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Published: 2008-03-26

Cross-Border Intellectual Property Disputes: Should My Company Use International Arbitration?



 
Cross-border intellectual property disputes present unique challenges. Many companies in the technology, publishing, and entertainment industries engage in intellectual property transactions giving little forethought to dispute resolution issues. Relying on a court to protect what is likely one of your most valuable assets without considering the benefits of international arbitration is almost certainly a mistake.

Why does intellectual property require special consideration? Unlike most other assets, intellectual property is rarely subject to the controls of national boundaries. By its nature, intellectual property can travel rapidly across boundaries with relative ease. Some intellectual property has long term value; other intellectual property has a short life span, particularly as product life cycles decrease. Regardless, the loss of intellectual property typically results in irreparable harm. Thus, the need for rapid, global resolution of disputes becomes paramount.

Relying on a local court to protect your intellectual property in an international transaction can be futile. Often, there is no way to enforce a local court injunction or judgment against a foreign party. Relying on a foreign court to protect your intellectual property imposes the disadvantage of being subjected to foreign procedure, custom, language and prejudice. Turning to the courts, locally or abroad, means taking a risk with a judge who is probably unfamiliar with your product, intellectual property issues and the foreign laws involved in the dispute.

International arbitration solves many of these problems. International arbitration offers a fair proceeding for both sides, with the expectation of doing so in a cost-efficient and effective manner. The parties can select the arbitrators, the hearing site and the governing procedures before the dispute arises. Significantly, thanks to the interplay of existing international treaties and national laws, international arbitration awards are enforceable nearly worldwide.

International arbitration also provides the parties with the ability to select a decision maker schooled in a particular industry or technology. This streamlines the process on its own and may reduce the need for retaining costly expert witnesses. Also, arbitration allows for greater confidentiality protections than many courts provide. Confidentiality protections are often welcome in what would otherwise be high profile court cases, and such protections are often critical in trade secret and similar disputes.

Finally, a key advantage of arbitration in an international intellectual property dispute is that the dispute can be resolved by a single tribunal. There is no multinational treaty for the enforcement of foreign court judgments and, relying on the courts of various jurisdictions to enforce a foreign court judgment is an expensive process with great risk of ineffective or, worse, inconsistent outcomes. Although foreign arbitral awards, like foreign judgments, require judicial recognition to be enforceable, an effective international treaty mechanism exists for enforcement of international arbitral awards. Moreover, arbitration allows multi-jurisdictional disputes to be resolved without requiring the courts of any number of countries to revisit the merits of the dispute.

Recommendations:

International arbitration differs from domestic arbitration. In deciding whether to include an international arbitration provision in a contract and in drafting the provision, considerable care must be given to the selection of the arbitration site and where enforcement might be sought. This is especially critical in transactions where injunctive relief may be needed. Experienced international arbitration counsel can advise on whether particular contracts should include arbitration clauses and the best arbitral site and rules to select based upon the type of transaction, the nationality and business operations of the parties, the law selected to govern the contract, the laws of the countries which are potential arbitration sites and the laws of the countries where the award may need to be enforced.

Often much of the legal work required in an international arbitration is not done in the country selected as the hearing site and most international arbitration specialists practice globally. Given the specialized nature of the practice, particularly where intellectual property is involved, it is better to retain an international arbitration practitioner specializing in intellectual property work than a local attorney with limited experience in either international arbitration or intellectual property. It is also important to retain counsel in a firm which can provide the international support needed to successfully arbitrate the dispute on your behalf.