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In this second article of our International Arbitration Series,
we consider the benefits of international arbitration as a dispute
resolution mechanism for intellectual property disputes.
The rapid development of new technologies and processes in
sectors such as pharmaceuticals, biotechnology, life sciences,
aerospace, energy, telecommunications, and information technology
has led to an exponential increase in the number of patents and
trademarks issued and domain name registrations around the globe.
The increase is unlikely to slow with ongoing events like the COVID
19 pandemic, the fourth industrial revolution, and the scramble to
address climate change—all of which are driving further
To harness and capitalize on these advances, many companies and
governments are seeking strategic partnerships with international
business partners (both public and private), particularly in
emerging markets. Business arrangements are increasingly
cross-border and complex, often involving multiple parties in
high-value, long-term arrangements. Because intellectual property
(IP) is often an important asset in many of those arrangements, the
transaction documents often include provisions addressing the use
of IP, such as licensing, cooperation, or technology transfer
agreements. In most cases, these seek to protect IP rights across a
number of jurisdictions. With IP disputes common, companies and
governments should make sure to choose the right dispute resolution
Advantages of international arbitration for IP disputes
Parties are increasingly choosing international arbitration to
resolve disputes that might arise in arrangements that involve IP
in more than one country. International arbitration is well suited
for such complex, cross-border disputes.
While there is no arbitral institution in Turkey established
specifically for the resolution of IP disputes, there are
specialized IP courts. The availability of specialized IP courts
may adversely affect the parties’ willingness to resort to
arbitration, but the overall benefits which arbitration provides,
particularly the prospects of having the dispute resolved by expert
arbitrators, still lead many to choose arbitration as their
preferred way of dispute resolution.
Private and confidential
International arbitration is a private and often confidential
process, unlike most court proceedings. This offers benefits, from
reducing the risk to proprietary or commercially sensitive
information to avoiding airing disagreements between parties in
Less formal and adversarial
Arbitration is less formal than litigation and, although not
always less contentious, it can offer a less adversarial process
than litigation. When combined with the confidential nature of most
arbitrations, the less adversarial nature can help preserve a
long-term or strategically important business relationship, which
may be the most beneficial outcome.
Arbitration provides an impartial forum with neutral decision
makers under acceptable law and in a language with which the
parties are comfortable. It allows parties to avoid being before
foreign courts, which can be particularly important where disputes
involve jurisdictions, including emerging markets, where parties
have less confidence (a) in the local rule of law or (b) that local
courts will decide cases independently, fairly, impartially, and
timely. Concerns over neutrality may be compounded where states,
state-owned entities, or nationally strategic matters are
One forum for all disputes
Where companies operate internationally, IP disputes often
involve more than one jurisdiction. Because many IP rights
protections are territorial in nature, the resolution of a dispute
may require parallel litigation in courts in different countries.
This can lead to conflicting judgments with the scope of the
parties’ rights interpreted differently by different courts.
Litigation in multiple fora may also complicate settlement.
International arbitration can offer a single forum where multiple
disputes can be resolved holistically, before one tribunal. This
offers greater consistency of outcome and often presents better
opportunities for a global settlement.
Flexible process with good procedural safeguards. Major arbitral
rules are designed to work flexibly and accommodate the practices
of parties from different legal traditions. Parties can tailor
proceedings to their needs and that of the specific dispute. When
leveraged properly, this is a powerful tool. As one example,
discovery in IP litigation, particularly in the United States, can
be extremely expensive. In arbitration, parties can agree on a
limited scope of discovery, or agree that evidence will be on paper
only and hearings be held virtually, saving significant time and
cost. But, parties must actively seek to leverage procedural
flexibility. That is where it becomes critical to hire experienced
arbitration counsel. Too often these benefits are missed where, for
example, proceedings are run by litigators who simply treat the
arbitration as they would a lawsuit brought before a court.
That is not to say that it is a procedural
‘free-for-all.’ Arbitration rules provide procedural
safeguards. Some are mandatory, while others function through
agreement and at the request of the parties. For example, interim
relief (often of critical importance in IP disputes) can be sought
in the arbitration, although parties often can seek interim relief
from the courts in support of the arbitration. Expedited procedures
may also be available, from appointment of an emergency arbitrator
to accelerating the procedural timeline, curtailing disclosure, or
imposing a shorter deadline for issuance of the award.
