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The Advantages and Disadvantages of Using Arbitration or Mediation to Resolve Intellectual Property Disputes

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The Advantages and Disadvantages of Using Arbitration or Mediation to Resolve Intellectual Property Disputes

It has always been the case that the onus of enforcing intellectual property rights falls principally on the shoulders of the holders of such rights. Thus, when a case of unauthorized use is discovered (or is looming), the intellectual property owner usually must act quickly to stop the offending conduct, regain control over the property, and secure adequate compensatory relief. But is commencing a lawsuit in court the most effective and efficient way to achieve those ends? What considerations play into the decision over whether arbitration or mediation, for example, might be better options? Should arbitration or mediation even be a consideration during a negotiation over a dispute resolution clause before any conceivable dispute has even arisen? With over 20 years of experience as a commercial and intellectual property litigator, coupled with over 10 years of experience as an arbitrator and mediator, Theo Cheng will explain the advantages and disadvantages of using arbitration or mediation in connection with resolving intellectual property disputes so that you and your clients can be better informed before deciding to choose one of those alternative methods over court litigation.

Transcript

- Welcome to the advantages and disadvantages of using arbitration or mediation to resolve intellectual property disputes. In this program, we're going to try and understand the fundamental characteristics of the arbitration and mediation processes, especially as they apply to common issues and concerns that are raised by intellectual property disputes. We will appreciate both the benefits and limitations of using arbitration or mediation to resolve these kinds of disputes. And we'll recognize the salient differences between arbitrating or mediating an intellectual property dispute, as opposed to litigating one in court. We will become familiar with some of the key considerations in deciding whether to utilize arbitration or mediation either while negotiating a dispute resolution provision or after a dispute has arisen. And we will identify the subjects on which you need to engage your clients to entertain one of these alternative dispute resolution processes. But first a little about me. My name is Theodore Cheng. I have over 20 years of experience as a commercial and intellectual property litigator. I am now an independent full-time arbitrator and mediator based out of Princeton Junction, New Jersey. And I focus on commercial, intellectual property, technology, entertainment and employment disputes. I've been appointed to the private rosters of the American Arbitration Association, the CPR Institute and Resolute Systems. I'm a fellow of the College of Commercial Arbitrators, and also a member of the National Academy of Distinguished Neutrals. I'm also a Triple A Master Mediator. Separately, I'm an Adjunct Professor at New York Law School where I teach courses on dispute resolution processes, that includes negotiation, mediation and arbitration, as well as domestic arbitration. I'm a past chair of the New York State Bar Association's Dispute Resolution Section. And I'm the current president of the Justice Marie L. Garibaldi, American Inn of Court for ADR. First, let's imagine these scenarios, a photographer signs a license for the limited use of certain of his photos in connection with a Broadway musical. Because of the popularity of the show, several of those photos become iconic and the producers have decided to begin selling show related merchandise incorporating the photos. However, that's arguably outside the scope of the license granted by the photographer. Or how about another scenario where we have internal squabbling between the members of a rock band who happen to have a string of popular recordings. And they end up splintering to two different groups, each purporting to be the legitimate continuation of the original band. A dispute erupts over who owns and controls the rights to the name and other intellectual property of the original band. And finally, a beverage company claims that a competitor is making several faults and misleading statements in print, in a national television advertising campaign that have both just launched. Retail beverage sales for the company have plummeted as a result. All of these scenarios are very common intellectual property disputes and implicate a variety of different intellectual property. So let's begin by making sure we're all on the same page as to what is intellectual property. Intellectual property is a category of property, comprising intangible creations of the human intellect or the human mind. That's to be distinguished from tangible properties, such as a car, a chair or a pen. It's also distinguished from real property, such as land or a building. And there are many types of intellectual property. Some of the best known are copyrights, patents, trademarks, trade secrets and confidential and proprietary information. So let's talk about those five areas in particular. A copyright is an original work of expression, not an idea, but an expression that is fixed in a tangible medium. Most obvious are things like books and documents, perhaps even software, sculpture or a painting, a song, or a recording, or even a movie. The copyright laws provide a bundle of different rights to someone who is the owner of the copyrighted work, usually the author or the creator of the work, most important of which is the right to prevent others from copying or distributing the work. And the copyright laws are found in Title 17 of the United States Code. So it's explicitly and exclusively federal law. A trademark is any word phrase, slogan, symbol, or design that identifies or distinguishes the source or origin of the goods or services of one party from those of another. And the owner of a trademark can prevent others from using an identical or substantially similar mark in the marketplace to identify that person's goods or services. And the touchstone for determining whether there's been any kind of infringement is whether the marketplace consumers experience any likelihood of confusion as between the two goods and services. So think