Addressing the IP Dispute Resolution Paradox: Combining Mediation with Arbitration and Litigation
Clients and lawyers often consider negotiation or litigation to be their only options for resolving intellectual property (IP) disputes. While IP arbitration is on the rise, there is still a tendency to view these processes as alternatives to one another. A much broader range of processes can and should be considered to resolve IP disputes in most situations. While seasoned IP practitioners tend to focus on adjudicative processes (e.g., litigation and arbitration), non-adjudicative processes can help reduce the time and cost to outcome, improve settlement rates, preserve business relationships and provide higher satisfaction ratings. These non-adjudicative processes may be non-evaluative (e.g., mediation) or evaluative (e.g., conciliation or expert determinations). The inclusion of non-adjudicative processes (particularly mediation) in conjunction with adjudicative processes is likely to lead to significantly faster, cheaper and better outcomes, with higher compliance and satisfaction ratings in over 90 per cent of IP disputes, both in domestic and international matters. It should be considered in all IP disputes.
Despite its benefits, IP practitioners and in-house experts are still reluctant to include mediation or other non-adjudicative steps in resolving their disputes. This creates a paradox. Adjudicative processes remain the first port of call. This is despite non-adjudicative processes having been actively promoted within IP circles for over a quarter of a century (e.g., by the World Intellectual Property Organization (WIPO) and the International Trademark Association), as well as by national IP courts and judges. It is also despite the growing amount of evidence of clearly improved settlements rates (e.g., above 70 per cent when mediation is used on its own and above 80 per cent when it is combined with arbitration), reduced time to outcomes (measured in weeks instead of months or years) and significant cost savings, not to mention higher satisfaction ratings. This paradox seems to be due, in part, to a lack of personal familiarity with such processes, misunderstandings regarding the enforceability of settlement agreements reached through them, and a reticence of trying something new or too soon. This creates a perfect catch-22 situation. Unless and until IP practitioners and their clients become accustomed to using mediation and other non-adjudicative forms of dispute resolution (even if only to discuss the disputants’ procedural options), IP litigators are unlikely to try or recommend such processes early on and gain greater personal familiarity with such processes, or generate the savings these processes can offer their clients. This situation is further exacerbated by misunderstandings regarding the range and types of non-adjudicative processes that exist (e.g., mediation as distinct from conciliation), and how and when to include them in adjudicative IP proceedings.
This chapter will attempt to untangle and demystify some of the issues surrounding when and how to use non-adjudicative processes (particularly mediation as a distinct process from conciliation) and to propose some practical solutions, such as mixed mode and guided choice processes, allowing for mediation and other forms of non-adjudicative dispute resolution processes to be integrated earlier into litigation and arbitration for the benefit of all disputants and stakeholders.
The risks of purely adjudicative proceedings in IP disputes
Corporate expenditures on adjudicative IP proceedings have more than doubled over the past 10 years and continue to grow. The number of disputes and the length of these proceedings have consistently increased as well, across all IP categories. Furthermore, IP disputes are increasingly comprising a complex mix of technologies (e.g., with the rise of artificial intelligence and new interdisciplinary combinations of data or software-driven technologies, such as bio-informatics, neuro-informatics, DNA computing or theragnostics). This makes it more difficult to deconstruct some IP disputes into distinct IP categories, such as patents, trademarks, copyright, trade secrets and design rights, requiring greater expert involvement and potentially resulting in greater complexity, delays and costs. A forensic analysis of each issue on its own is likely to be too time-consuming and complex, even if were to be affordable (which is unlikely to be the case, given the need to find different experts in each key jurisdiction).
Resolving IP disputes solely by adjudicative processes is thus fraught with risk and can lead to highly unpredictable outcomes, even in the best of cases. This is true for patent (e.g., the Improver cases on the Epilady invention in the 1980s), trademark (e.g., the Budweiser disputes that started in 1907 and have still not been fully resolved) and other IP disputes. This is not only due to the amorphous, technical and nationalistic nature of IP rights, but also due to the growing importance of these same intangible assets on corporate balance sheets and in the global economy (usually greater than 80 per cent of any disputant’s corporate value) and the strong feelings IP owners may have towards their inventions, creations and brands. An IP dispute is not only a technical or forensic exercise in the assessment of objective issues of infringement or validity, but often a culturally shaped and at times deeply emotional ‘bet the company’ or ‘high-stakes’ conflict, which unavoidably depends on subjective determinations as well (e.g., assessments of scope or quantum/value, which are an art rather than a science as well as what is a copy or derived from someone else’s work or ideas). Adjudicative processes are not equipped to handle such subjective considerations, and even the ‘objective’ aspects are often subject to different interpretations in IP disputes, for a number of reasons.
Adjudicative IP dispute resolution processes such as litigation and arbitration tend to be fragmented, not only by applications of different national laws and rules of civil procedure but because of the different professionals who need to be involved to resolve them (e.g., the agents who registered them, the transactional lawyers and solicitors involved in commercialising them, and the trial lawyers and barristers who litigate them). They are also fragmented because of the different categories of overlapping IP rights that may exist in the same matter, requiring different expertise. It is extremely rare to find one person who can advise across several countries and categories of IP rights, and bringing several experts from different countries and fields of IP together can lead to disparate or even inconsistent advice being received.
