THEME: Mediation In Cases Of Intellectual Property Right Disputes
The article was authored by Aneesha Sondhi and Devangini Rai from the University School of Law and Legal Studies, Guru Gobind Singh Indraprastha University, New Delhi.
The wave of commercialization powered by the current government’s initiatives have led to rise in modern-day business transactions. Business entities are increasingly investing in evolving new forms of intellectual property. As a consequence, a wide gamut of IPR suits are initiated in the courts daily. Rapidly emerging technologies and mindboggling spurt in innovations, destine to make IPR disputes skyrocket to the point of becoming unmanageable. The ordinary court system is not well equipped to deal with the sheer number of IPR disputes. Amongst a number of reasons, the prime ones include the weight of pendency on the courts, innumerable adjournment and lack of judges’ expertise in IP matters. Exorbitant litigation and court fees too are a cause of concern.
Such a situation cannot be merely remedied by reforms in our adversarial mechanism. It calls for the adoption of alternate dispute resolution methods such as mediation. Mediation provides a forum for principled negotiations and the process is facilitated by the mediator i.e. a neutral third party. The parties get to participate directly in the dispute resolution process and decide the terms of settlement. It is estimated that 80 percent of the mediations are settled on the first day of the process itself. Certain advantages that the process of mediation has over the adversarial system include speedy resolution, voluntariness, flexibility of the process, economic viability and most importantly, confidentiality.
The intent of the paper is to analyze the scope of mediation in IPR disputes. This includes exploring the present scenario of mediation in IP disputes, throw light upon the pros and cons of mediation in such cases, and contrast it with the global trends of mediation. It would also focus on the Indian needs of the system and whether the existing mediation regulations are sufficient to guarantee the success of mediation.
Keywords: Mediation, IPR, ADR, WIPO, Commercial Dispute
“The courts of this country should not be the places where resolution of dispute begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried.”
– Retired Associate Justice Sandra Day O’Connor, US Supreme Court
Alternative Dispute Resolution (hereinafter ADR) as a growing body of law is one of the most significant and upcoming methods of settlement of our times. ADR is a blanket term for various kinds of methods which vary in formality and set-up. The ADR methods have found usage and acceptance in our country since times immemorial. As a country which seeks to present itself as a hub of commercial and business activity, India is in a dire need of overhauling its dispute mechanism. The confluence of ADR in IP disputes is more discernable than ever. Given these dynamics and prevalence of ADR since ancient times in India, it is equally surprising and disappointing that mediation is considered the poorer cousin to litigation and arbitration, and that its potential remains severely untapped.
A category of disputes over intellectual property occur over miscommunication in licensing deals and the nature of protection of the property, particularly in patent and copyright matters. Such cases often require a more negotiated settlement of disputes rather than traditional adversarial litigation. The nature of dispute resolution methods under ADR is such that it can be at best be invoked in commercial disputes. An essential element of ADR is that it promotes settlement and a non-adversarial environment. Thus, such a framework can be seen to be most applicable for resolving commercial disputes.
Mediation, as a form of ADR can be touted as the new age process suitable to dispose commercial disputes suiting the exigencies of the situation. Mediation puts the ball in the court of the parties involved, rather than looking at external agencies like courts, and urges them to engage with and resolve disputes. What is required is resolution of dispute at the earliest possible opportunity and via such a mechanism where the relationship between individual goes on in a healthy manner. The aim of such a process is to preserve, develop and improve communication, build bridges of understanding, find out options for settlement for mutual gains, search unobvious from obvious, dive underneath a problem and dig out underlying interests of the disputing parties, preserve and maintain relationships and collaborative problem solving are some of the fundamental advantages of mediation. The beauty of settlement through mediation is that it may bring about a solution which may not only be to the satisfaction of the parties and, therefore, create a win-win situation, the outcome which cannot be achieved by means of judicial adjudication.
