1 – Introduction

Arbitration refers to an alternative dispute resolution method in which a dispute is submitted, by agreement of the parties, to one or panel of qualified independent arbitrators selected by the parties who make a binding decision on the dispute. In choosing arbitration the parties opt for a private dispute resolution procedure instead of going to court and agree to have their case heard by a qualified independent arbitrator or panel of arbitrators out of court. (1&2)   

As a form of alternate dispute resolution, arbitration is particularly popular in the infrastructure, real estate, energy, trade, and banking sectors and is increasingly being used in recent times due to its many advantages such as confidentiality, liberty, and flexibility in choosing the arbitrator, faster completion, convenience, finality of the arbitral award etc.

Arbitration in Intellectual Property Rights is one of the most controversial and disputed issues in IP arbitration and so it has raised many questions before the courts. Choosing arbitration in intellectual property disputes has many advantages, just like any other form of dispute settlement, it has its downfalls such as lack of uniformity in all kinds of matters, the requirement of an arbitration clause when making the contract, requirement of great specialization of arbitrators that deal with IP disputes, lack of interim relief in most of the cases etc. (3)  

2 – IP Rights and Disputes

Traditionally, IP disputes were mainly heard by national courts. This is because IP rights were historically linked to public policy and the exclusive jurisdiction of State courts, which led to a common misconception that IP disputes were not “arbitrable” and could only be resolved by national courts. The reality is, however, that today, most jurisdictions recognize IP disputes as arbitrable, with certain exceptions and limitations, like any other dispute where the parties can dispose of their private rights freely. (4)

IP disputes are disputes that arise in relation to IP rights. The Convention of 14 July 1967 and its amendments, establishing The World Intellectual Property Organization defines Intellectual Property Rights as rights relating to literary, artistic, and scientific works, performances of performing artists, phonograms, and broadcasts, inventions in all fields of human endeavor, scientific discoveries, industrial designs, trademarks, service marks, and commercial names and designations, protection against unfair competition, and all other rights resulting from intellectual activity in the industrial, scientific, literary, or artistic fields.

Noting that the two main objectives of the organization are to promote the protection of intellectual property worldwide; and to ensure administrative cooperation among the intellectual property Unions established by the treaties that WIPO administers.

3 - Arbitrability of Intellectual Property Disputes

In practice, most IP disputes arise from infringements, validity and ownership of IP rights, or a breach of contract. (5) Infringement and breach of contract claims are considered arbitrable in most jurisdictions. There are only a few jurisdictions, such as South Africa, that prohibit arbitrating intellectual property disputes entirely. (6)

Most arbitrable disputes arise because of contract clauses containing an arbitration agreement submitting the dispute before an arbitrator / panel of arbitrators or arbitration institution. As for trademarks disputes, they are mostly disputes that arise between people and parties who do not know each other and do not have any contractual relations prior to the outbreak of the conflict that allow them by agreement to resolve the dispute through one of the alternative dispute resolutions.

Accordingly, arbitrable IP disputes can be submitted to arbitration in the following:

- IP disputes arise because of contract clauses containing an arbitration agreement submitting the dispute to arbitration.

-The parties may decide to submit a dispute to arbitration after a dispute has arisen.

The parties providing for an arbitration clause in their contracts should therefore be careful in making sure the IP rights in question are arbitrable under the applicable law, as well as the law of the State where an arbitral award may need to be enforced.

4- Advantages and Limitations of Arbitration in Intellectual Property Rights dispute  

Advantages

Arbitration in Intellectual Property Rights dispute has numerous advantages apart from its private nature.  The advantages of Arbitration in IPR are increasingly recognized. They include the following:

A single procedure. Court litigation in international IP disputes can involve a multitude of procedures in different jurisdictions with a risk of inconsistent results. Through ADR, the parties can agree to resolve in a single procedure a dispute involving a right that is protected in several different countries, thereby avoiding the expense and complexity of multi-jurisdictional litigation. (7)  