Much ink has already been spilled on the variability in outcomes of the same IP rights being simultaneously litigated in several jurisdictions. The costs, time frames, outcomes, damages and types of relief available when litigating the same IP asset in many countries vary significantly (even if they originate from the same Madrid system trademark application, the same Patent Cooperation Treaty patent application or the same original copyrighted work), which makes any international IP dispute unpredictable. Not only do the application of applicable norms vary from country to country (despite repeated attempts to harmonise them), but IP disputes are often driven by the disputants’ subjective perceptions, needs, interests and concerns, and the tribunal’s own cultural approaches to the same IP rights. (The distinction between the words ‘copyright’ and ‘authors’ rights’, for example, reflect deep historical and cultural differences when considering the rights of authors.) Inventors, creators and brand owners are often personally invested in their ideas or products, and these subjective factors, coupled with different cultural influences and the devastating impact that inconsistent outcomes may have on the disputants’ careers or valuations or senses of justice can fuel conflict escalation and an adversarial system that would often benefit from a different approach earlier on.
Arbitration of IP disputes may seem at first glance to be a more attractive solution to domestic or multi-jurisdictional IP litigation. Appointing arbitrators with incontestable legal or technological expertise may be viewed as a solution to unpredictable jury trials, overloaded dockets or unspecialised court tribunals, but IP arbitration is also fraught with uncertainties, risks, costs and technicalities. Top experts can differ on their assessment of the evidence or facts, the outcomes of IP arbitrations remain just as unpredictable and arbitral awards may be unenforceable in other jurisdictions. They typically entail high costs, extended timelines and an unclear value proposition. Where the stakes remain high, large costs need to be sunk upfront and reputations become vulnerable. Relationships can also deteriorate during the course of an arbitration, not only between the experts, but also between the lawyers and external teams of experts who represent or advise them. This is particularly unfortunate in certain industries where people tend to meet one another repeatedly. Even in the event of a successful outcome, the applicability of the New York Convention is uncertain for some international awards (e.g., if the tribunal declared a registered IP asset to be invalid or as having effect erga omnes as opposed to only as between the disputants).
The members of an arbitral tribunal may perceive the facts and the laws differently from one another or from the parties. They may have significantly different appreciations of the scope or value of the IP rights at stake. This may be due to invisible cultural influences or original professional source training. The subjectivity and unpredictability of the relief and damages available, even in IP arbitration, combined with the costs, stress, complexity, management time lost, formality and length of the proceedings may render IP arbitration equally unattractive as a value proposition – especially if an outcome is needed within a matter of months rather than years, or if the disputants cannot afford to spend hundreds of thousands of US dollars on a case. Furthermore, applying the varying interpretations of the same legal concepts in each relevant jurisdiction can still lead to contradictory outcomes in arbitration, just as in multistate litigation. Arbitral tribunals cannot be expected to calculate a weighted average of likely country-by-country outcomes, given the diametrically opposed outcomes that may emerge, and given the inherent subjectivity and unconscious biases that may exist in the tribunal members’ own minds regarding what may be fair or equitable.
The probability of winning any adjudicative process (whether litigation or arbitration) remains a gamble, with odds of 60 per cent in the best of cases. There will always be evidentiary surprises and invisible subjective variables influencing the outcome, such as the composition of the tribunal, unconscious biases, and cultural, cognitive, social and emotional factors affecting interpretations of the dispositive facts or applicable laws. Even if an arbitral award is favourable, its extraterritorial effect and enforceability will remain uncertain, especially with respect to third parties. In licensing disputes, this may seem to be less risky, but if hundreds or thousands of royalties are at stake (e.g., in a fair, reasonable and non-discriminatory (FRAND) licence dispute, where many IP rights and multiple owners are involved), the generation and application of norms regarding what may be fair or reasonable may require mediative competencies or dialogue facilitation, where a broader and more inclusive range of skills may be needed to discuss criteria, brainstorm ideas and understand the subjective needs or interests of the various stakeholders involved, looking to the future and not to the past.
For all these reasons, arbitration on its own is unlikely to provide complete closure to the parties involved in an IP dispute. Resolving one dispute may simply lead to a new dispute arising between the same parties.
Appropriate dispute resolution: the choices available to IP disputants
‘ADR’ is often defined as alternative dispute resolution or amicable dispute resolution. This, however, is a limitative interpretation that restricts its true potential. A more inclusive approach is to consider mediation, conciliation, arbitration and litigation as all being parts of the same thing: appropriate dispute resolution. Thus, the use of ADR to mean appropriate dispute resolution becomes a more holistic way of generating dispute resolution proceedings that can lead to complete closure of disputes, providing access to justice that is effective, affordable, efficient, flexible and enforceable. This was the view proposed by Sundaresh Menon, Chief Justice of the Supreme Court of Singapore, in 2016 at the opening ceremony of the Global Pound Conference Series (the GPC Series), an international series of 28 multi-stakeholder meetings to examine ways of improving access to justice and collecting data with a more disputant-centric approach to resolving commercial disputes, both domestic and cross-border. It is an approach that is particularly appropriate for IP disputes and is the interpretation applied for the purposes of this chapter.
