Apple and Samsung agree to mediation
Mediation for IP cases
It is expensive, time-consuming, and too adversarial—these are some of the complaints leveled against the court system when dealing with IP disputes. But are alternative procedures the answer? Sarah Morgan investigates.
The lighting was perfect. The subject is famous. You Tweet the photo to your thousand or so followers. Two days later, a newspaper with a circulation of four million publishes the photo alongside a story.
What are your options? You could take the newspaper to court for copyright infringement, but litigation tends to be expensive and time-consuming, with judges often lacking intellectual property (IP) specialization.
If you are looking for something potentially cheaper, quicker, and less adversarial than litigation, an alternative dispute resolution (ADR) procedure, such as mediation or arbitration, might be a better option. But, while ADR is booming in some jurisdictions, a general lack of awareness of the process and the perception of a lack of legitimacy seem to be preventing its wider use.
“ADR, in general, is akin to an additional toolbox that allows companies big and small to resolve their disputes in a manner that is suitable for them, depending on their priorities,” said Zechariah Chan, Partner at Lee & Lee (Singapore).
Mediation in particular can be helpful for small and medium-sized enterprises (SMEs) that are looking for a cost-efficient method of dispute resolution, but it can also benefit multinationals.
At the same time, as Mr. Chan noted, “Mediation is helpful to multinational companies who might be looking for a unique win-win solution that cannot be obtained before the courts (such as an apology or joint media statement).”
It is almost invariably in the interests of both parties to settle litigation rather than continue to trial and possibly beyond, pointed out His Honour Richard Hacon, Presiding Judge at the Intellectual Property Enterprise Court (IPEC) in the United Kingdom.
A specialist division of the High Court of England and Wales, the IPEC provides a streamlined, cheaper way of resolving lower value and less complex IP disputes.
“A successful mediation will lead to an outcome which, in the way of things, is unlikely to be ideal for either side, but will almost certainly result in much less waste of time and money for both sides,” Judge Hacon said.
“ADRs are more flexible and allow parties to customize the procedure to be followed.” - Nathalia Mazzonetto, Müller Mazzonetto
Time can be of the essence in these disputes. An injunction handed down by a court until the end of a trial (which could take years) could be the difference between life and death for smaller companies that are dependent on a single product, so ADR offers a potential way to circumvent this.
Nathalia Mazzonetto, IP Lawyer at Müller Mazzonetto (Brazil) and Chair of INTA’s ADR Committee, noted: “ADR provides less expensive and faster solutions for SMEs. It also gives the parties an opportunity to contribute to the final provisions and administer solutions that may best fit their needs, as ADRs are more flexible and allow parties to customize the procedure to be followed.”
In addition to lower costs generally, ADR allows parties to manage all their conflicts in one procedure, instead of having to file different suits over each issue in separate jurisdictions.
Arbitration generally affords parties greater flexibility in terms of procedure compared to litigation, said Mr. Chan, adding that “savvy and experienced” in-house or outside counsel may be able to use this flexibility to better protect the interests of their companies or clients.
In terms of outcomes, different solutions can be reached in different countries or territories, according to Magdalena Ławreszuk, Expert in the Trademark Department of the Patent Office of the Republic of Poland.
“It is the opposite of court or administrative adjudication that has to take into account the territorial character of the IP law,” she explained.
Ms. Mazzonetto agreed, noting that ADR allows companies to “avoid undesirable local and political pressures” when it comes to international disputes.
“It is the opposite of court or administrative adjudication that has to take into account the territorial character of the IP law.” - Magdalena Ławreszuk, Patent Office of the Republic of Poland
In some countries, the ADR business is booming. The burgeoning popularity of these procedures is perhaps best demonstrated by the Singapore Convention on Mediation.
Signed by 46 United Nations member countries, the agreement aims to create a global framework that increases the enforceability of settlement agreements that arise out of mediation.
Singapore has pushed to cement its standing as an ADR hub in recent years. In August last year, Singapore collaborated with the World Intellectual Property Organization (WIPO) to give businesses and creators access to reduced mediation rates to resolve copyright disputes at WIPO’s Arbitration and Mediation Center. Parties with an existing dispute before the Intellectual Property Office of Singapore (IPOS) involving patents, registered designs, and trademarks already enjoyed reduced rates.
“The legislative framework in Singapore strongly encourages the use of ADR, particularly mediation, and an increasing number of cases are settled through ADR,” Mr. Chan said.
