When it comes to intellectual property disputes, going down the litigation route isn’t always the best option. Gary Fern argues that protecting patents is best done through arbitration
Intellectual property (IP) disputes involving cross-border multi-jurisdiction patent litigation can be very amenable to utilising mediation or arbitration methodologies. IP, and patents in particular, are increasingly pan-European and international in nature. Yet at the same time they are also national, in that they may be designated to provide protection in specific countries – for example the UK, Germany, USA and Japan – but must be litigated in their respective national courts.
Although protection may be granted in those individual countries, litigating a patent granted in several countries cannot be achieved from one place. A company that is protecting a patent portfolio in all four countries needs to issue separate actions in each country for infringement, and in all likelihood will face invalidity proceedings as part of the defence, in each country.
Clearly this process is very expensive. The recent BlackBerry litigation, which nearly resulted in the company’s whole network being closed down, cost a ball-park figure of £8m. However, this is not the only problem. A patent that has been granted in several jurisdictions faces being subject to a different judicial decision depending on where the litigation is conducted. The end result can be that a valid patent loses its protection in certain jurisdictions, yet retains it in others.
This creates a clear problem for the patent portfolio holder. Its geographical area of protection is reduced, having a direct impact on the overall financial return on the life of the patent. A further problem is that if a negative judgment is published, it indicates to other market participants that the patent is not as strong as originally thought. This may lead to more challenges over the validity of the patents.
Thus the primary drawbacks of litigation are high costs, judicial uncertainty and a perceived weakening of the patent. What can be done to help resolve these issues? The wider use of mediation and arbitration would go some way to helping. If a dispute can be resolved without the need to go to court, all parties may end up with a ‘win- win’ solution, and a long-term business relationship may be saved.
Mediation is more flexible than litigation, and ideas such as cross-licensing, royalty rate-sharing and even mergers can be considered. A further benefit is that mediation may be commenced much quicker than litigation, producing a fast solution acceptable to all parties.
Patents by their very nature are a wasting asset; it is not unusual for a patent’s productive period to be only eight years. Technology moves very quickly and a great technology behind a patent may become obsolete or redundant, making the patent worth much less.
In technology or pharmaceutical patent disputes, a specialist mediator can help to reach a solution. Mediators may be described as either ‘facilitators’ or ‘directive’; in patent disputes a more directive approach is likely to achieve a faster beneficial result. A specialist mediator would be more able to highlight the technical strengths and weaknesses in a case than a non-specialist mediator.
The mediation process can reduce costs because the expensive and time-consuming aspects of litigation can be largely curtailed. Mediation limits the amount of discovery and the use of expert witnesses. The fact-finding aspect may also be greatly reduced. It may be possible to have an overall cost saving of more than 70 per cent.
A further reason to mediate is the possibility of an adverse cost sanction against a successful party to litigation, if that party refused to at least try to reach a settlement. The Civil Procedure Rules and the overriding objective of dealing with a case justly, support the basis of the use of adverse cost sanctions. In Halsey v Milton Keynes General NHS Trust, the main points were identified as:
- Type of dispute.
- What attempts to mediate had been tried.
- Cost of alternative dispute resolution (ADR).
- Effect of delay in mediating.
- Chances of success of ADR.
The Court of Appeal clearly indicated that breaching an order to attempt mediation might result in an adverse costs order against the successful party. It would seem to be that parties need to attempt mediation, and not that it has to work. The court cannot compel but merely encourage mediation.
A final advantage of mediation is that the parties may deem that the whole process is confidential, including the outcome and any terms of the settlement.
Several international bodies exist to help with international mediation and arbitration. The World Intellectual Property Organisation is probably the most wellknown, and provides a neutral service for international mediation and arbitration, thus allowing parties to avoid litigating in either of each other’s national courts. This helps remove any issues over perceived national bias. Others include the London Court of International Arbitration and the American Arbitration Association.
Finally, the TRIPs article 41(2) lays down that the enforcement of IP rights should not be unnecessarily costly or result in unnecessary delays. Mediation and arbitration can help to meet these criteria.