The data generated by the GPC Series is of particular relevance to the field of IP. Votes from hundreds of dispute resolution professionals and users of dispute resolution services from around the world indicated a universal lack of familiarity by disputants and their counsel with their non-adjudicative procedural choices when faced with a conflict. The data also highlighted the confusion surrounding what ADR could entail given the kaleidoscopic views of different stakeholder groups in response to various questions regarding what is currently available and accessible in the commercial dispute resolution market. The data identified significant gaps between what disputants want (the demand side of the market) and what is being offered (the supply side of the market). The four key findings of the GPC Series were as follows:
- efficiency is the key priority of disputants when seeking dispute resolution proceedings;
- disputants expect greater collaboration from their advisers (e.g., lawyers) in dispute resolution;
- there is a growing global interest in the use of pre-dispute protocols and mixed mode dispute resolution (i.e., combining adjudicative and non-adjudicative processes); and
- in-house counsel are the prime agents capable of orchestrating change (whereas external advisers are perceived – including by themselves – as the primary obstacles to change), although encouragement by judges, arbitrators and other providers of dispute resolution services is needed as well.
Seeking appropriate dispute resolution processes provides a broader spectrum of possibilities, which may all be used at different stages of an IP dispute. It provides greater choice, and provides for ways of combining or including different types of processes that can be considered earlier on. While disputants often tend to think in binary terms, with litigation being the main alternative when preliminary negotiations break down, there is a wide range of possibilities that exists between these two extremes, including mediation, conciliation and arbitration as discrete and separate processes that are distinct from one another. Each has its own benefits and inconveniences, as indicated in Figure 1.
Figure 1: The range of procedural options available for IP disputes
Source: J. Kalowski JOK Consulting
Much has been written about the differences and similarities between arbitration and litigation. A lot has also been written about different forms of negotiation, such as ‘interest-based’ or ‘principled’ negotiation versus ‘positional’ negotiation or ‘bargaining’. Less has been written, however, about the range of different processes that lie between these extremes, or comparing different types of non-adjudicative processes.
While arbitration and negotiation are adjudicative and non-adjudicative processes that are clearly distinguishable from mediation and conciliation, the latter two processes are often confused with one another and thought to be synonymous. This is another reason why disputants often fail to think in terms of what is most appropriate in each case.
Distinguishing mediation from conciliation
Conciliation and mediation can and should be distinguished from one another, especially for IP disputes. They differ in their purposes and how they are they are conducted, and they have different social impacts on the behaviour of the participants engaged in the process, which is being increasingly recognised in new research emerging in the fields of brain and social sciences. While this distinction is anathema to many common law practitioners, who prefer to think in terms of evaluative and non-evaluative mediation and are used to slipping seamlessly between these two forms of dispute resolution, this is a neutral as opposed to user-centric approach. It does not take into account the nature of conciliation in many civil law jurisdictions, as often being a court-annexed process that is evaluative and has a different status than mediation, which is usually considered to be an extrajudicial process that is not evaluative, facilitative or transformative. From a neurobiological perspective, the processes are also very different, triggering different patterns of social behaviour (e.g., ‘out-of-group’ or ‘in-group’ mental shortcuts or heuristics) depending on whether the ADR neutral is seeking an acceptable compromise between different positions or to help the disputants to jointly consider new opportunities for settlement that they may not have envisaged before.
The role of an IP conciliator is to be neutral, impartial and evaluative. IP conciliation may be considered to be a form of non-binding arbitration or an expert opinion process, designed to help the parties reach a mutually acceptable compromise. The classic IP conciliator is usually a learned expert (e.g., a retired judge, or an experienced agent or a lawyer) with relevant industry experience and knowledge of the products, services or technologies involved in the dispute, who understands what norms may or should apply in litigation. The role of the IP conciliator is to help the parties understand and apply these norms, and discuss and generate a zone of possible agreement (ZOPA) based on the application of these norms. This may include opining on what an adjudicative court or arbitral tribunal might reasonably find. This process can entail meeting the parties separately, in caucuses, and doing reality testing: challenging the parties’ assumptions about the strengths of their respective cases and helping them to understand the weaknesses of their positions. The assessment of these norms includes:
- what the applicable legislation provides for;
- the relevant jurisprudence;
- what dispositive issues of fact and law will need to be resolved;
- the range of possible outcomes if the findings of fact or law go one way or another;
- what the learned doctrine and textbooks suggest; and
- what a likely outcome ought to be, based on the law and facts provided.
This includes an understanding of the sector, the relevant technology, competitor products, the prior art, and the context in which these issues of fact and law are being discussed and debated. It is basically a forensic process, looking primarily to the past, although the future might come into play when seeking to determine damages.
Conciliation is a form of ‘objective justice’ that is based on the legal syllogism that ‘facts + law = outcome’. The IP conciliator helps the disputants to understand the variables in this equation, and what is relevant as opposed to irrelevant with respect to what the outcome should be. It is primarily a backwards-looking exercise, seeking to understand previously occurring facts, who or what caused them, who is responsible or liable for the breach or tort that occurred, and what appropriate damages or remedies, or principles of contributory fault or responsibility, should be applied.