Party autonomy.  Because of its private nature, Arbitration offers parties greater control over the way their dispute is resolved. Unlike in court litigation, the parties may choose the procedural rules, the applicable law, the place, and the language of the proceedings. The parties also have the freedom to choose their arbitrators who have specific knowledge related to the matter in dispute. (7)

Neutrality.  Arbitration can be neutral to the law, language, and institutional culture of the parties. It can thus eliminate any home court advantage that one of the parties might otherwise enjoy in the context of court litigation, where familiarity with the applicable law and local processes can offer significant strategic advantages. (7)

Expertise.  The parties can select arbitrators or mediators who have special expertise in the legal, technical, or business area relevant for resolving their dispute. (7)

Choosing an arbitrator who has expertise in the related matter will help reach decisions faster and eliminate unnecessary costs as well. (8)

Confidentiality.  ADR proceedings are private. Accordingly, the parties can agree to keep the proceedings and results confidential. This is particularly important where – as is often the case in IP disputes – confidential information or trade secrets are at stake. It also enables the parties to focus on the merits of the dispute, without being concerned about its public impact on their reputation. (7)

Furthermore, the arbitration process is much swifter and heard sooner than the traditional litigation process. Court proceedings are tedious and take a much longer time. The preparation required for arbitration process is also very less when compared to the court litigation process. (8)

The arbitration process is advantageous for people coming from a lower economic background. The process is extremely convenient for the parties of the case as the process will be held at places and time as per the convenience of the parties, arbitrator, and the witness of the dispute. Adding to it, the procedure can be modified, diversified, or reduced according to the facts or circumstances of the dispute in hand. (9)  

Finality and enforceability of arbitral awards.  Unlike court decisions, which can generally be contested through one or more rounds of litigation, arbitral awards are not normally subject to appeal. In all other cases, there is a high chance of appeal by the parties against the decision passed but in arbitration, the decision is final and there is no scope for appeal. Their enforcement across borders is greatly facilitated by the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards of 1958, known as the New York Convention, which requires all 137 Member States to recognize arbitral awards without review on the merits. (7) 

Limitations

Arbitration in IP Disputes does also have its limitations, and certain objectives can only be attained through court litigation.

Unlike traditional court litigation, the arbitration method cannot be applied to every IPR dispute in a uniform manner. (10) Also, when compared to ordinary litigation, the scope of arbitration is limited as they don’t create any precedents. (3)  

 It is not possible to obtain through Arbitration a decision that would set a public legal precedent. The results of an ADR procedure, an arbitral award, or a settlement agreement, are in principle binding only on the parties involved. So, for example, if a party wished to obtain a generally binding decision that the claims of a particular patent were valid/invalid, the only means of obtaining such a "public" decision would be a court judgment.

In addition, the consensual nature of arbitration makes it less appropriate if one of the two parties is uncooperative. Since both parties must agree to use arbitration, no party can force another to participate.

Furthermore, it is often found that most of the IPR disputes are between unrelated parties who do not wish to restore their relationship after the dispute and so, the chances of such parties preferring arbitration process are comparatively less.

Lastly, for all disputes on intellectual property, immediate availability of relief is extremely important and therefore, interim relief is crucial for protecting the rights of the injured party. However, most of the time, arbitration method does not provide swift interim relief for the party which erodes the value of the intellectual property. (3)  

5 - Common Law, Civil Law Jurisdictions, and the Arbitrability of IP Disputes 

Today, IP disputes are generally arbitrable in most jurisdictions, even though the scope and precise limitations of the “arbitrability” of certain IP rights are still a subject of debate. (4)

Various countries have different approaches when it comes to the arbitrability of IP disputes. There is a shared perspective for common law countries and civil law countries respectively. In common law countries like the US, UK, Canada etc., they have a more open approach towards arbitrability of IP disputes. In civil law Countries, the laws regarding arbitrability of IP disputes are stricter except for some countries such as Switzerland, which has a more relaxed approach towards this form of dispute settlement in IP related issues. (3)

Common Law Jurisdictions and the Arbitrability of IP Disputes

In most common law jurisdictions, IP disputes are generally considered to be arbitrable, with certain limitations: (4)

