What are the strategic considerations after an IPR dispute arises?

Comply with ongoing business obligations   

It is critical that the parties understand their obligations arising from the underlying contract. Very often in disputes over agreements concerning intellectual property, there arises a need for the parties to collaborate and continue to cooperate with each other throughout the proceedings due to other contractual obligations. For example, in a joint development agreement for the development of a medical treatment, there will likely be various provisions that require the cooperation of parties with respect to ongoing obligations to third parties, or in proceedings with administrative agencies. The parties will have to comply with these obligations even if an IP dispute has arisen under the said joint development agreement. Parties may also have to seek interim relief in order to maintain the status quo as regards cooperation while parties address the dispute. For example, there may be deadlines regarding intellectual property or regulatory applications that cannot be missed without harming the value of the collaboration and these considerations must be taken into account. 

Constituting an Arbitral Tribunal

In IP agreements concerning licensing and transfer agreements that resort to arbitration as their dispute settlement mechanism, the arbitration clause often cites the attributes the arbitral tribunal must possess. These attributes may often include the composition of the tribunal i.e., number of arbitrators that would constitute the tribunal, whether they would be subject matter experts pertaining to a particular domain or predetermined panel of arbitrators from which the tribunal must be selected. In such cases where there are dedicated panel of IP arbitrators, there are fewer strategic considerations when constructing a tribunal.

In IP agreements where there appears to be more flexibility in appointing an arbitrator or setting up a tribunal, the parties should be sure to examine a fundamental question i.e., whether or not the IP dispute in question is sufficiently distinct from other disputes arising from the agreement. This would be instrumental in determining if the IP dispute requires for instance, industry specific or domain related experts or IP law trained arbitrators.

Decide upon consequences of Termination

When IP agreements are terminated, the termination often has a significant impact on the rights and remedies available to the parties post-termination. Termination may have the effect of complete stoppage of the use of the IP or may even result in the inability to sell & market products that use the IP. Consequently, this may result in prior permitted use becoming an act of infringement, thereby changing the nature of the right itself. Termination of the agreement unnecessarily complicates the dispute. Termination provisions may give rise to other forms of wind-down activities     and return of confidential information that may require continued cooperation, or  resort to interim measures may be made. 

Therefore, a termination clause in an IP agreement must be cautiously drafted and must clearly spell out the rights and obligations of the parties post termination. For instance, it should contain a provision for return or destruction of the remaining inventory post termination, a specific time period for selling off the remaining goods covered by the IP. It should also specify as to who should provide for the return/ destruction of materials, confidential information & anything else which is not with its rightful owner[1]. 

Parallel litigation proceedings in multiple jurisdictions

An important concern among practitioners of arbitration and IP disputes especially pertaining to trademarks and patents is that there may be parallel litigation proceedings in multiple jurisdictions. Both trademarks and patents may be registered in multiple countries and the cover goods may be sold across the globe. It is a fairly common practice for an IP rights owner to seek enforcement of his IP assets against a defendant in multiple vital jurisdictions. And IP disputes can often involve entities or individuals who may not be privy to the dispute. Similarly, the validity of patents can be challenged in administrative proceedings and the enforceability of trademarks can also be litigated in national IP offices[2]. 

These above mentioned scenarios give rise to parallel litigation proceedings that may, in all likelihood have the following consequences thereby affecting the arbitration proceedings- i. Hamper the arbitration proceedings; ii. End before the arbitration, giving rise to arguments that IP rights at issue in an arbitration have been terminated or solidified; and iii. Involve information exchange that is different from the arbitration. Consequently, the visible differences in discovery, disclosure and other procedural practices give rise to a host of strategic considerations. 

This  necessitates  a more collaborative and coordinated decision-making approach by each party to the dispute in addition to the need for subject-specific expertise. Furthermore, arbitration clauses should expressly forbid parallel administrative challenges, uniform discovery and disclosure procedures in order to prevent parallel litigation proceedings. It may also help if the parties select to pursue the claims in a single fora rather than multiple foras. Additionally, the agreement must have a forum non conveniens clause wherein a court may use its discretionary power to decline to exercise its jurisdiction where another court, or forum, may more conveniently hear a case.

Confidentiality considerations

IP disputes demand great attention to the protection of confidential information. This is primarily because confidentiality is the fulcrum on which IP rights are built. The adversarial nature of litigation in most cases largely entails exchange of information that may be extremely sensitive and valuable to any business/ IP right owner and which has not been previously shared with the other party. Arbitration proceedings ensure that such sensitive information is kept confidential. Steps must also be taken to ensure to limit the disclosure of highly sensitive information and secure it even more tightly than ordinary confidential information.

Gathering Witnesses & Identifying Evidence

Parties should begin recording relevant documents and identifying witnesses as early as there appears to be a possibility of a future dispute. This would involve establishing links with persons with knowledge of the dispute that may be valuable to the party for the proceedings. This is primarily because, there may be a long interval between the birth of a dispute and the constitution of the tribunal, in which time people with knowledge of the dispute may leave the organization or change locations. In such cases, it is advisable to incorporate a cooperation clause in the agreement or enter into a cooperation agreement with such persons. Potential witnesses should be interviewed regarding their recollections of the events in dispute and the documents underlying those events as soon as practicable as they’re most effective when their memories are fresh.

It is also advisable that all documentary evidence, correspondence between parties and electronic records be taken care of as they are often essential in IP disputes, and their preservation, or lack thereof, can make or break the case[3].

Mediation

A recent practice in IP agreements is that they prescribe mandatory mediation as a requirement. Additionally, as a matter of practice, the choice of mediator is also predetermined in such cases (e.g., a person with experience in the subject matter of the agreement). However, the process of appointing a mediator requires a certain degree of collaboration with the opposing party. One must bear in mind that even if not mandated by the underlying contract, mediation can often be an attractive and lucrative option to resolve the dispute both prior to the commencement of arbitration and even during the arbitration proceedings. 

Parties must be aware that they can opt for mediation at any time during the arbitration and stall the arbitration proceedings until a settlement is reached by way of mediation. Whether mediation would be useful depends on the nature of the case and the relationship of the parties. Once mediation commences, it is advisable to seek agreement that all statements, arguments and correspondence be confidential and may only be used for the purpose of the mediation and for no other purposes.

[1] Michael D Nolan, Christopher J Gaspar, Nathaniel T Browand and Kamel Aitelaj, ‘Strategic Considerations Once a Dispute has Arisen’, World Trademark Review, < https://www.worldtrademarkreview.com/global-guide/the-guide-ip-arbitration/2021/article/strategic-considerations-once-dispute-has-arisen>,  11 March 2021.

[2] Ibid

[3] Ibid