litigation, has various advantages for settling IP and license issues if parties can agree and a suitable seat of arbitration is established. When entering into contracts or when disagreements emerge, parties should seriously consider agreeing to resolve such issues through arbitration.

advanced divider