The IP conciliator helps the parties to understand the relevant legal logic and key issues of fact to be determined to define and shape the ZOPA, and the suggested outcome of the dispute. If the parties are unable to reach an agreement within the ZOPA towards the end of the process (usually a one-day meeting after briefs and position papers have been submitted), then the IP conciliator is expected to make a non-binding settlement proposal, recommending where the parties might reasonably settle within the ZOPA. This can include recommendations on quantum or how to calculate damages. The role of the IP conciliator is to help the parties understand not only their best alternative to a negotiated agreement (BATNA), their worst alternative to a negotiated agreement (WATNA), their reasonable alternative to a negotiated agreement (RATNA) and their probable alternative to a negotiated agreement (PATNA) of proceeding to trial or arbitration.
Unlike an arbitrator, the IP conciliator can meet with the parties separately and provide advice before issuing a final proposal, because their opinion is non-binding. While IP conciliators should be neutral and impartial, they are expected to be evaluative from the outset. Conciliation is also a compulsory or non-voluntary step and part of court proceedings in many countries. In certain civil law jurisdictions, parties are not allowed to proceed to a hearing with a judge on the merits of their case, until they have attended a compulsory conciliation session. The conciliator may be another judge, a magistrate, a justice of the peace or a court-appointed expert, who will normally have a limited amount of time available to hear the matter (e.g., a few hours) and give a recommendation. In some jurisdictions if the parties did not settle, the court may even ask to see the conciliator’s final settlement proposal (unless the parties have agreed that this should not be the case), and sanction a party for having unreasonably failed to accept it. There is no reason for the parties or their advisers to try mediation if they perceive it as being a similar process to conciliation.
The role of an IP mediator is to be neutral, impartial (or equally multi-partial) and non-evaluative. Unlike a conciliator, the IP mediator is not expected to have or to express an opinion regarding what the outcome of the dispute ought to be. His or her role is to look to the future and facilitate an interest-based negotiation rather than find a zone of compromise between different positions. IP mediators are appointed primarily for their ability to engage in a constructive dialogue and to help the disputants have a broader and deeper understanding of one another, and not to debate the merits of the parties’ respective positions. The IP mediator is there to help the parties exchange meaningful information as part of a joint process, treating the disputants as partners in a dispute resolution process, where the outcome can also be based on subjective considerations, such as the disputants’ understandings, preferences, perceptions, emotions, interests, concerns, feelings, beliefs, values, needs and fears.
Although private meetings with the parties may also occur, the purpose of these caucuses is different from IP conciliation insofar as the mediator is not there to challenge the parties or their positions and beliefs, but to help the disputants exchange information, look to the future, and generate and consider new opportunities for settlement. The mediator can also help the disputants think through the possible consequences or ramifications of different alternatives and brainstorm new options. Reality testing can also be a key tool in mediation to help the disputants consider the likely consequences of any outcome, for themselves, their partners in the dispute and other key stakeholders. The mediator may also help the disputants to consider the benefits of bifurcated proceedings, the different positions that may be argued regarding the quantum of damages and the incidence of such different calculations (e.g., what if an alleged infringer cannot afford to pay anything, whether he or she may end up moving elsewhere or working with another competitor, and whether there are other mutually beneficial outcomes that can be generated without having to pay cash upfront). While conciliation may seem less useful in IP disputes where the IP rights are clearly valid and there is sufficient evidence of wilful infringement or pirated goods, mediation can still be beneficial to both parties in such cases, even with manufacturers that acted in bad faith, when looking at this from a purely pragmatic approach. Known IP offenders have ended up becoming key strategic allies to IP owners as a result of certain mediations in IP cases, when any form of dialogue was originally completely dismissed out of hand.
Mediation is a form of ‘subjective justice’. The primary role of the IP mediator is not to set a ZOPA, apply the legal syllogism or analyse WATNAs, RATNAs or PATNAs, but to help the disputants exchange information about their subjective needs, interests concerns and motives, looking to the future rather than the past. They may even have an aspirational ‘win-win’ goal of helping the disputants to reach outcomes that are equal to or better than their BATNAs. The IP mediator can start with broader procedural questions, such as any shared values regarding the process itself, what relationships or stakeholders need to be borne in mind, and treat the disputants not as parties to a dispute but as partners working together to find a mutually acceptable outcome. They may help the parties generate and apply their own norms, exchange information about their future concerns, needs and interests, and consider a broader range of options that are not shaped by what a court or tribunal might do. The IP mediator is not normally allowed to make settlement proposals (although he or she can suggest options as part of a brainstorming session to help the partners generate more ideas and explore a wide range of possible solutions that might address their subjective needs, concerns and interests). The IP mediator may also take into consideration the personal chemistry of the members of each team and reorganise them into smaller teams, taking cultural factors into account and helping to build personal working relationships in these groups.
The IP mediator helps the parties to realise that their needs and interests may not necessarily be in competition with one another, but that, on the contrary, there may be opportunities to ‘expand the pie’ by looking at the IP rights involved in the dispute in terms of different business sectors or their potential for generating revenues in different countries. They can encourage the disputants to understand different cultural perspectives regarding applicable norms, without having to evaluate who is right or wrong, and encourage the parties to work through certain hypotheses to find solutions that work for both of them. Needs and interests often turn out not to be in competition when viewed from this perspective. It is even common for IP disputants to have complementary technologies, know-how or access to customers whose interests may converge and be better served by working cooperatively rather than purely competitively. Most IP disputants have the same needs and interests: to increase revenues, decrease costs, retain key employees and maintain good reputations or brands. They may have a mutual interest in creating barriers to entry for competitors, but markets can also be reorganised by industry sector or geographically, where the disputants may have different operational strengths or weaknesses. This can lead to increased sales or royalties, reduce the needs for capital expenditure and enable both disputants to benefit from better distribution channels in other countries.
