How should the parties to a licence agreement, or other IP agreement, resolve their contract disputes?
Some would reply: amicably, quickly, reasonably. If they can, all well and good, and no special contract terms are needed. But the drafter of the IP agreement needs to cater for the possibility that they can’t.
If you know what the dispute is about, you can form a view on the most favourable dispute resolution mechanism to protect your client’s interests. For example, do you want a thorough examination of the legal issues by a superb court that leaves no stone unturned, and comes up with a magisterial (and public) conclusion? Or would you prefer something cheap, quick and private, focussed more on commercial outcomes than legal precedent?
At the time the agreement is made, it may be difficult or impossible to predict whether any disputes will arise, and what they will be about. So, any dispute resolution clause is a bit of a gamble. It may be best to stick to something ‘plain vanilla’ and, if a more fancy mechanism is needed, try to negotiate it with the other party when the dispute arises.
But what is a plain vanilla solution? Should you go for litigation in court, or arbitration? In the latter case, do you opt for a 3-person arbitration panel which will be expensive but reduce the risk of a quirky decision, or is it best to have a single arbitrator?
In the middle of negotiations, and depending on one’s bargaining position, the priority may be to find a solution that is not obviously terrible. The issue is important, and may justify two or three rounds of proposal and counter-proposal, but probably not many more.
IP Draughts’ preferences tend to reflect the type of clients that instruct him, and his background as an English solicitor. Others may have a different starting point that is better for them and their clients.
There is no absolute right or wrong on this issue, but the closer one can get to a list of preferences, the easier it is to strike a deal.
Remember that the final method of dispute resolution is either to go to court or arbitration. Other methods of ADR, such as mediation, can only be viewed as intermediate steps. If you want to force the parties to go to mediation or to have the CEOs negotiate, fine, but IP Draughts doubts the value of such an obligation. It may be better to include these as voluntary options that the parties must consider, but not be obliged to follow.
For the final dispute resolution mechanism, IP Draughts’ preferences, if English law and jurisdiction are not acceptable, include:
Choice of law
Dealing with European parties
- A large trading nation with a ‘North European’ approach
- Laws that are not too prescriptive
- Difficult to get a common law legal system (there aren’t many in Europe)
- Possible solutions: Swedish or Dutch law
- Second choices: German or Swiss
- To avoid: French, Italian, Greek, smaller nations
Dealing with US parties
- Try to avoid US, offer European alternative
- But if forced to choose US, go for large State with reputation re commercial disputes
- Preferably East Coast
- Preferably laws as close as possible to English law
- Possible first choice: New York law
- Second choices: Massachusetts or Delaware
Dealing with parties in the Far East, India, etc
- Common law system if possible, eg Australia, Hong Kong, Singapore
Choice of dispute resolution mechanism
- No overall, strong preference for courts or arbitration
- In England, courts are efficient so may be preferable
- Arbitration may be preferable in countries whose court systems are unattractive
- If confidentiality is a major issue, this may point to arbitration
If arbitration is chosen
- Essential to specify arbitration body
- Consider WIPO arbitration
- Avoid ICC – too expensive, heavyweight, not user friendly
- Prefer single arbitrator
- Sometimes prefer expedited arbitration procedure (eg for smaller claims)
- Need to specify seat of arbitration – procedural laws in that jurisdiction will govern
If court litigation is chosen
- Should be same as law – don’t have law of country A and courts of country B
- Overlapping issues with choice of law, above
- Avoid corrupt, biased, slow, jury trials, difficult to get to from Heathrow Airport