11 June 2024FeaturesPatentsJonathan Turnbull, Louise Barber, Rachel Montagnon

Head: Collaborating at speed: Why arbitration suits energy innovation disputes

Partnerships are inevitable as energy sector players race to transition to renewable sources. Jonathan Turnbull, Louise Barber and Rachel Montagnon of HSF explain why arbitration may be the best forum to resolve the resulting IP disputes.

The role of technology development and transfer in implementing the energy transition was a major focus of COP28 last year, with commitments from state parties to triple the use of renewable energy sources and overhaul financial support for green technologies in pursuit of this technological revolution.

Attracting investment and increasing the speed with which these technologies can come to market will be critical in meeting this milestone. Speed often relies on collaboration with external partners—who may bring differing expectations around the continued use and ownership of the intellectual property associated with the collaboration.

Developing and enforcing contractual frameworks which can protect the value of these IP assets, and reflect each party’s expectations around the use and ownership of the outputs, will be critical. Arbitration, as the dispute resolution mechanism at the heart of the energy sector, can have an important role to play in helping to resolve many of the disputes around these frameworks.

Meeting the needs of the energy transition

Energy sector players may not have the ability or internal resource to innovate at the speed required, so may look to commission or develop technology in collaboration with third parties. Given the speed of the transition and the value of being an early mover, these collaborations will often be completed under pressure.

There may be less time to explore in detail precisely what information and technology each party is contributing to the collaboration, how it is going to be used during the collaboration, and how each party can use the technology created (or the underlying technology) in the long term.

In these circumstances, it is not hard to see how disputes may arise from such collaborations. This is especially so given that many collaborations will involve more than two parties, as part of risk-sharing around novel technologies.

Many will be partnerships between established energy sector players and entities from other sectors and industries (including tech companies). They may therefore bring different expectations and operate by reference to different norms around how these collaborations will work, especially when it comes to ownership and continued use of outputs.

There may also be disputes around the licensing of technologies, including as to the scope of licences, royalties payable where one party owns the IP but licences it to another to develop in exchange for future royalties, and the breach of licence terms.

Arbitration for disputes involving development of technology

Arbitration is well known to the energy sector as a mechanism for resolving contractual disputes. The flexibility, relative ease of enforcement, neutrality and potential for confidentiality and specialist decision-makers, among many other things, have made arbitration the forum of choice in many energy sector contracts for decades.

The types of IP disputes described above are well suited to being resolved through arbitration.

  • Collaboration arrangements, joint ventures, technology development, and licensing arrangements will typically take place through contractual frameworks, often with multi-jurisdictional elements.

    Arbitration offers the potential to resolve disputes which arise under these agreements in a neutral forum, removed from any domestic court system—something that may be important where one party is state-owned or particularly influential in a jurisdiction.
  • Arbitration also allows the selection of a tribunal with relevant experience and expertise in both the subject matter and IP issues—something that may be important where the dispute is highly technical.
  • The potential to resolve disputes behind closed doors, as arbitration offers, will be appealing to parties involved in the development and use of novel technologies, where the nature of the technology and the existence of a rift in a commercial relationship between collaborators may both be sensitive topics.

    Similarly, a party out-licensing IP may not wish disputes as to royalty arrangements, longer-term use provisions or the validity of IP rights to be litigated in the public domain.
  • Arbitration also has certain advantages when it comes to procedural flexibility, including the prospect of agreeing a simplified or expedited procedure to address time-sensitive matters and the possibility of addressing multi-party and multi-contract disputes in a single forum.

    Moreover, when it comes to enforcement, arbitral awards remain a more straightforward proposition than many domestic court judgments, something which is likely to be of interest in cross-border contracts.

In the context of an ongoing collaboration, where disputes may arise at a number of points over the life of the contract, all of these considerations carry additional weight. In short, it will be critical in maintaining a good working relationship in the long term that disputes can be resolved efficiently and effectively when they arise.

Is arbitration the right choice?