Nothing is irrelevant in mediation. Emotions, relationships, quality of life, stress, fears, values, personal needs and interests (e.g., impacts on careers or personal lives) are just as relevant as issues of fact or law. This does not mean that norms have no importance at all in IP mediation. It will still be useful for the IP mediator to know the relevant industry and sector, and even the applicable laws, technologies, products, services and competitive landscape as they can be useful benchmarks by which to assess possible options (not to shape these options or for the mediators to provide their own views regarding how these norms should be applied). The mediator can ask open questions to explore whether the disputants have considered and discussed different options, and what the consequences of different outcomes might be for them in the future. The legal syllogism can still serve as a benchmark, but is only to assess whether the partners have co-created a solution that is better than or equal to what they might have obtained through litigation or arbitration.
IP mediation can also happen in steps, initially focusing on confidence-building measures, to help each partner understand and gain trust in the another, before exploring underlying opportunities that may exist in the future, such as cross-licensing or working together. Such avenues of thought often lead to surprising results that would never have been considered feasible initially. The journey can be more important than the destination initially embarked on. An acrimonious IP dispute (even cases that are in advanced stages of litigation or arbitration) may turn into a joint venture, a co-branding or a cross-licensing opportunity, allowing all of the disputants to increase their revenues, decrease costs, or strengthen their brands or reputations. This happens more often in real life than traditional IP practitioners make think possible. Even if the parties are not able to agree on dispositive issues and may need evaluative or adjudicative input on certain issues, they are still able to maintain good working relationships and align their shared interests when it comes to reducing the cost, time and complexities of reaching an outcome that provides closure. This is something a mediator can assist with as well, sometimes even inviting in an expert to provide an opinion within mediation proceedings, but in a way that has been discussed and agreed to by the partners involved in the process.
Mediation versus conciliation
Mediation and conciliation may be considered as having different objectives: mutually acceptable compromises as opposed to optimal outcomes that can be win-win. It is usually the case for IP disputes that the neutrals should have some relevant industry experience and be able to understand the substantive issues at stake in both processes, but with different emphases. While objective parameters such as findings of fact or law may be the central focus of the conciliator, the mediator seeks to understand and take into consideration a broader range of cultural, personal, social and emotional factors. While it is useful that both mediators and conciliators be informed of the relevant markets and the parties’ respective market shares, this can be for different reasons. It may be to avoid inadvertent unlawful or unfair competition discussions (e.g., technology or pricing cartels), especially in certain industries, or to help the disputants explore together the impact of different options for key stakeholders, such as consumers, and whether the disputants wish to factor such considerations into their settlement discussions. There may also be conflicts where there are too many IP owners or IP rights involved to be able to apply norms consistently (e.g., in FRAND licensing disputes). In such cases, solutions may be found by looking at a broader range of considerations, such as shared values, corporate social responsibility, industrial incentives and consumer needs. A possible solution may be viewed very differently when taking into consideration the future growth of the sector, how to promote constant innovation and improvement in an open IP market, while ensuring a fair and reasonable return on investment for each party’s respective contributions to the pool of relevant IP rights.
While the nuances between conciliation and mediation discussed in this section may seem trivial or too puritanical to some IP neutrals who are comfortable working both as mediators and as conciliators, the choice of process needs also to be considered not from the neutral’s perspective, but from that of the disputants themselves. Especially if they are not familiar with the concept of ADR in general. Each process may have a different effect on social and emotional heuristics affecting the quality of the dialogue between the disputants. The tendency to conflate mediation and conciliation is not only a semantic source of confusion but can lead to important distinctions in the way the process can impact the parties’ behaviour and the solutions they are able to generate together. Many non-adjudicative neutrals may contest this distinction on the grounds that they know when and how to act evaluatively and non-evaluatively, considering conciliation as simply being a form of evaluative mediation. Some mediators may even believe it is always best to swap hats between these two non-adjudicative styles, for example starting off as facilitative and non-evaluative in the beginning of the process, but becoming increasingly evaluative as time goes by, especially if a deadline was set by which the process should end, or the parties set themselves a fixed budget in terms of the mediator’s time. Such mediators may also believe that it is their job to give a mediator’s proposal at the end of the process, if the parties did not settle.
Recent findings from social and brain sciences, however, support treating conciliation and mediation as separate processes. Scientists are beginning to understand and explore such concepts as social and emotional plasticity, and the different innate patterns of thought or heuristics that can be pre-consciously triggered to limit or enhance cognitive reflection. Mediation and conciliation are likely to impact group dynamics and rational thought processes very differently when considered from this perspective. It is only in the past few years that functional magnetic resonance imaging studies have been available to study functional neural plasticity in the human brain, associated with different emotional states, attention orientation and social heuristics, such as empathy or compassion (or the participants’ inability to feel empathy or compassion for one another). Different networks seem to be unconsciously activated in the human brain, when people are primed to feel ‘in-group’ as opposed to ‘out-of-group’, leading to very different outcomes. This is a new area of science and the results are already surprising.