of the Nike Swoosh, for example, that represents the company, Nike and all of its goods and products and services, or even the color that Tiffany uses for its iconic blue bag and blue box, or think of even also the familiar tones of the NBC broadcasting company Those tones are also registered as a trademark and represents the NBC company. The trademark laws are found both in federal and state statutory law, as well as in common law. For the federal law it's found in Act, which is located in Title 15 of the United States Code. A patent is a right to exclude others from making, using, or selling an invention or discovery. And in order to have that right, the inventor has to publicly disclose his or her invention or discovery. The patent laws are also exclusively federal in nature and are found in Title 35 of the United States Code. If you drive a car, a car contains any number of technologies, all of which are patented. The device that you are watching and listening this program on, likely contains any number of patented technologies. Your iPhone or other smartphone also contains numerous patented technologies. Any new medicinal drug that comes out these days is also protected by a patent until such time the patent expires and then we have the onset of generics and generic drug manufacturers coming into the marketplace. A trade secret is any information that provides a business with a competitive advantage that is not generally known by competitors or readily discoverable. And it's also subject to reasonable efforts to maintain its secrecy. So for example, Kentucky Fried Chicken's, Famous 11 Herbs and Spices is a recipe that is a trade secret or the Coca-Cola company's formula or its beverage and various beverage lines is also a trade secret. Even the algorithm that determines a New York Times best seller list is a closely guarded trade secret. And trade secret law is found in both federal and state statutory law, as well as common law. Trade secrets come up in many, many instances, including things like misappropriation or theft of trade secret claims and corporate espionage, particularly in situations where employees leave a company and take trade secrets with them, or companies can raid other employee from other companies, confidential proprietary information is a little bit different. It's any information that's considered confidential or proprietary to the individual or business, but it doesn't necessarily rise to the level of a trade secret. Doesn't necessarily have the same value as a trade secret. And it's not subject to the same levels of safeguarding that a company, a trade secret. Now the resolution of any of these disputes, whether it's IP or not usually begins with party to party negotiations. By that, I mean negotiations between the parties who are actually in the dispute themselves by themselves. And it's only of those direct negotiations fail, should other dispute resolution mechanisms be considered. And I would submit to you that instead of resorting immediately to litigation as a default mechanism, one might consider other processes such as for example, the ones listed on this slide, facilitation and conciliation are both forms of facilitated negotiation between the parties. The use of an ombuds person dispute resolution boards, and of course, mediation. And we'll talk a little bit more about that in a few minutes. Fact finding and early neutral evaluation, are processes in which a third party is brought in to conduct an investigation and provide an early assessment of the merits of a dispute. Peer review is when other individuals are brought in to help evaluate and provide a assessment of the dispute. Usually peers of the person and persons involved in the dispute itself. A mini trial or summary jury trial is exactly what it sounds like. It's basically a shortened expedited version of an actual trial sometimes with a mock jury sometimes with just business persons attending the trial itself, which can lead to a potential negotiated settlement of the dispute. And finally, of course, arbitration, which we will again talk about in more detail in a few minutes. Now, whichever process the parties choose each method for trying to resolve a dispute is involve four principal transactional costs, time, money, emotions and control over the outcome. Lemme spend a few minutes going over those in more detail. First as to time, it was Benjamin Franklin who noted the time is money. And three time Pulitzer prize winning American poet, writer and editor, Carl Sandberg once said that time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent. Be careful less you let others spend it for you. Any dispute unavoidably spends time on the party's behalf to try and resolve it. And every metric of time diverted to handling a dispute is not being devoted to furthering an individual's other priorities or a company's primary mission. Disputes invariably take time. For example, if you followed at all the statistics in the federal courts where a lot of IP disputes are had, it takes an average of approximately 24 months for a dispute in the federal court system to when its waved from the commencement of a lawsuit to its disposition at the district court level. And by disposition I mean, either it ends in a jury trial verdict, or more often than not, it ends in some kind of dispositive motion practice or even settlement for that matter. In fact, only 2% of cases in the federal system actually make it to trial. So in fact, most cases gonna end before the main event, the trial before a judge or a jury. In those 24 months, don't include any time spent by the parties trying to appeal all or part of the decision to the circuit courts and any of the machinations in the circuit court level, including petitions for rehearing or the filing of a petition in the Supreme Court of the United States. That's 24 months of time on average for disputes in the federal court system. So definitely time is a factor. Moreover disputes have a incredible way of holding everybody hostage to a particular moment or moment in time. Lemme explain what I mean. It's the point in time when the dispute arose, that becomes the focus of any dispute resolution process. Parties will have to relive over and over again first by telling their attorneys what the dispute was about during the fact finding stage, and then participating in the preparation, for example, of a pleading, perhaps even answering discovery, sitting for a