“Our local Supreme Court Practice Directions make it a professional duty for lawyers to advise their clients on the appropriate forms of ADR, particularly when ADR may save costs or achieve a quicker resolution to meet the client’s needs.”
An unreasonable failure to engage in ADR can lead to potential adverse costs ordered by the court against that party. And IPOS even provides funding of mediation costs under its Enhanced Mediation Promotion Scheme.
In Singapore, there has been a year-on-year increase in mediation cases overall (although no such data is available for IP specifically). In 2019, more than 1,000 disputes were lodged with the Singapore Mediation Centre, one of four designated mediation service providers under Singapore’s Mediation Act 2017.
“ADR, in general, is akin to an additional toolbox that allows companies big and small to resolve their disputes in a manner that is suitable for them.” - Zechariah Chan, Lee & Lee
Mr. Chan started to draft dispute resolution clauses using mediation clauses several years ago and is seeing those matters proceed to mediation. “It gives me a sense of satisfaction to see those disputes settled amicably out of court through mediation,” he said.
In Israel, mediation has become quite common in recent years, particularly in trademark disputes, according to Yoav Oestreicher, Partner at Meitar | Law Offices (Israel).
“We see judges putting a lot of pressure on the parties to mediate or try to resolve the case through arbitration, outside the civil court system,” he said.
It is much the same in Canada, where the growth of mediation is being driven by the government’s need to reduce the burden of court costs and long delays, said Ruth Corbin, Chair of CorbinPartners Inc. (Canada), a forensic market research firm.
She suggested: “It will grow in credibility because more qualified and respected professionals, including retired judges, are taking on mediation roles.”
“It is much the same in Canada, where the growth of mediation is being driven by the government’s need to reduce the burden of court costs and long delays.” - Ruth Corbin, CorbinPartners Inc.
Earlier this year, and as a result of the pandemic, the Court of Appeals of São Paulo launched a pilot project to promote the use of non-adversarial means to resolve conflicts virtually. Ms. Mazzonetto added that Brazil has seen an expansive increase in the use of mediation to solve IP matters, particularly in franchise discussions, during this period, but, as mediation is confidential, it’s difficult to provide exact numbers or pinpoint the reasons behind the growth.
About two years ago, INTA’s ADR Committee began “banging the drum for parties and mediators to be more open to virtual mediation,” noted Kevin Hartley, Co-Founder at Trust Tree Legal (US) and Vice Chair of INTA’s ADR Committee.
“With COVID-19, virtual mediation has gone from a novel idea with few participants to commonplace in many parts of the world. I expect that trend to continue even after the pandemic is over,” he added.
Mr. Hartley believes that technology has been, and will continue to be, a game-changer for mediation.
“When we started pitching virtual mediation, there was a lot of skepticism. As more people participate, they realize the great benefits it can offer. I expect virtual mediation eventually to be more common than traditional, in-person mediation,” he predicted.
“Think about it. How is someone who is 13 years old today going to expect to mediate a dispute in 30 years’ time? My money is on virtually.”
Ms. Mazzonetto said: “We see ADR as the future of dispute resolution (globally) as more and more parties want to take solutions into their own hands and control the determination of matters that may badly impact their business and commercial routines.”
“There is a common misconception that agreeing to participate in ADR will lead a party to being strong-armed into an agreement involuntarily.” - Kevin Hartley, Trust Tree Legal
However, ADR procedures are not perfect. A perceived absence of enforceability and a lack of understanding seem to be two factors limiting ADR’s uptake.
“There is a common misconception that agreeing to participate in ADR will lead a party to being strong-armed into an agreement involuntarily. That is rarely the case,” Mr. Hartley said.
In 2016, the High Court of Bombay in India ruled that an IP dispute is arbitrable when there is a contract, such as a licensing agreement, between the parties in place. Justice Gautam Shirish Patel, who decided the case, held that not allowing arbitration in IP matters would result in an “apocalyptic legal thermonuclear devastation.”
Mahua Roy Chowdhury, Principal Partner at Royzz & Co (India), believes that more must be done in order to strengthen ADR as an alternative approach to litigation, as the “lack of binding statutory support is making mediation a toothless remedy.”
She suggested that mediation should be made mandatory at the pre-litigation stage and that mediation centers should be set up statutorily and administered by Bar Councils.
According to Mr. Chan: “There is sometimes a perception that ADR may lack ‘legitimacy,’ or that mediation settlement agreements or arbitration awards may be harder to enforce. This perception is mistaken—at least in Singapore—where mediation settlement agreements and arbitration awards may be recorded as orders of court and may be enforced as such.”