Cost and time efficiencies
Because parties and the tribunal can tailor the process,
arbitration has the potential to reduce the costs and time of
proceedings. As explained above, it does not always live up to this
promise, but where counsel leverage procedural flexibility and
utilize tools available to minimize costs (such as technologies to
drive efficiencies in case management, disclosure, and document
review), time and cost savings can be significant. This is
magnified when arbitrators are experienced and possess excellent
case management skills.
Arbitration awards are typically expressed as final and binding.
Most arbitral rules and laws limit rights to appeal or challenge
awards. While the ability to challenge an award on grounds of
procedural unfairness, bias, or want of jurisdiction is usually
available, most jurisdictions limit the right to appeal an award to
multiple levels of senior courts. In Turkey, however, courts
sometimes interpret the public policy defense broadly and tend to
review the merits of the dispute at the set-aside stage.
Arbitration offers significant benefits when it comes to
enforcement where disputes are cross-border. The Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, also known
as the ‘New York Convention,’ offers a regime for
enforcement of awards that is accepted in almost all countries. It
restricts the ability of domestic courts to reconsider the merits
of awards and limits challenges to enforcement to a limited set of
grounds (largely, serious procedural irregularities or lack of
jurisdiction), although some courts in Turkey interpret the public
policy defense broadly and tend to review the merits of the
dispute. There is no equivalent regime for enforcement of foreign
court judgments, so it is often harder to enforce court judgments
from one country in another country.
Mandatory arbitration on employees’ inventions
According to Turkish Industrial Code, and the relevant
regulation in relation to employee inventions, certain disputes
regarding employee inventions, such as disputes in relation to fee
schedule for employee inventions, are subject to a mandatory
arbitration, and the arbitration procedure to be followed in the
case of disputes is determined by the said regulation.
Limitations of international arbitration for IP
Pure IP rights disputes can arise between parties with no prior
relationship. Arbitration is a consensual process, and the right to
go to arbitration is rooted in the parties’ agreement to
arbitrate. Where there is no contractual relationship, an
arbitration cannot occur except by agreement after a dispute has
arisen. If parties can subsequently agree to arbitrate the dispute,
they can avoid litigation and reap the benefits of arbitration.
Because arbitration is a form of private dispute resolution, an
award that is binding on the parties to the arbitration will not be
binding against the whole world. Similarly, the award may not
amount to binding precedent. That said, for strategic reasons,
these points may sometimes be an advantage rather than a
Some national laws prohibit arbitration of certain fundamental
IP rights. For example, questions of the validity of IP rights
(such as the validity of a patent) may not be arbitrable. This
varies globally so it is important to consult experienced
arbitration counsel when choosing the dispute resolution forum.
Actions by governments can impact the profitability or even
viability of commercial arrangements.
Parallel rights under investment treaties
Where a dispute involves a state and a foreign investor, the
investor may have additional rights under a bilateral investment
treaty, including the right to sue the state in international
arbitration. Such rights often run parallel to rights under
domestic law or the law of the contract. Treaty rights can offer
important protections, particularly in current times where
governments are taking steps to address complex issues of national
strategic importance – COVID 19, national health, climate change,
the energy transition, energy security, the fourth industrial
revolution, trade disputes, rising nationalism – to name but a few.
Actions by governments can impact the profitability or even
viability of commercial arrangements. In those circumstances,
foreign investors may find they have little-to-no recourse before
domestic courts. Where they have rights under an investment treaty,
however, those rights offer powerful legal protections and a
stronger negotiating position.
As companies and governments seek to leverage opportunities
arising from rapid developments in technologies and processes, it
is critical that they think about protecting IP assets. A right is
only valuable if it is enforceable, and a crucial element of
enforceability is having an effective dispute resolution mechanism.
Choosing international arbitration to resolve IP disputes offers
significant benefits over litigation. However, when deciding on the
dispute resolution mechanism, parties should assess the dynamics of
the business and contractual arrangements. The best dispute
resolution proceedings are tailored to the specific circumstances.
An ounce of prevention has always been worth more than a pound of
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.