The use of arbitration as a forum for resolving appropriate IP disputes is growing. A recent report from the World Intellectual Property Organization (WIPO) revealed a 450% increase in requests for arbitration services filed with WIPO between 2012 and 2019, with 548 arbitrations having commenced in 2022.

Other arbitral institutions have created special procedures to encourage the resolution of IP disputes before them, with the Hong Kong International Arbitration Centre and the Singapore International Arbitration Centre both maintaining a panel of arbitrators with specialist IP expertise.

Whether arbitration is the right choice for a particular contract will depend on the relevant jurisdictions and the nature of the rights involved. There may, for example, be risks around arbitrability. Some jurisdictions do not permit arbitration of issues connected with certain IP rights, while others are silent on the issue.

By contrast, some jurisdictions (like Singapore) have expressly legislated to clarify that arbitration is indeed available to resolve such disputes (although disputes related to the validity or infringement of registered IP rights like patents and trademarks will typically be excluded from this).

More generally, it is important to distinguish between contractual parties enforcing IP rights as between themselves (in arbitration) and as against third parties (before courts).

Many of these points can be addressed through careful drafting of an arbitration clause. This is both to clarify the interaction between the submission to arbitration and the resolution of disputes involving third parties (typically those involving validity and infringement of patents and trademarks) and to make explicit the parties’ agreement as to the relief which can be ordered by a tribunal.

This could involve, for example, providing expressly that a tribunal may order a party to take an action, such as applying to remove a particular right from the register if found invalid by the tribunal. In drafting such clauses, it will be important to think about types of likely disputes, the nature of the IP rights involved and the remedies likely to be sought.

Reducing the risk of IP disputes in collaborative situations

Some dispute risk is inevitable, given the amount of collaboration and the pace of change. However, there are ways to mitigate the risk. This includes:

  • Identifying clearly the ‘background IP’ each party is contributing to the project and addressing in express terms how this can (or cannot) be used by the other party both during and after the collaboration.
  • Having a coherent IP protection strategy set out in the contractual framework, including identifying who will own new IP, data and know-how generated during the project (foreground IP), allocating responsibilities for protecting it using appropriate IP rights and confidentiality measures.

    While patent rights are some of the most significant and enforceable IP rights, trade secrets are also increasingly important as a means of protecting key knowledge around new technologies in fast-moving and innovative fields.

    With robust internal policies and enforcement, trade secrets and confidential information provisions can provide good protection over valuable information and innovations.
  • Anticipating the expectations and needs of both parties post-termination of the collaboration (or post-delivery of the commissioned technology ) and clearly allocating ownership/use rights during and after the project.
  • Setting up new or extended employment contracts for those participating in the project restricting use and dissemination of IP, data, confidential information and trade secrets during employment and post-employment.
  • Where ownership of know-how or IP is shared, clearly allocating responsibility for the registration of IP rights and the costs of defending claims from third parties in connection with them or enforcing those shared rights against third parties.

Arbitration of standards, SEPs and FRAND licensing disputes

Arbitration could allow FRAND disputes to be resolved confidentially (at least initially), provided there is an agreement to arbitrate (which could be concluded after the dispute arises if there is no pre-existing agreement). This will likely prove relevant in the context of the energy transition.

As new technologies are successfully developed and commercialised, these may become standardised in a similar way to those used for mobile telephony patents. Patent pools may be set up through which to enable licensing for those wishing to create new technology that integrates with these standards in order to achieve interoperability.

This may be a key part of facilitating the development of commercially viable markets and ensuring that elements produced by different manufacturers can work together, as part of scaling up these new technologies.

Arbitration is likely to offer an attractive forum for potential licensees and licensors as they navigate through their differences around the terms of access to these technologies.

Jonathan Turnbull is a partner at HSF. He can be contacted at: Jonathan.Turnbull@hsf.com

Louise Barber is of counsel at HSF. She can be contacted at: Louise.Barber@hsf.com

Rachel Montagnon is a professional support consultant at HSF. She can be contacted at: Rachel.Montagnon@hsf.com

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