It is obvious that the ordinary court system is simply incapable of resolving disputes efficiently. As per a SpicyIP research carried out in 2015, in response of various RTIs filed to collect data on the rate of disposal, a total of 143 patent infringement suits were filed between 2005-2015 at High Courts of Delhi, Bombay, Madras and Calcutta, out of which judgments were given in only 5 of these after the conclusion of trial. Such a figure is alarming and unsettling to say the least. Many IP disputes involve directly getting an injunction for immediate relief. While the strategy of the aggrieved party is understandable i.e. to secure a court order favoring commercial interests, the mandate of not just getting an immediate relief but to nip the evil in the bud has to be emphasized here. This is where mediation as a voluntary and a neutral mechanism comes into picture. Not having the traditional nitty gritty of a litigation based set-up as well as being less formal than an arbitration set-up, mediation has a considerable amount of scope for resolving such disputes.
MEDIATION: THE PROCESS AND RELEVANCE IN IP DISPUTES
Mediation provides a forum for principled negotiations and the process is facilitated by the mediator i.e. a neutral third party. The parties get to participate directly in the dispute resolution process and decide the terms of settlement. Certain advantages that the process of mediation has over the adversarial system include speedy resolution, voluntariness, and flexibility of the process, economic viability and most importantly, confidentiality. These advantages have been explored in detail below.
- Expertise: Mediation can be particularly valuable for IP disputes because of the complexity of the applicable law. A mediator with expertise in the applicable law and business can confidentially provide each party with a candid neutral assessment of the strengths and weaknesses of its case. This is of extreme importance in patent, copyright and trade secret disputes where specialized knowledge is required.
- Confidentiality– Mediation scores the most on the leader-board when it comes to its confidential character. Commercial disputes often involve parties such that they do not wish to leak their internal spats or disagreements in public. A litigation out in the public sphere can significantly affect the public image of a business entity.
- Reducing appeal, adjournments and narrowing down points of contention– In the process of mediation, the mediator does not sit with a pre-conceived disposition of the case. The mediator acting as a neutral facilitator purely goes by what the parties assert in the session. A mediation mechanism promotes a non-adversarial set-up where the mediator if not resolving the dispute helps the parties to narrow down the points of dispute. This can be of immense value in strategizing future litigation if the need be. Incessant adjournments and appeals on point of interpretation only adds to the work load of the court and delays the delivery of justice.
- Commercial value of IP- At the heart of an IP dispute lies its commercial value. The bone of contention in an IPR dispute is over who has the rights to monetize its value. In a UK case involving a patent entitlement dispute, it was observed that “…very often development or exploitation of the invention under dispute will be stultified by the dead hand of unresolved litigation…It will often be better to settle early for a smaller share than you think you are entitled to- a small share of large exploitation is better than a large share of none or little.” Intellectual Property disputes are known to stretch on for years without a significant disposal rate. A protracted litigation can directly affect the commercial value of the property at dispute stripping the rightful owner of its benefit and usage. Mediation through its speedy resolution can help conserve the value of the intellectual property.
- Time and Cost Efficient- In a UK Case concerning registered trademarks for beer, it was held that, “…the legal process appears to have caused the parties to become entrenched in their positions rather than seeking common ground…in future disputes of this nature should have the possibility of mediation explored as soon as is practicable”. A WIPO Survey on Dispute Resolution in Technology Transactions was conducted in 2013 to assess the use of ADR methods in technology disputes (hereinafter 2013 WIPO Survey). It recorded the kinds of agreements which the respondents concluded amongst themselves which included Non-Disclosure Agreements, assignments, licenses, agreement of settlement of litigation, research and development agreements and merger and acquisition agreements. On the time-cost graph of the 2013 WIPO survey, mediation finds itself at the least time taken and cost incurred position. It recorded that mediation took on average approximately 8 months, with 46% of Respondents further indicating that their mediation typically took between 1 and 6 months. 91% of the Respondents confirmed that mediation generally did not exceed USD 100,000. This confirms the fact that mediation is a high-efficiency mechanism which needs public confidence and approval to be instilled in it.
- Cross-Border Nature- Since IP disputes are often very international and involve different geographic locations, it may be extremely difficult to identify applicable jurisdiction and law. The territorial nature of patents and the non-harmonized nature of trade secret protection also do not facilitate the efficient resolution of international IP disputes in court. A litigation makes it highly complicated for the parties to be compliant to different jurisdictions and laws. Mediation on the other hand does not deal with such infirmities.