deposition and reliving again and again, what happened in that moment in time when the dispute rose, and then of course, if you make it to trial, then of course telling your story yet again to a judge or a jury in a trial setting. So again, time is insidious here. It takes time to resolve disputes and it also holds parties hostage to a moment in time. As to money. It's almost obvious that it takes money to resolve disputes, but it's also important to remember that the true costs here can be both direct and indirect. Direct costs of course, could encompass things like e-discovery, lawyers fees, document production costs, deposition expenses, expert witness fees. And the more adversarial the dispute resolution process, the higher those costs are likely to be. But there are also indirect costs as well. That can conclude things like negative publicity, reputational harm or loss of productivity or loss of business opportunities, because resources are being directed towards resolving the dispute rather than towards other priorities or missions. And then there's emotional capital. David Packard, the late Co-Founder of Hewlett Packard said, "A group of people get together "and exists as an institution, we call a company. "So they're able to accomplish something collectively "that they could not accomplish separately. "They make a contribution to society." A phrase which sounds trite, but is fundamental. A company is nothing but the passion, dedication and commitment of its people. And as Jack Welch, former CEO of GE said, "It goes without saying that no company small or large "can win over the long run without energized employees "who believe in the mission "and understand how to achieve it." And that goes for individuals too. An individual who's pursuing his or her own passion and priorities should not be diverted by having to expand emotional capital in something that's essentially a sideshow. And that's what dispute resolution is all about. Dispute resolution takes people away from their primary mission or priorities and compels them to invest emotionally in issues having little or nothing to do with those priorities and thereby having to participate meaningfully in some other endeavor rather than what they really want to do. And by doing so, they can feel disheartened, discouraged and demoralized. These are true emotional cause for the participants in a dispute. Devoting energies towards resolving disputes requires an expenditure emotional capital that will almost likely take a negative toll. And finally control over the outcome. An influential management consultant named Peter Drucker once said, "Management is doing things right, "leadership is doing the right things." So steering a company in line with its mission, growing profitability, respecting and responding to customers and safeguarding its reputation, these are all responsibilities over which management has to exercise properly control. And these responsibilities are no different for an individual and his or her own priorities. Disputes however, hold a potential to diminish one's ability to control one or more of these areas. And sometimes depending on the process that's used to resolve the dispute, decision makers may have little to no control over the outcome, creating the potential for results that could adversely impact the company. So it's important that when you bring in an intervener, realize that all of a sudden, instead of the parties using self-determination to negotiate by themselves a resolution, parties are seeding, some bit of control, some are all control to that intervener. In the case of litigation, you're seating almost entirely all of the control to either a judge or a jury who is gonna determine the outcome of the dispute. So that's why I say that direct negotiations, party to party, face to face either over the table or perhaps over the phone, or even by email, direct negotiations represent the least in terms of investment of time, money, and emotional capital to resolve the dispute. At the same time, direct negotiations also represent the most collaborative process for resolving disputes. While litigation at the opposite end represents the most adversarial process for achieving that same end. So I wanna illustrate this in a chart, which I've called the dispute resolution continuum. Lemme describe this chart to you in more detail. First from left to right, are various columns that indicate the types of dispute resolution processes the parties might consider. At the far left is pure negotiation. And by that, I mean, when the parties themselves are directly engaging in face to face, whether it's across the table or over the phone, or by email, some negotiation party to party. At the extreme right is court litigation. That's your standard situation where you've commenced a lawsuit in either a federal or state court forum. In between our various other processes. And from the left, we have a variety of processes under the mediation column, which can include facilitated negotiation, evaluative techniques for mediation, transformative mediation, and even a combination of mediation arbitration that we call MED-ARB In the middle are evaluative techniques like the ones I talked about earlier, including fact finding, peer review and early neutral evaluation, and even the mini trial where you get some sense of what the potential outcome could be in a non-binding manner. Then there's arbitration, which very much like a court litigation process in the sense that it's adjudicatory in nature. There is someone who's going to make a decision on the merits of the dispute and their various variations on arbitration there list there. What's important to remember as we look at this chart are two critical points. First, as you go from left to right, you are moving from a more collaborative process to a more adversarial process, as I said before. Pure negotiation, direct party-party negotiations are the most collaborative, while court litigation is the most adversarial. But perhaps even more importantly, as you go from left to right on this chart, parties are expending more time, more money and more emotional capital while at the same time, losing more and more control over the outcome. Let me say that again. As you go from left to right on this chart, parties are expending more time, more money and more emotional capital while losing more and more control over the outcome. So I suggest to you that before court litigation is