Lack of awareness poses an impediment to growth of alternative methods. In Mr. Oestreicher’s view, a non-specialist might not understand what the ADR process involves, and there may be a misconception about the role of the mediator.
“Litigants need to be educated,” he suggested, pointing out, for example, that mediators cannot dictate anything, and they are not judges or arbitrators.
Ms. Ławreszuk agreed, adding that Poland is dealing with a lack of awareness among businesspeople, and sometimes their lawyers. While the Patent Office and other institutions there provide information about using ADR, there is a long-standing culture of settling disputes in court.
“We can compare it to a similar experience with IP law in Poland, which was a totally exotic branch of law for students 15 years ago. Our society has to undergo the same process with ADR,” she said.
“People have to practice an amicable settlement of the dispute on their own and then they start to treat it more seriously.”
There is also a misconception that arbitration is faster than litigation and inexpensive.
Mr. Oestreicher said: “While arbitration can lead to the faster resolution of a dispute than mediation, that’s not always the case. The downside is that arbitration can become more expensive.”
Costs, such as expenses for the arbitrator and the attorneys at each hearing and rent for the venue, have made it an unsuitable option for many SMEs, Ms. Chowdhury noted.
Finally, a party’s standpoint and whether they are open to compromise could be the difference between success or failure of the mediation.
Ms. Corbin explained: “Parties sometimes come with agendas to bully or posture, based on their view of the strength of their legal position. Mediation isn’t about the law; it’s about each party’s ultimate interests, and whether they can arrive at an outcome that is at least satisfactory to both.”
“The lack of binding statutory support is making mediation a toothless remedy.” - Mahua Roy Chowdhury, Royzz & Co
ADR is not the only option for those looking to cut litigation costs and have a streamlined process. If parties are determined that their case be heard by the courts, other suitable forums exist.
The UK’s IPEC is a prime example. The specialist court was established in 1990—under the name Patents County Court before being reformulated as IPEC in 2003—to help individuals and SMEs protect their IP; it covers claims worth up to UK £500,000. The IPEC helps smaller parties in two ways, said Judge Hacon.
“The first is that whatever the outcome of the litigation, the cost is likely to be very much lower than if the case were heard in the Patents Court or, as the case may be, in the general IP list of the High Court.
“The second is the removal of the risk (or even the threat implied by a larger opponent) that if the smaller party is not successful, the consequence in costs to be paid to the winning party will be overwhelming,” he explained.
In November 2019, the IPEC announced that small claims could now be issued and heard in Business and Property Courts across England and Wales. “Particularly for litigants with small claims, it is important that these can be brought without the need to travel to London for the trial,” Judge Hacon said.
While the IPEC is primarily intended to help smaller parties, in recent years it has increasingly been used by larger undertakings—including several multinationals—to conduct litigation at a lower cost.
Check out INTA’s webcast “The Mediation Toolbox: Best Practices in Mediation for Europe, the Middle East, and Africa” for an overview of the applicable laws and useful tools for each location.
The IPEC also provides an important indirect benefit to smaller parties, which is possibly of even greater value. It is best explained by the example of photographers who use the small claims track, according to Judge Hacon.
Before the IPEC, if a photograph was used by a large newspaper or other undertaking without the photographer’s permission, thus infringing the photographer’s copyright, the cost of litigation was far too high to make enforcing the copyright right worthwhile.
“Infringing undertakings knew this and often used any photograph they chose with impunity,” he said.
But now, a photographer may bring her/his case in the IPEC at low cost and obtain relief. Infringing undertakings have become aware of this and have become more likely to pay the appropriate royalty rather than being pursued in the IPEC, Judge Hacon said.
“Essentially, the court provides smaller concerns with a credible threat: that unless other undertakings respect their IP rights, they will be required to do so by a court which such small businesses can credibly say they are prepared to use,” he added.
At the IPEC, mediation and other forms of ADR are actively encouraged. Judge Hacon noted that, in the IPEC multi-track, there is a high rate of settlement, although it is not possible to say to what extent this is linked to the use of ADR.
Even without exact numbers, it is clear that a range of options apart from litigation is beneficial to all parties involved, including those who operate smaller entities who need to assert their IP rights.
Mediation, INTA 2020, copyright infringement, IP litigation, ADR, SMEs, IPEC, injunction, trademarks, patent, WIPO, IPOS, Supreme Court