If parties are unconsciously primed by an IP conciliator to think of each other as separate groups, out-of-group heuristics are likely to be activated. This leads to innate patterns of thought that can reduce helping behaviour and increase aggressive behaviour, associated with greater feelings of distress, negative emotions and social disconnectedness. Different parts of the brain, such as the anterior cingulate cortex or the anterior insula appear to be involved in the metabolism of oxygen or glucose in these cases. In IP mediation, however, if the parties are primed to think of each other as partners seeking a mutually acceptable outcome (as opposed to an equally unhappy compromise), an in-group script can be triggered, which may lead to greater helping behaviour, less aggressive behaviour, greater feelings of compassion and positive emotions, and a sense of social connectedness between the disputes. The participants are likely to engage in deeper thinking and think creatively, responding better to one another’s non-verbal cues.
A neutral simply swapping hats between mediation and conciliation without the express prior understanding or approval of the disputants about these different processes, and especially the benefits of working in-group or out-of-group may prevent the disputants from having true party autonomy and self-determination when selecting or designing their own ADR processes. Not discussing such nuances upfront with the disputants and letting each ADR neutral simply decide for themselves when to be facilitative or evaluative can have unintended consequences and may adversely impact the participants’ cognitive abilities or willingness to engage in empathetic or compassionate discussions with one another, even if this may all be subconscious or pre-conscious.
Emotions often reflect unmet needs. The stronger the emotion, the greater the unmet need. Many inventorship or authorship disputes are based on personal needs, such as personal recognition of who contributed what or who should be given greater credit. This is not only about financial compensation, but personality traits and a subjective sense of justice. Co-ownership or cross-licensing solutions may turn out to be resolved better by approaching outcomes cooperatively, than assuming a competitive ‘winner takes all’ mindset from the beginning, especially if the IP assets at stake may be vulnerable.
The IP mediator’s role can thus be distinguished from that of the IP conciliator, not only as focusing on different issues and objectives, as outlined above, but also as priming in-group scripts of behaviour that trigger greater pro-social behaviour, such as cooperation, a desire to be helpful and reduced aggression. It can also trigger mirror neurons and mental attribution systems differently, generating greater compassion or empathy between the disputants. This also discourages more competitive or out-of-group heuristics from being activated, which can be a concern in some conciliations. Evaluative processes and discussions can easily trigger out-of-group scripts, especially if parties feel they need to develop a coalition with the conciliator and caucuses are used to do robust reality testing, regardless of the disputants’ ongoing trust and willingness to work with the same IP neutral. These will impact how the parties perceive and consider one another’s proposals in ways that they are not aware of. Mediation is thus particularly useful in highly emotional disputes or where profound cultural differences may be at play, which is common in IP disputes.
Understanding and discussing these procedural differences early on can lead to very different choices when jointly selecting or designing an optimal ADR process. Looking at process design from a social, emotional and cognitive perspective allows greater choice, party autonomy and informed consent.
Combining conciliation and mediation
Mediation and conciliation are not mutually exclusive. Combining them as part of a ‘med-con’ or ‘co-mediation’ process with two neutrals (one acting as a mediator and the other as a conciliator), may be particularly beneficial in IP disputes. Although appointing two non-adjudicative neutrals may easily be perceived as simply adding costs as compared to a traditional IP mediation or conciliation, these additional costs are negligible given the added value and satisfaction such combined proceedings have the ability to provide. Med-con processes are likely to generate settlement rates greater than 90 per cent based on anecdotal reports of the use of such combined processes in the Netherlands in the field of labour disputes. They are also likely to provide greater satisfaction both to the disputants and to their advisers, especially traditional IP practitioners. This combination provides both the opportunity to consider and analyse traditional issues of fact and law that lawyers are used to assessing, and to take into consideration the participants’ subjective needs and interests. While one person could cognitively achieve both roles, swapping hats between conciliator and mediator mode, there is a different impact on emotional and social plasticity when two neutrals work together. It is natural to seek to create coalitions with a single person who will be perceived to act at some stage as a conciliator (priming out-of-group behaviour between the participants). There is no purpose, however, in seeking to build such coalitions with a mediator, who can never be considered as a potential threat, given that they will not be evaluative if a conciliator is also present. The mediator can help the participants reflect on the quality and flow of information, promoting pro-social and in-group behaviour, without having to focus as much on the substance. Such a combined process holds great promise for resolving IP disputes in a faster, cheaper way, and it is better than solely resorting to adjudicative IP proceedings.
Mixed modes: the benefits of combining adjudicative and non-adjudicative processes
Adjudicative and non-adjudicative processes such as mediation, conciliation and arbitration are fundamentally compatible and complementary. Taking into consideration procedural precautions to prevent a mediation from adversely affecting the recognition and enforceability of an arbitral award under the New York Convention (e.g., by ensuring that information heard by a mediator or conciliator in a caucus is never shared with an arbitrator), they may be combined in a number of ways: sequentially, in parallel or as integrated processes as indicated in Figure 2. Independently of the time and costs savings, there are a number of additional benefits to be considered by combining such processes to design bespoke ‘mixed mode’ processes, especially for complex IP disputes.
