The Intellectual Property Office of the Philippines (IPO) and the World Intellectual Property Office Arbitration and Mediation Center (WIPO AMC), in cooperation with the PDRCI, held a mediation workshop for intellectual property law practitioners last December 12 and 13, 2011 at the Intellectual Property Center in Bonifacio Global City
The two-day training workshop was led by WIPO AMC Director Erik Wilbers. The first day of the workshop featured sessions on IP dispute resolution before the IPO and WIPO AMC. PDRCI Trustee Gwen B. Grecia de Vera gave an overview of the IPO arbitration and mediation procedures. This was followed by Mr. Wilbers’ overview of WIPO mediation principles, the role of the WIPO AMC, and trends in IP alternative dispute resolution.
David Perkins, a partner of Arnold & Porter (UK) LLP, and Mr. Wilbers then provided examples of IP disputes, including the series of trademark disputes between Apples Corporation, the holding company founded by the Beatles band, and Apple Computer (now Apple, Inc.) of Steve Jobs. They also discussed methods of submitting disputes to WIPO mediation.
Peter Moody, a partner at BrookStreet des Roches LLP, led the sessions on the roles of lawyers and parties in IP mediation as well the steps in commencing IP mediation.
Mr. Moody, together with Mr. Perkins, also discussed others aspects of IP mediation preparation.
The second day of the workshop featured a session focused on the IP mediation meeting phase. Messrs. Moody and Perkins discussed the conduct of a typical mediation, from opening of the meeting until conclusion of a settlement agreement. Workshop attendees also participated in simulations of mediation scenarios involving a hypothetical claim for damages suffered by the claimant, a European bookstore chain, against a software supplier who designed and installed a point-of-sale system.
Messrs. Wilbers, Moody and Perkins shared their experiences and insights on mediation, and gave tips on how to handle the parties and their counsel during the process.
The workshop ended with the closing remarks of IPO Bureau of Legal Affairs Director Nathaniel S. Arevalo.
Delays in arbitration
Arbitration is broadly defined in the implementing rules of the ADR Act of 2004 as a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties or the rules, resolve a dispute by rendering an award (IRR of Rep. Act No. 9285, Dept. of Justice Circ. No. 8, s. 2009, Rule 2, Art. 1.6, A.3).
It is similar to adjudication, a statutory remedy introduced by the United Kingdom in Part II of its Housing, Construction and Regeneration Act of 1996 to address complaints in the construction industry of mounting time and cost expended in disputes and the improper withholding of monies due to contractors, which was causing severe cash flow problems. Like arbitration, a neutral third party examines the arguments of the contracting parties and decides the dispute.
It differs from arbitration in that the resolution is temporary pending final determination of the dispute by arbitration or litigation, although the adjudicator’s decision may become final and binding upon agreement of the parties or upon the lapse of time for referral to arbitration or litigation. In the UK, it is often a condition precedent to arbitration (Derek Simmonds, Statutory Adjudication: A Practical Guide 3, 5).
The main drawback of adjudication in its pre-1996 form was the difficulty in enforcing the adjudicator’s decision. According to Simmonds,
“Adjudication being a contractual provision, failure of the losing party to comply with a decision is a breach of contract.” In contrast, arbitral awards could be enforced summarily.
However, adjudication was speedy and – in many cases where the parties acted in good faith in resolving their disputes – efficient and effective. Arbitration, which was designed to put an end to the cost, delay and acrimony of litigation, was falling into the same trap it was designed to overcome.
The rise of “Litarbigation”
The London Court of International Arbitration declared in lofty terms the merits of arbitration upon its founding on November 23, 1892:
This Chamber is to have all the virtues in which the law lacks. It is expeditious were the law is slow, cheap where the law is costly, simple where the law is technical, a peacemaker instead of a stirrer of strife.
Arbitration’s success in the century that followed these ringing words was founded on its private, commercial, and confidential nature. Merchants wanted an expeditious settlement of their disputes without regard to technical rules of evidence or the niceties of contract law. It was informal and rudimentary, without the need for lawyers or technical experts.
Two traders, in dispute over the price or quality of goods delivered, would turn to a third person whom they knew and trusted for his decision on the dispute. Or two merchants, arguing over damaged merchandise, would settle their dispute by accepting the judgment of a fellow merchant. And they would do it not because of a legal sanction, but because this was expected of them in a community where they carried on their business (Alan Redfern, Law and Practice of International Commercial Arbitration 3).
Arbitration is largely self-regulated by the parties. According to a French author, it was conceived “… as an institution of peace, the purpose of which was not primarily to ensure the rule of law but rather to maintain harmony between persons who were destined to live together.” (René David, Arbitration in International Trade 29).
However, as commercial arbitration has gained wide acceptance and popularity, counsel have become more sophisticated in the process. Since most arbitration practitioners are also litigators, arbitration now often incorporates many elements of a court trial. One author called this the “juridization” of the arbitral process (Peter Sanders, Quo Vadis Arbitration? Sixty Years of Arbitration Practice: A Comparative Study 22). He noted the attempts to introduce court procedures, resorts to discovery, and submissions of “car loads” of documents to swamp the arbitrators.
Arbitration, traditionally seen as a no-nonsense method of dispute resolution, relying more on technical assessment rather than on the application of judicial nuances, has for a number of years become overly legalistic, leading the House of Lords to observe in one case, Northern Regional Health Authority v. Derek Crouch Construction Company, Ltd. (1984), that “Arbitration is usually no more and no less than litigation in the private sector.” (Peter R. Hibberd and Paul Newman, ADR and Adjudication in Construction Disputes 17)
In an article in the summer 2011 issue of Litigation magazine, JAMS managing director Richard Chernick noted that “Litigation constructs such as pleadings, broad-based discovery, provisional relief, dispositive motions, and formal rules of evidence are now commonly part of arbitration, as is the review of arbitration orders and awards on the merits and for procedural error.” Arbitration is now referred to as the “new litigation” or by the portmanteau term “Litarbigation.”
Causes of delay in arbitration
Delays and disruptions in the arbitration may be caused by the parties, their counsel, the arbitrators, and by the provider organization. As a rule, delay occurs when any of the following conditions are present: (a) pathological arbitration clauses; (b) inexperienced counsel and arbitrators; (c) substantial amounts and complex issues at stake; and (d) conflict between the substantive arbitration law, procedural rules, and contractual clauses.
Pathological arbitration clauses
An enforceable arbitration clause should contain at least some of the following substantial elements: an intention to arbitrate clearly expressed in the clause, scope of the arbitration, the arbitration institution or rules for ad hoc arbitration, place of arbitration, arbitral rules, and effect of arbitral award. An arbitration clause that fails to satisfy these substantial elements is called a pathological clause, a term first coined by Dr. Frederic Eisemann to describe arbitration clauses so affected by gaps, ambiguities and imprecision as to render them ineffective (Jean-Louise Delvolve, et al., French Arbitration Law and Practice: A Dynamic Civil Law Approach to International Arbitration 65).
A pathological arbitration clause is one “… drafted in such a way that (it) may lead to disputes over the interpretation of the arbitration agreement, may result in failure of the arbitral clause or may result in the unenforceability of an award.” (Vijay Bhatia, Christopher Candlin & Maurizio Gotti, The Discourses of Dispute Resolution 151)
Pathological clauses are caused by the parties and their counsel’s inattention during the drafting process and by the desire to immediately close the deal. Such clauses may result in socalled parasitic litigation just to ferret out the parties’ real intention to settle their dispute, which can tie up the arbitration for years.