NATURE OF IP DISPUTES REQUIRING MEDIATION
The foremost reason for avoiding mediation would be when the party is seeking an emergency injunctive relief. A mediator does not have the power to pass any interim orders therefore, the public courts would be the go-to-authority. For instance, in a case of copyright violation, the owner would seek a temporary restraining order against the alleged infringer and would approach the civil court at the first instance. All mediation cases are not exactly suitable to go in for mediation. Mediation as a procedure stands for compromise and deliberation. It is the most suitable where issues of mine and thine can be solved by sitting across the table in an informal set-up. Cases where is a strategic need for publicity or where a precedent has to be established involving core issues of interpretation, application of a new law, or where parties do not have a reason to compromise cannot be compulsorily pushed for mediation. Thus, the authors identify a certain particular category of disputes which are best disposed by mediation.
Intellectual Property as a field of law is understandably wide and therefore involves disputes of a wide conundrum. A business’s dispute resolution toolkit needs to be broad and flexible, allowing it to deal with disputes with contracting parties, both domestically and internationally, and with third parties. Mediation is particularly suitable for disputes in which an acceptable outcome for both parties is some form of shared rights, for example, a licensing agreement or a supply contract, rather than “success” for one party and “defeat” for the other as is traditionally provided by litigation. A mediated outcome in such instances also has the advantage of preserving ongoing business relationships, while the confidentiality of the process is advantageous to parties who wish to preserve the confidentiality of certain information related to their intellectual property and perhaps also their business reputations. Matters involving disputes related to trade secrets or patents particularly involve business conglomerates, business partners or a parent-subsidiary equation. It is of utmost importance for such parties that the business relationship is maintained and at the same time the details of dispute are behind closed doors. A corporate entity having a dynamic business can find its position in the market significantly affected if its ongoing disputes are in the public domain. Elaborating on this, the 2013 WIPO Survey recorded that most commonly used dispute resolution methods included Court litigation at 32% and mediation at 29%. This indicates that while respondents go for litigation, mediation is equally catching up.
Although IP cases typically involve issues that are less susceptible to a negotiated settlement than purely financial claims, notably the IP rights holder seeking injunctive relief, and the alleged infringer denying its activities are within the scope of the relevant IP right, and also asserting that the IP right in question is invalid or limited in scope. However, there are cases where disputes over licensing, R&D etc. occur where mediation may provide a potentially attractive mechanism for resolving any disputes while preserving an on-going relationship. TMT i.e. Technology, Media and Telecom disputes is one of the niche fields where mediation finds a suitable prospect. A case in point is disputes involving Open Innovation (OI) Agreements. OI agreements refer to agreements involving external knowledge sources or partners for the process of innovation. This is a classic example where technology licensing agreements come in purview and become a breeding ground for disputes.
MEDIATION IN IPR DISPUTES: GLOBAL OUTLOOK
In China, mediation is a crucial part of the Chinese business approach. With technological development and rampant IPR infringements, the number of first instance civil IP cases filed is on a rise in China, therefore, mediation as an effective means to resolve disputes is highly valued. In Hong Kong, facilitative mediation is the most popular type of mediation whereas evaluative mediation is preferred on the Chinese Mainland. In a case where a jewelry company based in Hong Kong accused a Chinese mainland company of copying its designs, they approached the Hong Kong Mediation Centre, the result of which was not only the resolution of their differences but also an agreement on cross-border collaboration.
In the United States, mediation is one of the prominent methods of IP dispute resolution. The termination of the long drawn legal battle between Apple and Qualcomm by resorting to mediation is just one example. They ended all the ongoing litigation world over between the two. The settlement arrived between the two giants includes a payment by Apple to Qualcomm, a global patent license agreement and a chipset supply agreement.  The UNCITRAL and the Uniform Mediation Act, 2003 govern mediation in the USA.