Figure 2: Considerations when designing mixed adjudicative and non-adjudicative processes
Distinct topics and issues (especially those involving subjective needs, interests and concerns looking to the future, or corporate motivations or strategies) can be carved out of adjudicative IP processes. Courts or tribunals may often wish to create mediation or conciliation windows in the midst of IP proceedings, not only to encourage the parties to settle but also to discuss and consider additional considerations. While IP tribunals may invite disputants to meet with a non-adjudicative neutral (e.g., to discuss evidentiary issues, the ranges of royalty rates to be applied or to jointly identify the key dispositive issues they would like to have adjudicated), they are unlikely to do so. They are often not comfortable raising or proposing such proceedings themselves, for fear that such a proposal might be perceived as compromising their impartiality or willingness to tackle their own mandate themselves, or because they fear hearing things that they should not take into consideration. It is instead for the disputants, their counsel and advisers to seize these initiatives.
The GPC Series confirmed a growing interest in the use of mixed modes for resolving commercial disputes. As a result, a tripartite task force was set up by the College of Commercial Arbitrators, the International Mediation Institute and the Straus Institute for Dispute Resolution at the Pepperdine School of Law, comprising seven working groups. While it is too soon to discuss the task force’s recommendations, they are likely to be of interest to IP disputants, especially since the Singapore Convention on Mediated Settlement Agreements came into force in September 2020. The Singapore Convention provides broad and far-reaching enforceability provisions for mediated settlement agreements. It has already been signed by several influential IP jurisdictions especially in the field of new technologies (including China, India, Israel, Singapore, South Korea, Turkey and the United States). It fills a gap that currently exists between the New York Convention on arbitration and the Hague Convention Judgments Convention, which will enter into effect in March 2021. As such, given some of the concerns raised by public policy exceptions to the extraterritorial enforcement of certain arbitral awards in some IP cases, and the narrow terms of reference that some IP arbitral tribunals may feel they are bound by, it may be judicious for IP disputants who are seeking internationally enforceable settlement agreements to initiate mediation and arbitration proceedings in parallel, and include in a mediated settlement agreement whatever cannot be included in an arbitral consent award. Unlike awards or judgments that may be judicially reviewed, the logic of a mediated settlement agreement is not something courts or tribunals are competent to probe. The only question will be whether they were obtained with the help of a bona fide mediator and whether the settlement award is clear on its face. Disputants also typically share the same IP procedural interests in most IP disputes, such as spending as little time as possible on disputes, reducing the time to reach outcomes, preserving good relationships and preventing conflicts (and especially their costs) from spiralling or escalating further. Disputants usually prefer to treat the root causes of a conflict and not only its symptoms, which is one of the key benefits of mediation as compared to other dispute resolution processes.
Non-adjudicative processes should not be regarded as alternatives to arbitration or litigation but as complementary adjuncts. They are capable of catalysing faster, cheaper and better outcomes synergistically. This is true for institutional as well as ad hoc proceedings. A number of institutions already offer model clauses providing for mediation followed by arbitration or, as in the case of the Rule 9 of the American Arbitration Association’s (AAA) Arbitration Rules and Mediation Procedures, or in the case of the Singapore International Arbitration Centre, incorporating mediation as part of arbitration proceedings.
Rather than leave courts or arbitral tribunals to decide between competing positions or expert opinions in IP disputes, organising non-adjudicative sessions with the help of a neutral can help clarify and narrow the zone of potential settlement, exclude certain risks and possibly enable the parties to amicably identify and resolve key dispositive elements of the dispute faster. These sorts of discussions usually cannot be discussed in a tribunal’s presence. Deciding whether to do so, however, requires an appreciation not only of why, but also when and how to combine such non-adjudicative windows into mixed-mode ADR processes, and how to effectively combine them with arbitration or litigation to reach faster, cheaper and better outcomes, especially for IP disputes. This presupposes, however, understanding the full range of ADR options, some of the key differences between different types of processes (e.g., mediation versus conciliation), and process design considerations.
An arbitration could also be combined with a med-con process as described above in ‘Combining conciliation and mediation’ to generate a ‘med-con-arb’ process. Rather than appointing a three-person arbitral tribunal, as is often the case for high-value commercial disputes, disputants may wish to consider saving time and money by appointing a sole arbitrator who can also act as a conciliator (if he or she does not attend caucuses) together with a mediator, or by jointly appointing a three-person arbitral tribunal comprising three ADR neutrals: a chair (who would only act as an arbitrator and would not participate in any caucuses) and two ‘wing arbitrators’ (one who may act as a mediator and the other as a conciliator). The chair would ensure the ongoing quality and enforceability of a final arbitral award, which could include a consent award resulting from any mediation or conciliation sessions led by the two other wing arbitrators. It would be wise, however, to avoid caucusing separately with the parties if the conciliator and mediator intend to continue to function as arbitrators and participate in the final arbitral award. Caucusing may still be possible with the mediator or with the conciliator in such cases, however, if certain precautions and safeguards are taken. These include signed waivers, consenting to a conciliator or mediator continuing to work as an arbitrator following a caucus, or ensuring either that no information heard in caucus may be used or taken into consideration during the arbitral tribunal’s discussions and determinations, or ensuring that information heard in caucus may only be relied upon if it was subsequently disclosed to all of the parties, who will each have been given the opportunity to respond to it in accordance with due process, the audi alteram partem principle and the adversarial principle.