United Kingdom: in the United Kingdom, there is no statutory definition of the arbitrability of disputes in the Arbitration Act 1996. The UK Patents Act 1977 allows for arbitration in very limited circumstances. (11) Arbitrability of IP disputes has also been recognized judicially. Trademark and copyright related disputes are fully arbitrable in the UK. (12)

United States: Federal statutes in the United States explicitly provide that parties can agree to arbitrate patent disputes, either by including an arbitration provision in a contract between them that involves a patent, or by agreeing to submit an already existing dispute to arbitration. (13) There is no federal statute explicitly providing for arbitration of copyright disputes, however, even though U.S. courts have held that copyrights are generally arbitrable. (14) In the U.S., there is no federal statute providing for binding arbitration of trademark disputes either. (15)

Canada: in Canada, there is no similar statute as in the U.S. providing for the arbitrability of patent disputes, even though an arbitral award that concerns a patent can be enforced in Canada. (16) When it comes to the arbitrability of copyright disputes, the Supreme Court of Canada ruled, “The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding”, (17) which is a significant development confirming Canada’s pro-arbitration policy in relation to IP disputes. (18)

Australia: in Australia, there is no specific statute providing for the arbitrability of IP disputes. Australian courts start from a general premise that IP disputes are arbitrable. For instance, the Supreme Court of New South Wales addressed the issue of arbitrability of patent disputes in Larkden Pty Limited -v- Lloyd Energy Systems Pty Limited, (19) confirming that arbitrators can resolve IP disputes, however, cannot issue determinations declaring IP rights of the parties. (20)

Singapore: in Singapore, there have been certain interesting developments in relation to IP disputes recently. In 2019, Singapore passed the Intellectual Property (Dispute Resolution) Act, which amended the Singapore Arbitration Act and International Arbitration Act and now specifically allows for arbitration of IP disputes, regardless of whether an IP right is a central or incidental issue. This is a significant development, strengthening the position of Singapore as a dispute resolution venue for IP disputes.

Hong Kong: as part of its ongoing efforts to become a leading center for international arbitration, in 2017, Hong Kong issued an Arbitration (Amendment) Ordinance 2017, which clarifies that disputes over IP rights may be arbitrated and that it is not contrary to public policy to enforce arbitral awards involving IP rights.

Civil Law Jurisdictions and the Arbitrability of IP Disputes

In civil law jurisdictions, IP disputes between private parties are, to a large extent, considered arbitrable. This is particularly the case in IP arbitrations involving contractual claims and obligations. (4)   

Certain IP-related issues such as, for instance, patent validity, are still largely brought before national courts and considered non-arbitrable, mainly because a patent is a right that is granted by a State to a patent holder and is limited to a specific subject matter, territory, and time. (21)

The arbitrability of IP disputes in civil law countries largely depends on the jurisdiction in question. Three main tendencies may be distinguished, however: (22)

Jurisdictions that expressly allow full arbitrability of IP disputes, including patent violations, for instance, Switzerland and Belgium on one side, and jurisdictions which expressly prohibit it, such as South Africa, on the other side: (23)

Jurisdictions that accept inter parties’ awards or incidental decisions on patent validity, which, however, do not have a universal, res judicata effect.

Jurisdictions where there is no express law on the matter, so arbitrability is a matter of debate.

Switzerland is well known for its liberal arbitration stance, as IP disputes have traditionally been considered arbitrable. This is based on Section 177(1) of Swiss International Private Law, which provides for a very broad definition of “arbitrability”. (24) Swiss courts have regularly interpreted this article to cover any claims with a “pecuniary value for the parties”, confirming that this included IP-related disputes. (25) Arbitral awards on patent validity are recognized and enforced by the Swiss Federal Institute on Intellectual Property if they have been declared enforceable by a Swiss court. (26)

France, on the other side, has adopted a more restrictive approach to the arbitrability of IP disputes. In 2008, however, the Paris Court of Appeal accepted the arbitrability of patent validity if it was raised as an incidental issue in arbitration proceedings. (27) Following this decision, France passed Law No. 2011-525 in 2011, amending the Intellectual Property Act (28) now expressly allowing arbitration of IP disputes.