considered, perhaps any one of these other techniques in the middle ought to be something that you talk to your clients about because failing to do so means going directly from a more collaborative to the most collaborative process to the most adversarial, but it also means expanding the most time, most money and most emotional capital to try and resolve that dispute while also losing the most control over the outcome of that dispute. So let's turn to arbitration and mediation, which is the focus of this program. And I'll first start with arbitration. Arbitration is a voluntary, consensual and private adjudicatory process for resolving disputes. In this dispute process, the parties select a neutral, disinterested third party who will call the arbitrator. And the arbitrator's role is to determine the merits of the dispute, usually in a final and binding manner, and critically here based upon rules and procedures that are agreed upon by the parties themselves. We often say that arbitration is a creature of contract. What do we mean by that? We mean two things. First is that the parties cannot be compelled to arbitrate unless they have contracted to do so. And with very rare exceptions least here in the United States, that arbitration agreement has to be in writing somewhere. Secondly, the parties agree to arbitrate the process using any procedural terms or rules so long as there's agreement over them. So arbitration really does rest on a meeting of the minds on a contractual basis between the parties and that's why we call arbitration a creature of contract. Now the general process of arbitration follows a very typical prescribed series of events. And I'll describe them for you here. First, there's the preliminary hearing. That's usually the first time when the parties and the arbitrator or tribunal will meet and speak to each other. It's at this preliminary hearing that the parties will at least set down a case schedule for the rest of the matter and discuss any other case management matters that may have come up or may possibly come up during the course of the process. This is really very similar to what we all know as the Rule 16 initial conference with the court under the federals of civil procedure, or what's known in state court as a preliminary conference or preliminary management conference. Now, once the preliminary hearing is over, there's usually a procedural order or case management order that's sent out, which lists a various dates and milestones for the parties to complete. But usually the next step for the parties is what's known as the information and document exchange phase. That's just a fancy term for discovery, but it is different from federal and state court discovery in the sense that information and document exchange is very limited in nature in the arbitration process, it's also by agreement between the parties. So the arbitrator will discuss with the parties exactly what the nature and scope of that exchange will look like and put limitations both time and substantive limitations on that exchange. Once that exchange has completed, usually the parties will get together and prepare and submit pre-hearing materials. And pre-hearing materials in the arbitration process would include things like the final witness list, who's going to be testifying at the hearing, any stipulations of uncontested facts that the parties have agreed to. All of the hearing exhibits that the parties intend on using at the hearing and possibly a pre-hearing brief to help the arbitrator better understand the nature of the dispute and to sort of proceed what the arguments and contentions will likely be. This is similar or analogous to the pre-trial materials that judges typically order parties to prepare in advance of a trial. And I keep mentioning hearing, and that's the next phase, it's known as the evidentiary hearing. That's analogous to a trial in a court system, but the evidentiary hearing is similar, but also different from a trial. It's similar in that the typical examinations that we're used to as advocates do take place direct and cross examination sometimes also redirect and recross. And there is testimonial and documentary evidence introduced at the hearing, but there is a lot more flexibility in arbitration too, for example, take witnesses out of order. And we'll talk a little bit about using witness statements and other techniques that are not as commonly found in both the federal and state court system, but it is like a bench trial in that regard. There is no jury, only the arbitrator or the tribunal is listening to the evidence. After the evidentiary hearing has concluded, the arbitrator or tribunal will recess, deliberate and issue what is known as a final award. And this is analogous to the bench opinion, following a bench trial. Again, no jury in an arbitration proceeding. There are a lot of benefits to the arbitration process. Most importantly of which is that the entire design of the process is left to the party's agreement. And so the parties can talk about ways in which they can reduce costs in this process to provide more efficiency in the process. And if done correctly in collaboration and cooperation with the arbitrator and the tribunal, it usually involves a faster and less expensive process than actually going through court litigation. But it highly depends on whether the arbitrator is well trained, whether the advocates know of the options and ability to be flexible and the sort of recognition of best practices in arbitration practice these days. Arbitration can also be administered or ad hoc. By administered, I mean that some administering entity, institutional entity, like for example, the American Arbitration Association, Resolute Systems, JAMS, CPR Institute is involved in the background, helping the parties and the arbitrator provides administrative support, or if the parties wish to avoid the costs involved of having an administrative entity involved, they can do it ad hoc, which is having the arbitrator tribunal self-administer the entire proceeding. There are definitely pros and cons of having a proceeding administer of ad hoc that are beyond the scope of this program. But it's not a simple answer of saying that one is better than another. Arbitration also does have some limitations that are, you need to be mindful of. First and foremost, arbitration is limited jurisdiction, in that the arbitrator only has the power and authority provided to him or