This research work aims to understand the gradual shift from the more traditional dispute settlement solution that is Litigation, to alternate dispute resolution mechanisms, mainly arbitration, in the world of international technology related disputes.
Disputes in Tech business
A technology business due to its complexity, usage of protected and confidential information, operation in an ever-changing competitive market and being subject to government regulations, makes it prone to be involved in disputes.
The nature of tech businesses is extremely complicated and their product and services, specifically in areas of science, technology, and engineering, makes it clear. Industries like aerospace have intricate processes and design, with technologies like rockets and other space vehicles that have their presence in both the atmosphere as well as in space.
Fields of Telecommunication and Information technology are even more complex as the design of their application system needs to be configured accordingly with the requirements of their businesses. Complexity gets even more severe in fields like medicine, biotechnology and pharmaceuticals, the reason being such businesses highly rely on new and innovative technology.
Trade secrets, engineering methods, computer programs, chemical formulas and algorithms are some of the confidential business information that a tech company needs to protect, so that it does not get revealed to the public nor to its business competitors.
Issues in relation with litigating intellectual property disputes are well known, especially those that are associated with Patent and copyright or other issues which are global and involve territorial rights like product piracy, counterfeiting or cybersecurity. Such litigations are notoriously intricate, costly and time consuming.
On the other hand, dispute resolution methods like arbitration are private impartial meetings that let the parties solve their disputes outside of the court in a surrounding that encourages discussions and helps sort out the dispute through mutual understanding.
ADR and its benefits
Alternate Dispute Resolution or ADR is an alternative to Litigation which helps the parties to arrive at a quick and reasonable resolution to the dispute through mutual agreement, out of court. It includes dispute settlement mechanisms such as arbitration.
Arbitration is a procedure that resembles an informal trial where an impartial third party listens to each side of a dispute and based on that gives a judgment known as an arbitral award. Such an award may or may not be binding depending on what the parties have agreed upon beforehand.
Today, in most cases, tech disputes emerging from commercial contracts have a mandatory clause that makes it binding for the parties to resolve the dispute through arbitration. This is because only two parties are needed in the dispute, with an agreement to work with a neutral third party who has knowledge and expertise in that area of dispute and has no stake or interest in the dispute himself whatsoever.
The confidential nature of arbitration is reassuring as well when information in relation to trade secrets and internal policies are being discussed. Most of the Intellectual Property and tech disputes involve confidential, restricted, and classified information which companies must make sure that it remains that way.
With litigation, all proceedings are matters of public record and anyone can have access to the transcript of the proceeding. The company can not only avoid the inflated cost and slow procedure of litigation, but arbitration is also not likely to get bad publicity to cases like high-profile tech business disputes.
Since arbitration is a less formal procedure, it eliminates the fundamental issues and time needed in instructing a judge or jury. Arbitrators may not always have to be lawyers and can even be engineers, architects, scientists, or experts in their respective fields. Also, procedures such as evidence submission may also not always be followed strictly. The parties have full control over the dispute settlement which makes them more confident and accepting of the final award.
The parties may agree upon the strength of the arbitrators to be present, which can either be one or three, as well as the way they may be selected. There can however be two arbitrators where one is specializing in the area of the dispute like a scientist or an engineer and the second who has an expertise in matters indirectly relating to such dispute, for instance an accountant, businessperson, or a practicing lawyer.
A specific law can be selected which will govern the dispute, despite their jurisdiction and provisions on the conflict of law. The parties may also select a law which is different from the law that is governing the underlying contract, and allow them to choose friendly jurisdictions where they have past experiences.
Tech companies which are in jurisdictions where laws relating to tech and intellectual property are still evolving have a huge advantage in choosing arbitration for dispute settlement as they can select laws from more mature jurisdictions, supplying stability and helping parties correctly expect the overall outcome of the dispute.
International Scenario and cross border disputes
Litigation for international disputes has many drawbacks. For instance, if a case is being litigated against a tech company on a foreign land, the other party has a home advantage over that company. There may also be a case where the trial court of that country has little to no experience on such a subject.
Litigation has further issues like a party being unfamiliar with the foreign laws and is forced to follow such rules and customs, or is even unfamiliar with the foreign language but still must conduct the litigation procedure in that language.
Arbitration is a preferred choice in such scenarios as the arbitrators would be likely to belong from a country different from that of the parties involved as decided by the agreement between them, making the arbitrators impartial to the dispute.
The Arbitrators also expected to be highly experienced in arbitration as well as the subject matters of the dispute and would settle the dispute with a fair judgment or award. The parties are allowed by international arbitration agencies to choose how the arbitration procedure should be governed as well as appointing a neutral organization that will be moderating to implement the proceedings.
International arbitrations are being carried out by prevailing and acknowledged agencies of arbitration having the experience in resolving cross border disputes, especially by companies that have partnered up with parties from foreign countries as licensees, licensors or even distributors.
Such partnering agreements are likely to cause disputes and hence these agencies are preferred. Among them, one agency is the Silicon Valley Arbitration and Mediation Center (SVAMC), which works with the tech companies of Silicon Valley to try to settle tech related disputes.
Another agency that consists of a panel known for being neutral and for having an experience in resolving tech related disputes with specialization in intellectual property is the World Intellectual Property organization (WIPO). It has proven itself as a reputed not for profit dispute resolution center offering its services in a manner which is both time and cost efficient.
The main focus of this agency is on administration of disputes that relate to technology transfer, Research and Development, agreements and contracts of licensing including cases from the energy sector, and Pharma, Biotech as well as the software sector.
Disadvantages of arbitration
Enforceability of the final award however, can be challenging. Countries across the globe have a legal system of their own and the arbitration system of each country has been evolving at its own pace. Countries like India, which is not in a very advanced stage when it comes to arbitration, does not allow every type of commercial issue to be arbitrable.
A lack of formal evidence procedure as mentioned before, could pose a huge drawback. Litigation proceedings have a stage where new discovery can be tried in court and evidence is a fundamental element of this process. Tech disputes involving intellectual property need a proper evidence procedure.
Also, since an arbitral award is said to be final and non-appealable, many corporates can be dissuaded from choosing this dispute resolution mechanism. Arbitrators may as well overlook the law and only consider the position of the parties and the general fairness to decide the case, which is not mostly possible in case of litigation.
Due to the rapid advancement in technology like marketing complexities and innovative new tech products which generates hype for commercialization, as well as an increase in globalization, there has been a significant increase in competition between businesses resulting in disputes of complicated nature.
Such disputes are likely to arise in the tech business and involve the companies including its partners, customers, suppliers, and the other stakeholders, who must be ready to settle the dispute with the best possible resolution mechanism.
Alternate Dispute Resolution mechanism like international arbitration is highly preferred over litigation in such situations where the disputes are multi-jurisdictional in nature and the subject matters of such disputes are highly technical.
Experts thoroughly familiar with the subject matter are required in order to resolve such disputes in the fastest way possible. A tech business cannot afford delays as it causes a loss in value, and litigating such complex disputes can be time consuming and costly.
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This article is written by Ayush Tripathi of Lloyd Law College.