Jump-starting mediation in the Philippines

Eighty-nine (37 percent) of these cases were judgments based on compromise agreements resulting from the mediation process that was ‘re-introduced’ in January, 2011.

IPOPHL has been offering mediation services since May 2001, but very few cases were settled through this process. Before 2011, mediation was held on a voluntary basis during the pre-trial stage of cases pending before the Bureau of Legal Affairs (BLA), IPOPHL’s adjudicating arm, and conducted by IPOPHL employees who were trained as mediators.

Challenged by the ever-continuing presence of the Philippines in the US Trade Representative’s 301 report and watchlist of countries with significant counterfeiting problems, in addition to simplifying its rules of procedure in handling cases, IPOPHL improved its alternative dispute resolution capability, and on January 29, 2010, it created its own Mediation Office.

However, it was in November 2010 that IPOPHL revised its mediation rules with Office Order No. 154 (Rules of Procedure of Mediation Proceedings), making the referral of cases to the office mandatory, after various consultations with its stakeholders and publication of the rules in newspapers of general circulation.

A settlement period was declared between January 31, 2011 and February 28, 2011, in which mediation fees were reduced by nearly 70 percent to encourage parties to undergo the process. Also, IPOPHL accredited 16 IP practitioners and professional mediators, after giving them intensive training in January 2011.

IPOPHL defines mediation as “a process of settling disputes with the help of a third neutral party called the mediator. The mediator handles the opposing parties and skilfully enjoins them to cooperate in order to come up with a mutually satisfactory settlement of their dispute”.

Office Order No. 154 mandates the following cases as subject to the mandatory referral to the mediation office:

• Administrative complaints for violation of IP rights (IPV), eg, infringement, unfair competition;

• Inter partes cases, eg, trademark opposition, patent cancellation;

• Disputes involving technology transfer payments;

• Disputes relating to the terms of a licence involving the author’s rights to public performance or other communication of his work;

• Cases appealed to the Office of the Director General from decisions of the BLA and the Documentation, Information and Technology Transfer Bureau (DITTB); and

• All other cases which may be referred to mediation during the settlement period declared by the Director General.

The parties or their representatives are required to appear at the mediation conference. Any representatives must be equipped with the proper authorisation, such as a special power of attorney, or a secretary’s certificate or a resolution of the board of directors, which must indicate that the representative is empowered to offer, negotiate, accept and decide to enter into a compromise agreement.

The parties will be required to sign an agreement to mediate, specify their preferred dates to meet, and manifest their commitment and sincerity to prepare for, and engage in, a meaningful settlement process. Failure of the parties or their representative to attend the mediation session shall be grounds for dismissal of the case.

If there are good grounds for failure to attend, the absent party may be held liable to pay triple the costs incurred, together with attorneys’ fees for the day.The official mediation fee is 4,000 Pesos ($92) per party, and this entitles the parties to two sessions at a maximum of two hours per session, payable at the beginning of the session.

Thereafter, the parties have to pay 50 percent of these fees per mediation session. This fee does not include the professional fees of each party’s counsel. The parties can select their mediator from the list of accredited mediators. The mediation proceedings are conducted in private and are confidential, and no recording of the proceedings is made.

All statements, admissions or incidents occurring during the mediation shall not be admissible in a proceeding, unless specifically provided by law. The parties, their counsels and other persons whom they bring to the mediation proceedings, are prohibited from disclosing any information obtained in the course of the mediation proceedings to anyone else. Those who violate this confidentiality requirement shall be liable for contempt.

"The originating office of the case will not interfere provided that the conditions of the settlement are not contrary to law, morals, good customs, public order or policy."

The parties are given 60 days from the start of the mediation, to submit a settlement agreement. This period can be extended by 30 days, by mutual agreement of the parties. Should the parties fail to reach an agreement within the given period, the mediator shall terminate the proceedings by issuing a Notice of Non-Settlement of Dispute. Once the originating office has received a copy of the Notice of Non- Settlement of Dispute, it can continue the adjudication process, and set the case for pre-trial.

When mediation is terminated, the parties have the option to go to arbitration, instead of continuing with the adjudication proceedings. In the case of a successful mediation, the mediator will submit the compromise agreement drawn up by the parties to the originating office, which has three days from receipt to approve it, unless there are objections to it on the grounds of being contrary to law, public policy, morals or good customs.

If approved, a judgment is issued based on the agreement, which has the effect of a decision. About 300 cases were referred to the Mediation Office in 2011, making 30 percent the batting average for settlement.

No data have been released as to how many of the referred cases which were returned to the originating offices were due to the refusal of the parties to undergo mediation proceedings, or were declared as failure of mediation.

In any case, considering that the average pendency of a case is five or more years, removing a third of these cases from the docket of IPOPHL and potential appeals to the appellate courts such as the Court of Appeals and the Supreme Court is a significant achievement for the first year of ‘re-introduction’ of the mediation process.

Samples of successfully mediated cases are listed below, including some their salient provisions:

• Wintrade Industrial Sales Corp v Flowil International Lighting Holdings BV. In this case, Wintrade, a Philippine company, for good and valuable consideration assigned all its Sylvania trademark registrations to Flowil and undertook to discontinue all use and promotion of said mark, and to destroy all materials or goods bearing the mark Sylvania.

• Allied Wires and Cables Corporation v Alvin Chester Lam. For the sole purpose of buying peace, respondent Lam agreed to pay Allied Wires 120,000 Pesos (approximately $2700) and to source electrical wires and cables bearing the trademark Allied exclusively from Allied Wires, in exchange for dismissal of the case.

• Arvin U. Ting v Quanta Paper Corp. In this case, respondent Quanta agreed to give up all its rights to four trademark containing the marks Smile and Smiley, and in return opposer Ting allowed Quanta a phase-out period of 12 months to dispose of its products.

• L’Oreal v Ever Bilena Cosmetics et al. Plaintiff L’Oreal agreed to have all of its four cases against Ever Bilena withdrawn, and in return Ever Bilena undertook to (i) not renew its four design registrations, and (ii) withdraw from the market products bearing the mark Ever Bilena Advance Glamour Shine, Ever Bilena Advance Dazzling Shine, and Ever Bilena Volume Exact Mascara within three months of the agreement.

These examples demonstrate that parties have a wide range of settlement options to choose from, and the originating office of the case will not interfere provided that the conditions of the settlement are not contrary to law, morals, good customs, public order or policy.

The mediation process has pitfalls, however. About 50 percent of trademark and patent filings in the Philippines are from non-resident IP owners whose representatives or agents have limited authority to negotiate for settlement. Obtaining instructions from their principals takes time, well beyond the allotted mediation period.

The settlement figures for 2011 augur well for mediation as an alternative method of resolving disputes. There is certainly a case for encouraging mediation because of known benefits: the autonomy of the parties is central; speedier and cost-effective settlement of a dispute which may include multi-jurisdictional litigation; the presence of the mediator who is neutral and impartial may encourage openness among the parties; the confidential nature of the proceedings allows parties to save face and incur less damage to their reputations.