Arbitration and mediation – a missed opportunity?

Among the different alternative dispute resolution (ADR) processes available today, arbitration and mediation are probably the oldest. While both are enjoying a publicity boost in relation to IP disputes, there is a question mark over whether this corresponds to real success.

Arbitration and mediation were first developed for matters that were unrelated to intellectual property. Arbitration has been used since at least the 13th century in France, when traders began designating arbitrators to deal with disputes that arose during commercial fairs. With the development of trade and industry, the popularity of arbitration grew, especially in international matters. Mediation is a more recent development, at least with regard to its introduction into the law – although King Solomon and King (Saint) Louis of France could be described as having conducted mediation of a sort.

As an initial step, it is important to highlight the resemblances and differences between the two processes. We can then analyse how each works in trademark matters, the advantages and limitations, and what real successes can be attributed to them.

Resemblances and differences

The fact that arbitration and mediation are both ADR processes and share some resemblances means that they are often considered to be the same process or extremely similar.

Both are out-of-court proceedings where confidentiality can be preserved. One or several arbitrators or mediators are chosen by agreement between the parties, unlike in court litigation, where the judge is imposed on the parties. This means that the designated arbitrator or mediator can be an expert in industrial property, which is not necessarily the case for judges.

The two procedures are also more flexible than litigation, in particular with regard to location, language, rules of procedure and the nature and form of the documents to be provided to the arbitrator or mediator.

However, despite these obvious resemblances, arbitration and mediation remain radically different.

In arbitration, the procedure is conducted by the arbitrators, whereas mediation remains in the hands of the parties to the mediation and depends on their willingness to reach agreement – although the mediator does play an important role in the procedure.

Arbitration consists mainly of an exchange of arguments. Mediation, on the other hand, is not about claiming rights, but a negotiation which takes no account of the well-grounded character of each party’s position.

Finally, arbitration ends in a decision issued by the arbitrator, whereas mediation ends in an agreement concluded with the help of the mediator. As a result, the two procedures work in different ways for trademark matters, with different advantages and disadvantages.

Arbitration in trademark matters

Arbitration is provided by and can be conducted before several national and international bodies, such as chambers of commerce and national or international centres of arbitration, including the International Chamber of Commerce, the London Court of International Arbitration, the Permanent Court of Arbitration and the American Arbitration Association. Each organisation has its own rules and regulations, although these are not necessarily very different from one another.

In addition, the New York Convention 1958, which now has 149 signatory states, allows arbitral awards to be acknowledged and executed between signatories. Therefore, arbitration is a procedure which is known and accepted by most countries in the world.

However, arbitration is seldom used in IP disputes, particularly those involving trademarks. There are several reasons for this. First, traditionally, arbitration cannot be used for matters of public order or matters for which exclusive competence is given to particular courts. Both factors apply to trademark matters.

In many countries, trademarks rights are granted by a registration certificate issued by a national authority, which has the right to accept or refuse a mark. In addition, only a national authority can decide on a mark’s validity – it may also decide to cancel the mark.

It was generally considered that these prerogatives could not be transferred to private bodies and thus could not be arbitrated. In the same way, it was held that national courts’ exclusive competence to decide on the validity of trademarks and rule on infringement could not be transferred to other authorities (eg, arbitrators).

However, it is now considered that national courts’ exclusive competence is no barrier to arbitration, and that questions regarding the exclusive competence of the courts and non-arbitrability of a matter must not be confused. In addition, many disputes regarding trademarks do not concern validity and therefore can be arbitrated if the parties decide to do so.

Arbitration of trademark disputes has several advantages, which all parties would do well to bear in mind.

One of these is confidentially. Unlike court judgments, arbitral awards remain confidential between the parties and are not published. This is doubtless one of the reasons that arbitration has proved so successful in international contracts.

Another advantage lies in the fact that the parties choose the arbitrator, meaning that they can select an arbitrator who is an expert in litigation and familiar with the subject area. The choice of arbitrator is important as he or she must not only conduct the proceedings, but also draft the award that is rendered. The flexibility of arbitration makes it quicker than litigation. Preliminary decisions and provisional measures can be requested and obtained with fewer constraints and less red tape.

However, the decision to arbitrate must be made before court action commences. Once a case has been brought before a court, it is not normally possible to revert to arbitration.

Arbitration proceedings function similarly to litigation. The parties must present their arguments and evidence, although there are fewer formalities than in litigation. During the arbitration proceedings, several sessions can take place depending on the case, which means that the process is still time consuming, even if it is quicker than litigation.

The arbitration ends once an award, which is drafted by the arbitrator, has been issued. If the parties are dissatisfied with this, they can normally appeal, unless they have renounced this possibility.

However, it remains the case that arbitration is often expensive, particularly as the arbitrator(s) are paid by the parties. Moreover, although arbitration ends in an award, unless the losing party complies with this voluntarily, it will be necessary to execute specific procedures (exequatur) in order for it to be enforced with the help of national authorities. Such procedures vary from country to country and may be expensive and difficult to undertake. This is perhaps one of the major stumbling blocks for arbitration – the reluctance of national authorities to execute an award which was not issued by their national judges.

However, despite these issues, arbitration remains a good tool for settling trademark conflicts, especially when the dispute involves several countries. In fact, arbitration may allow several disputes to be settled in one proceeding, which would certainly save time, if not money. In addition, there are obvious advantages when the dispute involves financial and commercial information for which confidentiality is a major issue.

Nevertheless, to benefit fully from its efficiency, some precautions should be taken. First, where possible, the parties should agree on the arbitration clause in advance. At the very least, advance agreement should be reached on the arbitrator or, at least, on a process to appoint him or her, together with the place and the language of arbitration.