6- Are IP Disputes Arbitrable in The UAE Law n°37 of 1992?

  In UAE there is no express law that allow arbitrability of IP disputes, and there is also no law prohibiting arbitration in these disputes, so arbitrability of IP disputes is a matter of debate, especially the governing laws do not provide a crystal-clear view of the possibility of applying arbitration to trademark disputes.

Law No37 of 1992 with respect to Trademarks does not contain any provisions allowing the resolution of IP disputes through arbitration.

As per Article 2 of Law n°6 of 2018 The provisions of the Law of Arbitration apply on:

• any arbitration conducted in the UAE, unless the parties agree that another law should govern the arbitration, provided it is not in conflict with the public order of the state.
• any international commercial arbitration conducted abroad, if the parties chose this law to govern such arbitration.
• any arbitration arising from a dispute in respect of a legal relationship, whether contractual or not, governed by UAE law, unless it is excluded by a special provision.

 Arbitration Law prohibits arbitration in respect of the disputes that are incapable of being reconciled. It appears that arbitration must not be used as a mechanism for resolution in disputes which are personal in nature, such as those relating to marriage, incapacity or guardianship, criminal disputes and those contrary to public policy (that is, disputes relating to gambling, drugs, or prostitution). Further, the Arbitration Law expressly prohibits public sector entities from arbitrating disputes arising between themselves. (29)

Accordingly penal IP disputes are not arbitrable because they are not civil disputes and are incapable of being reconciled. The Arbitration Law provides that arbitration is not permitted in matters in which conciliation is not permitted. The matters in which conciliation is not permitted are not defined; however, personal, or family or criminal disputes of a non-commercial nature are likely to be non-arbitrable.

As for civil IP disputes, civil IP disputes in trademark law are divided into several sections. There are disputes related to the validity and ownership of the trademark, disputes related to its infringement, and other disputes related to the trademark assignment, licensing, franchising, and distribution agreements, and finally disputes related to trademark registration.  

IP disputes related to the validity and ownership of the trademark are non-arbitrable. Mainly because it is the state that grants intellectual property rights in the first place and due to the contractual and consensual nature of the arbitration, the arbitration awards cannot cancel the registration of a trademark or any intellectual property right.

However, we point out that Ownership of a registered trademark in the UAE can be transferred from one entity to another by submitting, to the Trademark Office, a document confirming the transfer of ownership. This is in line with article 37 of the UAE Executive Regulations of the UAE Trademark Law. Generally, the document which is required to confirm the transfer of ownership can be a deed of assignment or a court judgment. In a recent judgment by the Dubai Court in Alfahim vs Alfahim Case No. 205 of 2020, it was decided that trademark ownership can be transferred by virtue of an arbitral award.

The case of Alfahim vs Alfahim Case No. 205 of 2020 concluded that the Memorandum of Association of Alfahim Holdings (the ‘Company’) includes an arbitration clause for settling disputes related to the rights and duties of the partners as well as the management and the properties and business transactions of the Company. In 2012 a dispute arose between the parties regarding various issues including the shares of the partners in the assets of the Company which comprised the “Dhind Aloud” trademark. Mr. Abdullah Alfahim (the ‘Claimant’), who is a shareholder in the Company, requested the Dubai Court of First Instance to audit the assets of the Company and to decide on his share in the Company, but the Dubai Court of First Instance rejected the request of the Claimant, and proceeded to enforce the arbitration clause in the Company’s Memorandum of Association and appointed a panel of five arbitrators to settle the dispute. The panel of arbitrators found that the Company incurred losses as a result of the commercial behavior of the Claimant and they decided to transfer the share of the Claimant in the Company to his brothers (the ‘Defendants’) and award compensation for the losses the Claimant caused the Company. The Claimant, subsequently, lost his shares in the “Dhind Aloud” trademark and other trademarks, and the Defendants transferred the ownership of the disputed property, including the trademarks, to themselves. The Claimant challenged the arbitral award in court, arguing that his trademarks were illegally transferred to the other party, but the Dubai Court of Cassation in Case No. 205 of 2020 found that the decision of the panel of arbitrators was correct and confirmed the decisions of the lower courts.