United Kingdom’s Intellectual Property Office (IPO) offers mediation service to parties that are involved in IPR related disputes. The accredited mediators appointed by the IPO are qualified to deal with matters relating to the full range of IP. The disputes might be related to licensing, ownership, infringement, trade mark opposition or involving knowledge transfer issues.
Turkey has made mediation mandatory for monetary-related IP disputes i.e. where compensation or payment of a certain sum is sought. The exhaustion of the remedy of mediation is a pre-requisite to filing a suit in the court. It is speculated that mediation may be made mandatory for other kinds of IP disputes as well. The position is Greece is similar, the law establishing compulsory mediation in IP disputes. The disputes concerning trademarks, patents and industrial designs initiated before civil courts are also subject to mandatory mediation. The Israeli Patent Office recently collaborated with the WIPO Arbitration and Mediation Centre to raise awareness of ADR to resolve IP and tech-disputes in Israel.
World Intellectual Property Organization (WIPO) was established with the aim to promote the protection of intellectual property globally via cooperation amongst state actors and in collaboration with International Organizations. The WIPO Arbitration and Mediation Centre, based in Geneva, Switzerland, plays a crucial role at the international level. It assists the parties in settling their IP disputes, either national or cross-border, out of the court. Other facilities by WIPO include providing good offices, assisting in the drafting of contract clauses that provide for submission of disputes to mediation, training mediators and arbitrators and organizing conferences on IP dispute resolution. Various countries have signed the WIPO Mediation pledge to show willingness to opt for mediation in IP and technology-related disputes.
WIPO’s success rate in resolving IP matters is indisputable. The following are just a few examples-
- A WIPO Copyright Mediation
A Dutch company concluded a copyright license with a French company. The licensee became insolvent and was unable to pay the royalty amount. Since the contract between the two contained a WIPO mediation clause, the licensor requested the mediation procedure. An Intellectual Property specialist was appointed by WIPO and the matter between the two got settled within two meetings.
- Trademark Coexistence Dispute
A trademark dispute arose between a North American Company and two Italian companies. They reached an agreement for mediation under the WIPO mediation rules. The WIPO center suggested experts in European Trademark Law having fluency in both English and Italian to the parties to assist them in settling their dispute. The mediation was successful.
- Mediation of a Pharma Patent License
In this matter, a European University was holding pharmaceutical patent licenses in various countries. A European pharma company wanted to negotiate a license with the university. Unable to agree on the terms of the license, they submitted a joint request to the mediation center. The center appointed a lawyer as mediator who had worked in the pharma industry for several years and had experience in drafting licenses. With the help of the mediator, the parties finally reached a settled agreement.
Thus, it can be concluded that countries world over are taking initiatives to increasingly incorporate the use of mediation for resolving IPR disputes. Some countries, including India, have made pre-litigation mediation mandatory for such disputes. On the other hand, other countries are taking steps to raise ADR awareness in IP dispute resolution. It is recognized as the best alternative to court litigation in order to reduce the impact of disputes in IP advancement, innovation and creation.
The famous Roche-Cipla patent infringement case was the first case to be referred to mediation by the Delhi High Court. It was however not successful and the parties resumed the litigation. The case ultimately ended with the parties drawing a settlement and withdrawing all allegations. In more recent times in 2017, the case between fashion label Raw Mango’s Sanjay Garg and designer Vaishali Shadangule, was resolved by the Fashion Development Council of India (FDCI) in a record time of FOUR days. This is an excellent example of how common allegations of plagiarism rampant in such industries are far more efficiently adjudged by a group of experts rather than through traditional litigation.
Right from the introduction of Section 89 in the Code of Civil Procedure , to the Training Manual by the Mediation and Conciliation Project Committee (MCPC) to the recent amendment in the Commercial Courts Act, 2018, the attempts of the legislature to introduce ADR in the resolution of IP disputes have been sincere, if not completely effective. However the Supreme Court’s distress over the language of Section 89, calling it a “Trial Judge’s nightmare… It puts the cart before the horse and lays down an impractical, if not impossible, procedure…” does not seem to have loose its significance even if it was delivered as a judgement ten years ago. The increasing number of commercial transactions which have particularly mushroomed in the past decade need a robust dispute settlement procedure. The stepping stone in this direction is a National Mediation Act.
