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Conference on Rules for Institutional Arbitration and Mediation

20 January 1995, Geneva, Switzerland


Commentary: The Mediation Rules of WIPO and Others: A Ticket to Paradise or into a Better Mousetrap?
by Martin J. Lutz
Lenz & Staehelin, Zurich;
Secretary General of the International Association for the Protection of Industrial Property (AIPPI)

I am always flattered by ASA’s almost byzantine tendency of mutual praise, but this gives rise to a personal observation. In the papers you find correctly that I have a law degree from Michigan and Zurich. Although I studied in Berlin and Munich, I have no law degree from those universities, and so far they have not even offered an honorary degree to me. I am afraid you have to pull out those two feathers.

In my professional activity I have gained considerable experience in multinational industrial property litigation. With respect to mediation I am, like Dr. Blessing, a learner, only, of course, at a more modest level. In Mr. Paulsson’s paper there was a sentence which was not read today, that the conciliation system of the ICC was actually almost a still-born child. On the other hand, Dr. Blessing states that mediation may have a considerable future in Europe as well. I felt it appropriate to make a brief analysis as to what industrial property disputes are likely to come before arbitration and are likely to come before a mediation panel of the kind that we have in front of us.

Rules of procedure are actually the wrapping around disputes, and we all agree that the WIPO Arbitration and Mediation Rules are probably a particularly beautiful wrapping. But they have very little significance if we do not find disputes to put into that wrapping.

Let us make a brief analysis. Geography: We can distinguish between disputes affecting one country only, for example, infringement of a Swiss patent by a local Swiss producer. Alternatively, we can have disputes affecting several countries, for example, Europe-wide infringement of a group of pharmaceutical patents. On the other hand, we have differences in legal nature. We have disputes emanating from contracts, for example, the dispute over the question whether a new invention is an innovation falling under an existing license contract. This dispute may typically be subject to an arbitration clause concluded before the dispute arose. Or there can be an extra-contractual or tort dispute, for example, the classic patent infringement case. For these disputes there is regularly no pre-set arbitration agreement. The parties may decide, however, to submit to arbitration or mediation such a dispute after it has arisen. For both cases there are examples in the WIPO documentation of typical clauses and you have similarly clauses for both cases in the Patent Arbitration Rules of the American Arbitration Association (AAA).

Disputes affecting one country only, whether under contract or under tort, are less likely to come before an international board of arbitration. The cases that are of interest to us are the international disputes, whether contractual or extra-contractual.

What speaks for arbitration or mediation in these disputes? When parties are involved in an international industrial property dispute, it is very likely that they end up before ten, 15, or 20 different courts. In each of the countries the parties are confronted with the infringement issue, the injunction issue, the nullity issue, which even in cases of contracts cannot be avoided, and sometimes different courts are competent for each issue and then, if the dispute affects six, eight, ten countries, there are quite a number of cases pending.

Experience shows that in these huge international industrial property disputes the foreseeable end is that parties give some and take some. This is inevitable, because all these national law systems are different. Even if European patents are affected, the interpretation may ultimately be different. To give a very simple example: the question of novelty for patents. Some patent laws use the whole contents approach. Everything that is contained in an earlier publication counts against novelty. Other countries use the prior claim approach. Only what is in the patent claims of earlier patents counts against the novelty. It is foreseeable that this may lead to completely different results in different countries. There are similar distinctions in other fields of patent law and patent infringement law as well. That leads to the conclusion that such an international industrial property dispute carried out before a number of courts in a number of countries regularly takes many years, is very costly, ties up entire litigation teams for years, and in the result ends with a settlement of the dispute because "you lose some, you win some." That speaks for an alternative system of resolution of such disputes.

What is the difficulty of international arbitration? The difficulty can be best shown when you think of arbitration and you think of a tort case, where you have a large international patent infringement dispute between two parties and no contract. Then, of course, immediately if you go to arbitration, you are confronted with the problem of arbitrability, because you have to attack the nullity issue and many countries do not allow that the nullity of a patent by necessity granted under the statute of that country with territorial effect is subjected to arbitration and will not recognize or execute a corresponding judgement. That is one issue.

AIPPI has, a few years ago, made a study about arbitrability. I am afraid that this study will, in the near future, need enlargement and completion because, if we want to start an industrial property dispute arbitration system, we have first to learn which issues are arbitrable and which issues are not. On that issue the documentation is still not yet complete.

But there is not only the question of arbitrability. All patents, the same applies for trademarks, of course, and designs and models, are granted under a national law with territorial effect. Some countries even restrict the choice of law. It is difficult to imagine that a court of arbitration deals with the question of nullity of a Swiss patent in arbitration by applying another law than Swiss law. If in the same arbitration ten different patents granted in ten different countries are at issue, you have either to find a way to apply one law to all patents, which would seem natural, or else you have the problem that the arbitration panel would have to apply ten different laws. That is also a problem not entirely resolved that merits further study.

International arbitration on strict industrial property issues may have a number of question marks on the substantive laws that go with it. It is probably a bit easier when you have a contractual situation. But even in a license contract, where, of course, you can have one applicable law, you cannot rule out the question of nullity entirely. A number of jurisdictions prohibit a licensee from undertaking not to attack a patent. The typical dispute in license litigation may arise when the license agreement extends to related innovations made after the conclusion of the license agreement. If such an innovation is made, the immediate question is whether the innovation falls under the license contract or remains outside it. If the licensor says that it falls outside, then he will try to block the licensee. If it is a cross-licensing arrangement, then it is just the reversal of the position, but the result is the same. In both cases the question of patent infringement and validity may become the central issue. Even in the case of the typical contractual intellectual property dispute, there may then be a problem of arbitrability and of the free choice of the applicable law.

This is different with mediation. With mediation you do not have the problem of applying a law. You do not have the problem of different statutes under which the patents are granted. In my opinion, in international industrial property disputes it is foreseeable that, if the parties carry that suit to the end before State courts, they will end up by having half a dozen positive court decisions, a similar number of lost cases, and a few ties. Those kinds of disputes are particularly suited for mediation. Why? Because in those disputes both sides very often obtain injunctions at early stages or at least try to get injunctions. If they are successful only in one or two countries, the parties tend to block each other for years. Not only have they unresolved questions of money at risk which they may have to pay in the future, but they have an unresolved question whether they have the right to use a particular industrial property right and may reasonably invest in its exploitation. It is similar with trademarks and with designs and models. That is why I think that mediation is cheaper in the end and may offer a lot of possibilities for international industrial property disputes.

I would like to reiterate a second observation. I think that AIPPI, with the help of WIPO, should continue and go into further depth with studies about arbitrability and the free choice of law in intellectual property disputes in order to be able to give guidance to parties and arbitrators.

One last observation about fast-track arbitration. I think the fast-track arbitration has a very important role to play if key issues can be carved out. For example, if under a license agreement one party gives notice of termination and the other party objects. Rather than going through the entire dispute on the notice of termination with all its consequences and mutual blocking of pending litigation, it may be more expedient to go through a fast-track arbitration on the question alone, whether the notice of termination was justified. Once the parties know it is justified or not, they will easily find a way for the future concerning all the other parameters of their dispute. That is, of course, just one example where a fast-track arbitration may be helpful, there may be many others.



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