Alfahim vs Alfahim Case No. 205 of 2020 is a remarkable court case as it sheds light on the possibility of relying on arbitration in settling trademark ownership disputes instead of bringing the dispute exclusively before the competent UAE court. However, parties are to be reminded that trademark ownership disputes which may arise during the trademark registration process are to be raised before defined authorities, namely, the UAE Trademark Office in line with article of (12) of the UAE Trademark Law. (30)

Disputes related to civil trademark infringement are arbitrable. Trademark infringement disputes against non-registered trademarks can be settled through arbitration as they do not fall within the exclusive jurisdiction of the criminal courts.

On January 3 1993, the Dubai Court of Cassation issued its final judgment No. 241/1992 Civil in which the court refused to stop importing counterfeit products; as claimed in the court’s statement of claims, (from Bangladesh to the local market) and decided to appoint an arbitrator to settle the dispute. The judgment in this case implies that trademark infringement acts can be arbitrated instead of taking the traditional court route in this case, an Indian tobacco company (the ‘Claimant’) contracted with a UAE local distributor (the ‘Defendant”), who was accused of manufacturing a confusingly similar trademark for tobacco products and began exporting the same to the local market in the UAE. The contract between both parties included an arbitration clause which could be used to settle all disputes that may arise from the contractual relationship or from harmful acts. The Claimant requested the Dubai Court of First Instance to prevent the Defendant from its trade in counterfeit cigarettes in the UAE. Conversely, the Defendant requested the court to appoint an arbitrator to settle the dispute because the disputing parties were engaged in a contract that included an arbitration clause. In response, the Dubai Court of First Instance issued a judgment in favor of the Claimant and ordered the Defendant to stop the infringing acts. The Defendant appealed the judgment and the Dubai Court of Appeal confirmed the judgment of the Court of First Instance. The Defendant escalated the dispute and challenged the judgment of the Court of Appeal before the Dubai Court of Cassation which decided that the disputing parties were engaged in a contract that included an arbitration clause, and the arbitration clause clearly states that “All disputes which may rise from the contractual relationship or any harmful act shall be resolved by arbitration”. The court considered the act of the trademark infringement to be arbitrable which opened the door for disputing parties, regarding trademark infringement acts, to utilize arbitration instead of litigation through the courts. It is worth mentioning that the so-claimed duplicate trademark in this case was, seemingly, not registered with the UAE Trademark Office.

The Dubai Court of Cassation judgment No. 241/1992 Civil shows that disputes related to trademark infringement acts can be the subject of arbitration if there is an arbitration agreement between the disputed parties. However, trademark infringements are treated as criminal acts, in line with the UAE Trademark Law, and criminal courts may have a different view over the arbitrability of these types of disputes. This type of dispute is still debatable because the criminal courts, to our knowledge, are yet to test the same. (31)

Disputes related to the trademark assignment, licensing, franchising, and distribution agreements, arbitration is allowed for these kinds of disputes, because these disputes include contractual claims and obligation.

IP disputes related to trademark registration are not arbitrable. Trademark registration dispute is a dispute of an administrative nature, as it is a dispute with a governmental body, and the law has specified the competent authority to deal with it, and therefore, submitting this kind of dispute by agreement before an arbitral tribunal to decide on it is not permissible. The UAE Trademark Law No. 37 of 1992 (with respect to Trademarks) vests the UAE Trademark Office and the Civil Courts with exclusive authority to settle certain trademark disputes such as disputes related to trademark acceptance and registration. (32)

Finally, we point out that the arbitral award in arbitrability disputes would be applicable to the disputed parties (parties involved) only and will not affect the third party.

7- Conclusion

With globalization, intellectual property rights have become internationalized and commercialized. The number of IP related disputes at the WIPO, but also other reputable international arbitration institutions, is continuously on the rise. This evident shift from litigation to arbitration of IP disputes is logical and expected – as IP-related disputes are inherently international in nature, accordingly, arbitration is considered a more suitable and efficient dispute resolution method than litigation. The trend is expected to continue, with the number of IP disputes increasing given the importance of intellectual property to the global economy. (4)

In conclusion, utilizing arbitration in UAE as an Alternative Dispute Resolution (ADR) to settle trademark disputes is not widely known and used because the UAE laws do not include explicit provisions regulating the arbitrability of IP disputes. (33) However, it has been observed that disputing parties can benefit from arbitration to settle some of their trademark disputes we mentioned above, since there are court judgements in this direction issued by UAE Courts.