The Commercial Courts Act amended in 2018 in a laudable move to make all commercial disputes go through a mandatory pre-institution mediation for cases not involving urgent relief. The Section places the responsibility on the State Legal Services Authority to carry out the procedure and dispose of cases within 3 months. The mediated settlement assumes the status of a deemed arbitral award under Section 30(4) of the Arbitration and Conciliation Act, 1996 and can accordingly be enforced as an arbitral award.
While the legislative intent is to make more commercial disputes come under mediation, it is the structuring of Section12-A in the Act which seems pre-mature and questionable.
- Authorities under the Act- The authorities which have been authorized to carry out the task of mediation are the State Legal Service Authorities. These authorities are overburdened in carrying out services as mandated under The Legal Services Authority Act, 1987 in terms of providing legal aid to the underprivileged and downtrodden. A broad definition of “commercial dispute” combined with a lower pecuniary threshold is more likely than not to result in more suits filed under the Act. This in turn means more pre-institution mediations which the LSA Authorities are simply not equipped to effectively deal with this.
- Urgent Relief not defined- A lack of definition of the word “urgent interim relief” on which the entire provision hinges on would make or mar this section. The cloud on the definition could be conveniently used by parties to avoid what has been proposed by the legislature. Most parties plead for preliminary injunctive relief, as mentioned earlier. However, in a number of disputes going for a pre-institution mediation to narrow down the point of actual dispute would prove to be more effective, less time consuming and one which would meet the ultimate ends of an adversarial litigation. This can be applicable even for disputes which do not necessarily arise out of contractual provisions.
- Experts as Mediators- The Mediation Manual of 2005, the Arbitration and Conciliation Act, 1996, the Standing Operating Protocol released by the Delhi State Legal Service Authority on Mediation and the Rules on Pre-Institution Mediation and Settlement under Section 12-A all discuss in detail the method of mediation and the ethics to be followed. The text and material of the respective official documents reads more or less similar. However, an important point that all the documents miss is the appointment of an expert in the mediation process. It is of utmost importance that the mediator is abreast with the factual matrix of the dispute. This finds relevance in patent disputes involving science and technology.
This invariably brings the authors to the method of Private mediation. As a method independent from Court-Annexed mediation, it affords complete freedom in choosing the mediator. A common thread weaving the rise of private commercial mediation in the US, UK and Singapore was excessive litigation and public dissatisfaction with the civil justice system. The Indian judicial system is notorious for being one of the slowest in the world, a malaise which is only compounded by its other deficiencies, such as entrenched corruption and poor accessibility to courts. Our limited legislative framework does not give its due recognition to mediation, let alone legislate on private mediation. The most prominent roadblock preventing the popularity of mediation is in its enforceability. The legitimacy of private mediation can only be established if it is granted recognition in form of a statute than just gaining enforceability via contracts between parties only.
MEDIATION FAR FROM FLOURISHING: NEED FOR A STATUTORY LEGISLATION
Commercial mediation has flourished without a statutory and regulatory framework in jurisdictions like the UK. However, the practitioners opine that statutory direction is imperative in a “chaotic” jurisdiction such as India. The legal recognition of the concept of mediation dates back to independence era when the Industrial Disputes Act, 1947 was enacted. The conciliators appointed were charged with the duty of mediating in and promoting the settlement of industrial disputes. Other ADR methods such as arbitration and conciliation are regulated by the Arbitration and Conciliation Act, 1996 whereas the process of mediation still struggles to find itself a statutory cover.
The need for an Indian Mediation Act was observed by a division bench of the Supreme Court in March, 2019. Despite the existence of various legislations giving the opportunity to the parties to opt for mediation, the lack of procedural guidance on the same gives rise to procedural inconsistency. This uncertainty lowers the confidence of the disputed parties to the mediation process. Taking advantage of these loopholes, the lawyers are successful in discouraging their clients to opt for mediation. Many times, the lawyers present at the mediation center along with the parties, try to dissuade them from continuing the process. The underlying motive behind this lawyers’ move can be either mistrust in the process or preservation of economic-interests, the client being a money minting entity, or both.