It is usually best to rely on and select the rules of an existing arbitration centre. The World Intellectual Property Organisation (WIPO) has developed its own centre, which allows the parties to benefit from WIPO’s trademark experts. WIPO’s centre also has rules for expedited arbitration, which simplify the process and lower costs (www.wipo.int/amc/en/arbitration/).

Another issue which should be decided in advance is the applicable law. Trademark matters are often international, so several choices of law can potentially apply, such as:

• the law corresponding to the nationality of the parties;
• the law of the place where the contract was executed;
• the law attached to one or other of the trademarks in question; and
• in the case of regional trademarks (eg, European trademarks), associated regulations.

This can be a significant source of discussion, so it is strongly advised that parties try to reach agreement on this issue in advance to avoid slowing down the arbitration process.

Mediation is very different from arbitration in this regard, as no particular system of law applies. Does this mean that mediation is used more often in trademark matters?

Mediation in trademark matters

Similar to arbitration, many national and international bodies provide mediation centres. In fact, arbitration centres often have mediation centres attached.

Like arbitration, mediation is rarely used in IP matters, although the reasons for this appear to be quite different. One reason might be that mediation is not well known or understood in Latin countries. It is often perceived as a sign of weakness and parties to a case that could be mediated rarely understand that entering into mediation has nothing to do with winning or losing.

On the contrary, when the parties have nothing to lose or gain through litigation (because of mitigated risks and uncertainty as to the decision or because litigation is so expensive in terms of time and fees), or when the parties have been litigating for years, mediation can offer the chance to settle the case efficiently. In addition, if the mediation fails, the parties can simply return to the normal procedure with no disadvantage, except for loss of time and some money.

Mediation is a process that is not only agreed on, but also governed by the parties. This means that they need to engage fully with it in order to find a solution.

As with arbitration, the choice of mediator is crucial, as he or she plays an important role in conducting the discussion and in the mediation’s success. The mediator must be chosen by common agreement between the parties. The choice of language is also important, because the parties must be sure that the mediator is fluent in the relevant languages so that discussions can be conducted with no misunderstandings.

The mediator has an important task to perform in trying to find the points on which the parties can agree and in helping their positions to evolve so that, eventually, they are willing to discuss a reasonable settlement.

The goal of mediation is simply to try to reach an agreement, divorced from legal discussions which may not be easy for the parties to understand at first. This means that the strength of the parties’ positions is not considered at all.

Whereas arbitration is a procedure in which the parties are represented by their lawyers, in mediation the discussions are normally conducted by the parties themselves. In fact, it is important for the success of the process that the parties be present and not merely represented by their attorneys. This means that the designation and capacity of the persons participating in the mediation are crucial. The designated persons must be able not only to sign the mediation contract, but also to bind their company and make decisions during the session.

The mandate given to these parties must cover all possible discussions and agreements, especially involving financial compensation. As a result, it may be difficult for large companies with complicated decision-making processes to decide who should participate in the mediation and what kind of mandate they will have, which can prove an obstacle to engaging in the mediation process and to its eventual success.

Thus, parties commonly ask to see the appropriate documents in order to establish the capacity of the persons who are to participate before entering into mediation.

In addition, it is important to ensure that the whole mediation process remains strictly confidential. One of the main disadvantages of mediation can be the fear that it will lead to the disclosure of information that one of the parties could use thereafter.

Normally, mediation is relatively fast, which is one of its advantages. The parties agree to a mediation session during which they will hold discussions and try to reach an agreement with the mediator’s help.

However, this means that the strategy needs to be worked out carefully in advance with instructions that can be followed, including different fallback positions. If financial aspects must or may be envisaged, the parties must think about an acceptable amount, depending on the steps in the negotiation and the concessions made by the other party.

If successful, mediation culminates in an agreement, with the parties agreeing on the rough terms. However, signing of the settlement agreement can take several additional months, because although the broad outline can be easy to define, entering into the details can be complicated and can open up new issues.

When it succeeds, mediation can transform the parties’ state of mind, especially if they themselves participated, rather than merely their attorneys. Normally, mediation makes parties more ready to cooperate and to find acceptable solutions.

When several different procedures are involved, it is important to draft the necessary provisions to ensure that the relevant steps are taken to conclude them all.

The mediator can help to draft and conclude the final agreement and the parties can request a new intervention if necessary.

A great advantage of mediation is that it makes it possible to escape the litigation process and enter into discussions without a decision about who is right and who is wrong. When parties have been litigating for years, their relations are often no longer entirely rational and may be dominated by resentment.

Once these aspects can be set aside, the parties often realise that it is possible to reach a settlement, sometimes without too many difficulties and very quickly.

However, the success of the mediation depends on the mediator’s ability to help the parties to find approaches for discussion and agreement, and on the parties’ willingness to engage with the mediation process. Confidentiality remains an important issue. In addition, mediation needs to be prepared well in advance.

Recently, the Office for Harmonisation in the Internal Market (OHIM) initiated a mediation process for use in trademark opposition procedures (when the case is before the Board of Appeal). OHIM provides online CVs for its mediators, along with a draft contract for mediation (including a confidentiality agreement) to be signed by the parties (http://oami.europa.eu/ohimportal/en/mediation). An important advantage in agreeing to mediation is that the procedure pending before the Board of Appeal is then suspended. OHIM offers this procedure to parties completely free of charge – another advantage.

Conclusion

Although they have their drawbacks, arbitration and mediation can prove useful tools for settling trademark disputes, notably because they can address international aspects, which are often present in trademark matters. They also facilitate the finding of solutions – whether decisions or agreements – that will remain confidential, using flexible and quick procedures.