her or the tribunal based upon the party's agreement. So cannot issue for example, awards and orders that affect parties that are not before the arbitrator. I previously mentioned that there's limited discovery, which can be a bit of surprise to most US advocates, but is not a surprise to a lot of foreign advocates, but it could be beneficial because I think limited discovery can actually lead to a more cost effective and efficient process. Although I will add that in the last decade or so, advocates have increasingly brought into the arbitration forum, their desire to conduct more full blown and robust discovery as they do in court litigation. And so there's been an opposite trend in domestic arbitrations where discovery has become a little bit more of an issue, especially in commercial cases and employment cases. And as a result, arbitration does have a little bit of a reputation of sometimes being litigation light. But again, this is highly dependent on whether or not the arbitrator and the parties can talk through the real need for discovery and whether other alternatives can be considered. There's also no presidential value of a final award because it really does impact only the parties before the arbitrator. However, if the parties are in any way repeat players in the arbitration process, this happens for example, often in the employment in the consumer context, there is a possibility of collateral estoppel doctrine being applied to past arbitration awards. There's a lot of case law on this of mixed nature across the country, but it is potentially useful for parties who are involved with other parties that are repeat players in the arbitration forum. And finally, there is no merits based appeal of an arbitration award, meaning that if an arbitrator somehow gets the law wrong or applies the law incorrectly to the facts, there is no review De novo review of the kind that advocates are used to in the court system. Let me talk a little bit about that because that's of some concern to most advocates. While there are no merit space reviews of a arbitration award, there is at least a possibility to vacate the award based upon procedural irregularities that affect due process and fairness in the arbitration process. I mentioned term vacatur, and this is the only kind of appellate review that's available. And it really depends on the statutory framework, the background procedural arbitration statute that applies to the proceeding, whether that's the Federal Arbitration Act located in Title 9 of the United States code or various state law statutes, oftentimes a variant of either the Uniform Arbitration Act or the revised Uniform Arbitration Act. The grounds for vacatur are quite limited, but they include things like if the award was somehow procured by corruption or fraud, or if the arbitrator had demonstrated evident partiality of corruption in the process, or if the arbitrator, for example, refused to postpone the hearing when good cause was shown by the parties or refused to hear evidence that was relevant and pertinent and material to the dispute in question, or if the arbitrator went beyond the powers that he or she was delegated in the arbitration agreement by the parties or so imperfectly execute them that a final and definite award really wasn't made in the end. You can see already that these grounds are quite limited. And also you can imagine that the burden to prove these things is actually quite high. There are some other common law grounds, including whether the award was in manifest disregard of the law and what that means. Although that sounds like error of law, it actually is far more stringent than that. Manifest disregard of the law means that the arbitrator appreciated and acknowledged the applicable law that applied to the dispute, but then consciously decided to ignore or disregard the law. So you can imagine that both of those prongs have to be clearly established and it's a very, very high burden or of the award itself was completely irrational in some way, or if there's some very definite and articulated public policy that the award went against. Again, vacatur is very rare in both the federal and state court system, but it provides parties with some measure of comfort that if something does truly go off the rails in an arbitration proceeding, there may be some way in which that award can be reviewed. Let's turn next to mediation. Mediation is also a voluntary, consensual and private process for dispute resolution, just like arbitration. Also, it's a process in which the parties selecting neutral, disinterested third party, this time called the mediator. But unlike the arbitrator who makes a decision on the merits of this dispute based on evidence presented, the mediator here has no such power. No such power to decide to dispute, no power to order anybody to do anything, or to even compel a resolution at the end. The role of the mediators to help facilitate communications, discussion and negotiation between the parties in hopes of having them arrive at a mutually acceptable resolution of the dispute of the party's own making. And by that, I mean that the parties exercise their own self determination as to whether or not they voluntarily want to enter into some sort of resolution of the dispute in questions. There's enormous flexibility afforded in designing a customized process here, much like there is an arbitration. For example, the manner in which communications take place between and amongst the parties and/or with the mediator, can truly be customized for the dispute in question. The extent to which information is informally exchanged, as opposed to in a formal discovery like manner, in advance of or during the session itself can be very, very helpful to affording the parties opportunities to explore possible resolutions. The timing of the mediation session itself, and whether multiple sessions may be appropriate, particularly in this age of the pandemic where we're doing a lot of remote mediations and Zoom fatigue is a true phenomenon. And here's a key here that mediation allows parties to explore resolution possibilities well beyond what could ever be attained in a court litigation, 'cause this isn't about trying to determine who's right or wrong and impose remedies or relief that you might be able to achieve in court, but actually being creative and innovative and coming up with solutions to a problem. Mediation can be extremely helpful where the