Some of the particular reasons strengthening the cause for national legislation on mediation are as follows:
Confusion in the process– The effects of the absence of a strong statutory structure is evident in the imminent confusion which the authorities have created while interpreting mediation. After the Law Commission in 2003 framed the Draft Mediation Rules, the Delhi High Court’s Mediation Centre formed its rules in 2005. These rules were similar to what the Arbitration and Conciliation Act had already brought in force. The Act essentially makes conciliation and mediation one and the same process making it very ambiguous thereby lacking confidence.
Mediation not a full-time profession– The lack of a statutory framework acts as a roadblock to mediation becoming a full-fledged profession. It is an empirical fact that mediators are mostly retired judges or advocates who practice mediation few times a week. Mediation is not seen as a full-time profession option and mostly taken up as a side-job due to the low pay-scale that it offers. A well-structured detailed statute mentioning qualifications and experience required, the manner of training of mediators, the fee payable along with the code of conduct would incentivize the growth of mediation as a lucrative profession preference. A collective effort must be made by the Bar Council and other legal deliberative bodies to deal with this issue.
Experts as Mediators- In the court annexed mediation, the parties are not free to choose their own mediator, therefore, there is always an apprehension that the mediator may not have the technical knowledge or scientific know-how relating to IP. The competency of a mediator to deal with technical matters is usually questioned. To tackle with IPR matters specifically, a panel of mediators should be created having relevant expertise in IP arena to help parties effectively settle their grievances. Without having relevant expertise, the mediator would be unable to understand the technicalities of the dispute. It is here that private mediation in the coming years can gain more prominence. The independence of choosing the mediator would be effective in its truest sense if the mediator has a relevant industry experience in the particular area. A large number of governmental bodies aiding in research in science, technology, industry, fashion etc. can be enjoined as a panel who may offer mediators particularly focused for the job. This is an essential feature which needs its due statutory recognition in form of the proposed Mediation Act.
CONCLUSION: SUGGESTION AND RECOMMENDATIONS
Mediation needs to be promoted as a mechanism that complements the judicial process. To achieve acceptance and popularity of mediation as the first step before approaching the court or any other ADR method, it is crucial to develop confidence in the process of mediation.
Further, mediation should be promoted on all levels, ranging from grass-root level to national level. It includes measures such as public awareness campaigns, promoting easy access to mediation and conducting mediation drives. With the increasing IPR awareness, various small and medium enterprises are claiming protection of their business ideas and strategies. IP owners including small artists, weavers and craftsmen are gaining rewards for their intellectual labour. In case of their IP infringement, they do not have enough means to fight court cases. To protect them from harassment, mediation is the key to the answer. Therefore, they should be educated about mediation. Various intellectual property facilitation centers have been set up by the Government to help these enterprises. They provide specialized trainings, assistance in the grant of patents, geographical indication registration and conduct seminars for the spread of IPR education. Maximum benefit of these IP centers can be reaped by setting up corresponding mediation centers for quick resolution of disputes. Above all, the success of mediation drives is irrefutable. The latest example being the family courts mediation drive conducted by the Delhi High Court in December 2019. A case disposal of a staggering 75.27% was reported by the High Court. A similar drive should be conducted for IPR related mediation for the promotion of the process.
Finally, the lack of a transparent regulatory authority and framework is a serious setback for the mediation fraternity. Endeavors must be made to establish a body at the national level consisting of persons with high expertise in adjudication, mediation and dealing with IP matters. They should be tasked with monitoring the mediation scenario, ensuring law universities introduce mediation course in their syllabi and provide for proper theoretical and practical training to to-be-mediators. This would foster confidence in the mediation process and bring it into the mainstream, making it a first choice, always.
To conclude the authors would like to end with a fitting quote given by famed advocate T.R Andhyarujina who represented in the watershed Novartis Patent litigation-
“To take the adversary out of the adversarial! And to be civil to even those that oppose us.”
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