As the importance of intellectual property is growing, and simultaneously the disputes in IP rights, so it is better to amend Law 37 of 1992(with respect to Trademarks) and Law 6 of 2018(Arbitration Law) to allow arbitration explicitly in IP disputes and institutionalize the arbitration process like WIPO Model especially that The UAE Arbitration Law is largely based on the United Nations Commission on International Trade Law (‘UNCITRAL’) and since UAE has become the first and main magnet for expatriates and foreign investors in The Arabian Gulf offering  an attractive business environment this step will represent one further reason for national and foreign investors to continue investments in the State’s fast-expanding economy . 

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1- Cornell Law School https://www.law.cornell.edu/wex/arbitration.

2- WIPO https://www.wipo.int/amc/en/arbitration/what-is-arb.html.

3- ARBITRATION AND INTELLECTUAL PROPERTY DISPUTES: THE GLOBAL PERSPECTIVE by Adv. Krusch P Antony, with Rachna R Kurup & Noureen Siddique, 3rd Year Law Students of BBA, LL. B, Symbiosis Law School, Hyderabad.

4 - International Arbitration and Intellectual Property (IP) Disputes BY ACERIS LAW LLC 05/04/2021.

5- T. Legler, “Arbitration of Intellectual Property Disputes” (ASA Bull. 2/2019, p. 291).

6- GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 26.

7- WIPO Magazine https://www.wipo.int/wipo_magazine/en/2006/02/article_0008.html.

8- Tom Creel, The Pros and Cons of Arbitrating Patent Disputes, JAMS ADR Blog, 2019.

9- Aastha Mullick, Institutional Arbitration in intellectual property right disputes, https://www.latestlaws.com/wp-content/uploads/2018/08/Institutional-Arbitration-in-Intellectual-Property-Right-Disputes-By-Aastha-Mullick.pdf.

10- Anirudh Vashishta, Resolving Intellectual Property Rights Disputes through ADR,1, Amity Law Review (2012).

11- UK Patents Act 1977, Section 52-(5).

12-GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.

13- 35 U.S.C. Section 294(a).

14- Packeteer, Inc. v. Valencia Systems Inc., 2007 WL 707501, 82 U.S.P.Q.2d 1216; Boss Worldwide LLC v. Crabill WL 124805 (S.D.N.Y 2020).

15- GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.

16- GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 29.

17- Desputeaux v. Éditions Chouette (1987) inc., [2003] 1 SCR 178; see also GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 30.

18- GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 30.

19- Larkden Pty Limited v. Lloyd Energy Systems Pty Limited [2011] NSWSC 268.

20- GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 31-32.

21- GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 34-35.

22- GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 34-35.

23 - D. M. Vicente, “Arbitrability of Intellectual Property Disputes: A Comparative Survey”, Arbitration International (2015), pp. 155, 157.

24- See Swiss International Private Law (English translation), available at: https://www.trans-lex.org/602000.

25- GAR, The Guide to IP Arbitration, Law Business Research 2021, pp. 35-36.

26- GAR, The Guide to IP Arbitration, Law Business Research 2021, p. 36.

27- Court of Appeal of Paris, Ganz v. Societe Nationale es Chemins de Fer Tunisiens (SNCFT), 29 March 1991, Rev. Arb 1991, p. 478.

28- Article L 615-17 of the Intellectual Property Act, as amended by Law No. 2011-525.

29-https://uk.practicallaw.thomsonreuters.com/w-011-1052?transitionType=Default&contextData=(scDefault)&first page = true.

30,31,32,33- Arbitrability of trademark disputes in the UAE Bassam Al-Azzeh - Senior Associate - Intellectual Property -Al Tamimi & co.