parties either have not been effectively negotiating between themselves on their own or have done so, and have arrived at an impasse in their dialogue. And so that mediator can help facilitate and grease that communication between the parties. And here's another critical point about mediation that's different from an adjudicatory process. It's very prospective in nature, not retrospective. Here's what I mean. Litigation or even arbitration looks to pass events to find fault and impose appropriate relief. I mentioned earlier that parties to a dispute often get trapped or become hostage in time to when the dispute actually arose. That's exactly what litigation and arbitration do to the parties. Makes them focus on the past, relive the past, retell the past, ultimately trying to find who's right or wrong, who's at fault and then impose appropriate relief. By contrast mediation tries to help the parties focus on how best to resolve the dispute that's presently before them and move on. In other words, look prospectively to the future, not retrospectively backwards. As a result, mediation tends to be far more cooperative in nature rather than adversarial like litigation and arbitration. Now the end result of a mediation usually is some kind of a binding agreement between the parties. The benefits of mediation are the extension of the negotiation process. So when the parties have either failed to negotiate effectively or reached an impasse, a mediator can come in and help facilitate that negotiation and it's by someone who has no stake whatsoever, financial, legal, personal, or otherwise, in the outcome of the dispute. The mediators there truly to be of assistance to the parties. Because mediation is an extension of the negotiation process, it also tends to be much less expensive than any adjudicatory process, and also can take far less time than a typical adjudicatory process. And resolutions in mediation are limited only by the creativity and willingness of the parties to reach a mutually acceptable solution. There are some limitations. The two of them, I note are one that, there is no binding resolution, of course, unless agreed to by the parties. So if the parties are seeking some sort of binding resolution and are unable to achieve it through either direct party party negotiations or through remediation, then they will have to resort to some kind of adjudicatory process in order to get to a binding resolution. And second, enforcement of any agreement that's reached between the parties under mediation is usually going have to be through a subsequent lawsuit for a breach of that agreement. Let's talk next about the advantages of using ADR processes for resolving IP disputes. First and foremost is confidentiality. IP disputes, often address business operations and disclosure of financial or proprietary information. It may also involve the disclosure or litigation over company trade secrets or other confidential and proprietary information. By using ADR processes you can avoid the potential for unwanted publicity and public disclosure. The neutral, the arbitrator or mediator, and even the administering I institution, whether it's the AAA, JAMS, Resolute Systems or CPR Institute are usually obligated to maintain confidentiality under the rules that those institutions have promulgated. The parties themselves can also agree to maintain confidentiality over the process. And here I wanna distinguish between privacy and confidentiality. I earlier said that these ADR processes in particular arbitration and mediation are private processes. And by that, I mean, of course that they are private in nature in the sense that these disputes are not being filed as a lawsuit in a public form, like a federal state court. So they are private in nature and scope, but even though the proceedings themselves may be held privately, there's nothing stopping the parties from going and talking about the process or what happens during the process, unless they have a further agreement to maintain confidentiality over that process. So if it's not already in the party's agreement, and if there isn't any kind of governing law or court rule or statute of some kind, then neither of these processes, arbitration or remediation is inherently confidential. And so if confidentiality is a concern for the parties, as a practice point, the parties ought to consider entering into something like a stipulated protective order or confidentiality agreement of the kind that they're used to entering into in a court proceeding and having the arbitrator so order or approve that agreement or making sure that it is made a part of the mediation process. Another advantage of using ADR for IP disputes is the ability to select a neutral with industry, subject matter legal and/or business expertise. In an IP dispute, you often want particular industry expertise, whether it's manufacturing background or royalty negotiations. This expertise is necessary for understanding of the norms and customs in that industry, or perhaps you want someone with technical knowledge appropriate to the intellectual property at issue, or even someone with a depth of legal knowledge in the IP space, because a decisional law here, particularly copyrights, trademarks, patents, and trade secrets can be quite complicated. In theory, having someone, arbitrator or a mediator, with particular industry subject matter, legal and/or business expertise would likely result in a more efficient and faster dispute resolution process than having your dispute simply be assigned to a generalist judge in either a federal or state court. And in particular, a mediator with subject matter expertise can also be more evaluative and directive in the mediation process, which may be of benefit if there are disparate understandings of the law by the parties and/or their counsel. The qualifications of such a neutral, if that's what you're looking for, can certainly be addressed in advance. Those qualifications can be set forth explicitly in writing in the very language of the dispute resolution clause rather than having it come up after the dispute has arisen. Because as you can imagine, once a dispute has arisen the parties and their council are not likely to be able to reach agreement on many things. And so even reaching agreement on the qualifications of a neutral might be difficult. And doing so in advance through the dispute resolution clause can provide comfort and confidence to the parties that any dispute will ultimately be handled by someone with the appropriate knowledge, expertise and background. However, a word of caution here and a practice point, take care not to overly specify those qualifications. So for example, if you wrote into the clause that you wanted in an arbitrator with a PhD in quantum mechanics, who's worked for at least 15 years in the aerospace industry, that's certainly very specific, but the problem is that that can lead to unnecessarily limiting the pool of available neutrals. In other words, you can't find anybody who fits those qualifications, or maybe there's only a few people in the entire world that can fit those qualifications. That would require the parties to thereafter, try and reach an agreement about an appropriate neutral after the dispute has arisen. And as I mentioned earlier, that can be quite problematic. Another advantage of using ADR for IP disputes is lower costs. As all IP practitioners know, IP disputes are notoriously expensive to litigate in court, and you can leverage the flexibility that ADR processes afford to design a process that best fits the dispute. In particular, in arbitration, if you can adopt some best practices, you might be able to streamline the proceedings so that all the parties benefit from the flexibility that arbitration affords. For example, I mentioned earlier about limited discovery, while it's true that you might want to limit document requests, if not the number of document requests then perhaps limiting them to a single set of document requests, as opposed to the multiple sets we're used to seeing in court litigation. Interrogatories and depositions are also relatively rare and in fact, unknown, usually in arbitration. Although, as I mentioned earlier, there are some advocates who have started to import some of these things from court litigation. But limiting, or even eliminating interrogatories or depositions can certainly keep the cost down and move the process forward faster. Use of requests for emission can also be very, very helpful at the very tail end of the information document exchange to try and round out some of the issues in dispute. Restricting e-discovery, in the way that the federal rules civil procedure have actually counseled talking about proportionality, and burden and cost might really be helpful. And actually having a robust discussion with the arbitrator or at least between the parties about whether ESI is really needed and the costs involved in having to harvest the ESI, preserve the ESI, go through the ESI and actually produce ESI, maybe fruitful to do in trying to design a process that's more cost effective. Using witness statements, which are essentially affidavits of witnesses and/or the actual expert reports of the expert witnesses in lieu of putting them on the stand and going through a typical direct examination, maybe a wonderful way to save some time and money. I say that because direct examinations are usually simply scripted presentations between an attorney, the attorney promoting or putting on the witness and the witness him or herself. Well, why not have that all presented in written format in advance so that the parties can better prepare their cross examinations and especially in a situation where there are no depositions. Having the witness statements in advance can allow the cross examinations to be more efficient and targeted as opposed to having them look and sound more like a deposition on the stand. Also eliminating or limiting dispositive motion practice can be very helpful. Most arbitrators like to limit them by only permitting briefing on dispositive motions after having the party seek leave to do so. And so by doing so, we can cut down the amount of motion practice, which oftentimes doesn't lead to anything more than advocates trying to chip away at certain claims, but doesn't really change the amount of evidence that's actually heard at the hearing or the number of witnesses that need to testify. So in which case, the parties have expended thousands and thousands of dollars on motion practice, really for an end result that could be handled in the final award itself. There's also the availability of preliminary and emergency relief in arbitrations that could be very beneficial in IP disputes. Nearly all of the major institutional providers rules now authorize arbitrators to issue interim and emergency relief. Such relief in the form of an injunction or attachment for example, can generally be obtained on a faster timetable than in court. And they likely can also be obtained at far less cost. The higher court evidentiary standards that usually apply to these kinds of applications aren't necessarily needed here because in arbitration, there is no strict adherence to evidentiary rules. But also there's no interlocutory appeals, which can sometimes slow down processes a lot in the federal and state court systems after the issuance of a preliminary injunction, for example. And as in court proceedings, the issuance of preliminary emergency relief can and often does lead to settlement discussions, leading to a resolution of the dispute. It would behoove of me though, however, to mention some limitations on such relief in arbitration, there are two of them in particular. First, the arbitrator's jurisdiction again, arises from the party's agreement. So the scope of any objective or equitable relief can only extend to those parties that are actually before the tribunal. So for example, the arbitrator could enjoin a party from certain conduct and could even enjoin that party from acting in concert with any other party to engage in that conduct. But the arbitrator's power and authority can't extend that injunction, for example, expressly to any other party not before the tribunal. So there are some limitations here that judges and courts are not bound by. Secondly, any adverse issuance of relief, whether it's the actual issuance of an injunction against a party, or for example, the lack of adequacy of any security or the collateral, neither of those issues is immediately appealable, which parties would have the ability to do so in either a federal or state court. Finally, there are also significant advantages in the international arena for IP disputes using ADR. First is for neutrality, meaning that no party has to be in some other party home court. The arbitration form or the mediation form are neutral. And so the parties can bring their disputes without any fear of any party having some advantage over another. Also IP disputes also tend to be multi-jurisdictional in nature. And by that, I mean across not only state boundaries, but also across country and national boundaries. And so rather than trying to consolidate multi-jurisdictional disputes, using an MDL process or some other process in the international arena, you can agree to consolidate those disputes before a single arbitral or mediation forum, and then use your typical bellwether or other techniques to resolve those multiple disputes. The limited discovery, which is even far more common in international disputes than it is here in the US, results in reduced costs, international dispute resolution. There's also nearly worldwide recognition and enforcement of international arbitral awards through what's known as a New York Convention and the promise of similar worldwide recognition and enforcement of mediated settlement agreements through the Singapore Mediation Convention. Lemme take a moment to talk about those two conventions 'cause I think they're very important, particularly with respect to international IP disputes. First, the New York Convention, it's known as the UNCITRAL, Convention on the Recognition and Enforcement of Foreign Arbitral Awards. UNCITRAL, stands for the United Nations Commission on International Trade Law. This is an international agreement between the UN and other countries. Was originally adopted on June 10th, 1958, and entered into force on June 7th, 1959. Under the convention it requires the courts of any contracting state to give effect to private agreements to arbitrate and to recognize and enforce subject to certain limited defenses the arbitration awards that are made in those contracting states. In an increasingly global economy, especially when IP holders are coming from many different jurisdictions and possess rights across national boundaries, the existence of the New York Convention over these many, many decades has been a powerful mechanism for achieving broad relief, injustice, really and truly on a worldwide scale. This especially true where there's a lot of uncertainty over the ability to enforce an overseas money judgment that you might obtain in one country and try to enforce in another. The Singapore Mediation Convention was adopted on December 20th, 2018, by the UN and signed on August 7th, 2019 in Singapore. The Singapore Mediation Convention, similarly like the New York Convention recognizes and enforce mediated settlement agreements in signatory states. So this starts to get around the problem of enforcement that I mentioned earlier, where parties need to sue over a breach of contract and no party after having gone into a mediated settlement agreement would like to have to go into someone else's country and have to sue there on that agreement. As of November 18th, 2020, 155 countries have signed the convention, including the US, Australia, China, India and South Korea, and eight states have ratified. So while it's still in its infancy, the Singapore Mediation Convention holds a potential for leveraging the power and the cost effectiveness of mediation as a dispute resolution process to continue spurring global trade and access to justice. Returning back to the US, lemme conclude this program with just a little footnote on a new program that's just recently been established here in the United States that incorporates arbitration into an IP dispute. It's known as the CASE Act. On December 27th, 2020, the Copyright Alternative in Small Claims Enforcement Act of 2019 known as the CASE Act was signed into law. The CASE Act establishes a new remember tribunal called the Copyright Claims Board, the CCB within US Copyright Office to handle small dollar value copyright claims. The tribunal members either have experience litigating or adjudicating copyright infringement claims. They've either represented owners and users of copyright works and/or they have experience in the field of ADR. CCB proceedings are intended to be streamlined and function much like an arbitration proceeding. And the CCB began accepting cases beginning in June, 2022. So it remains to be seen how useful the CCB process will be. But in a situation in this country where the burden has always rested on the copyright owner to enforce in the court system his or its copyright rights and where small dollar value copyright claims become inefficient and not cost effective to bring in federal court, this alternative provides a new mechanism for those copyright owners. And also for those who are defending against copyright claims to have a different way and a different process that could save them a lot of money that can lead to a result much faster than they have to win their way through the federal court system. So I look forward to seeing how the CASE Act will develop over time. Again, the CCB only began accepting cases in June of 2022. So it's a little too early to say whether or not the system is working or not, but we have high hopes that the system will be used and that copyright owners and those who defend against copyright claims will have an ability other than having to resolve their disputes in federal court. I'll conclude the program with a few final thoughts. It's my belief that the use of ADR processes and in particular arbitration and mediation in IP disputes, really should not be overlooked. It adds the potential to address many, many of the concerns underlying those types of disputes, including maintaining confidentiality, securing preliminary remedies, resolving multi-jurisdictional IP disputes and arriving in an outcome in an expeditious manner. I personally believe that ADR should always be an option for both IP practitioners and IP creators and owners when deciding how best to resolve their disputes. On this last slide, I provide a number of reference materials that supplement the program here. They go into some detail or more detail than what I've done in this program. They're all articles that I've written and are available to you. I thank you for listening. If you have any questions, please feel free to reach out to me. I do believe again, that IP disputes can be resolved using ADR, and I urge you to consider their usefulness as a result of what you've learned in this program. Thank you again.

Presenter(s)

Theo Cheng
Attorney, Arbitrator, and Mediator
ADR Office of Theo Cheng

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