Metrics and data
There is a wide range of empirical data in existence demonstrating that combining adjudicative and non-adjudicative processes will lead to faster, cheaper and better outcomes in over 70 per cent of IP disputes.
WIPO is a financially independent agency of the United Nations, with 193 member states and offices in Algeria, Brazil, China, Japan, Nigeria, Russia, Singapore and Switzerland, where it has had its headquarters ever since it was created in 1967 in Geneva. Its services and statistics confirm the existence of the IP paradox, and provides data upon which recommendations can be made for change and action. Foreseeing the importance of globalisation, new technologies and the rising economic importance of IP for entities of all shapes and sizes, in low-income, middle-income and high-income countries, WIPO created a Mediation and Arbitration Center in 1994. Since then, IP rights have since become ubiquitous, affecting international commerce, all industries and all consumers, especially in Asia. The Center accordingly opened up offices at Maxwell Chambers in Singapore in 2010, in addition to its Geneva office, in anticipation of a large increase in cases.
Today, the WIPO Mediation and Arbitration Center offers a broad range of procedural choices including mediation, arbitration, expedited arbitration and expert determination. It has developed a variety of online case administration tools for IP disputes, including an electronic case facility system to facilitate online dispute resolution and videoconferencing services. While WIPO does not distinguish between mediation and conciliation, and specifically includes conciliation in its definition of mediation, it provides a full range of ADR solutions. WIPO has also adapted its procedural options to meet the needs of specific industry sectors, such as art, energy, fashion, entertainment, franchising, information and communication technologies, financial technology, FRAND licensing, life sciences, research and development, technology transfer, sports and trade fairs. Despite the fact that hundreds if not thousands of new IP litigation proceedings are filed in almost every medium-income to high-income country since 2009, very few of these cases have been consolidated or resolved by international arbitration or mediation before WIPO, despite it having an enviable list of IP experts and ADR neutrals.
Since January 2000, WIPO has administered over 700 mediation, arbitration and expert determination ADR cases, and more than 650 related requests of assistance, with average settlement rates of 70 per cent using mediation and 33 per cent using arbitration. When mediation and arbitration were combined as sequential steps in contract escalation clauses, the settlement rate increased to well over 80 per cent. This data is supported by other ADR centres and practitioners worldwide who repeatedly provide the same statistics around the world, despite having different cultural approaches to mediation, conciliation and arbitration. They report settlement rates of 70 per cent to 85 per cent for non-adjudicative processes (higher if such processes are combined with adjudicative processes), time frames that are significantly faster than litigation or arbitration (usually within one to two days over a three-month period), at costs that are considerably cheaper (1 per cent to 5 per cent of the value of the dispute depending on its size and complexity) and with higher satisfaction ratings.
The table below shows a theoretical average cost reduction of 40 per cent if mediation and arbitration proceedings were to be combined, based on a number of publications. These average costs are expressed as a percentage of the value of the dispute and have been calculated by taking the mean averages of the costs of mediation and arbitration on their own, which are likely to be far too conservative. The savings are likely to be considerably higher in reality, and also lead to significantly higher time savings and satisfaction ratings.
|Average costs of arbitration v. mediation v. mixed-mode processes expressed as a % of value|
|World Bank Data||ACB (NL) Data||McIlwrath & Savage||McIlwrath & Savage||McLaughlin & Alexander||Averages (unweighted)|
|Civil Law (Ave)||Common Law (Ave).|
|Value of dispute||$200,000||$5 million||$10 million||$10 million||$20 million||N/A|
|Estimated global cost (arbitration)||$34,500||$450,000||$556,500||$1,428,500||$3,027,000||N/A|
|Arbitration cost as % of value||17.3%||9%||5.6%||14.3%||15.1%||12.2%|
|Estimated global cost (mediation)||$9,488||$65,000||$150,000||$325,000||$266,000||N/A|
|Mediation cost as % of value||4.7%||1.3%||1.5%||3.3%||1.3%||2.4%|
|Hypothetical combined costs as % of value for (med+arb)/2||11%||5.2%||3.5%||8.8%||8.2%||7.3%|
|Theoretical % of savings using mixed mode||36.2%||42.8%||36.5%||38.6%||45.6%||40.1%|
This author’s assessment is that non-adjudicative processes combined with adjudicative processes will lead to significantly faster, cheaper and better outcomes in more than 90 per cent of IP disputes. This is particularly the case when combining mediation with arbitration, where the ADR neutrals can work with the parties, both separately and together, to explore and take into consideration a broader vision of the dispute, including the participants’ procedural interests, needs, concerns, motives and perspectives early on. IP mediators can take into consideration factors that IP arbitrators cannot and a mediated settlement may be just as enforceable, whether presented as a settlement agreement under the Singapore Convention or as a consent award under arbitration.
While these settlement rates are very high, the numbers of ADR cases filed annually with WIPO are still moderate compared to the number of cases filed with the WIPO Mediation and Arbitration Center under its Uniform Domain Name Dispute Resolution Policy (UDRP). During that same time period, the Mediation and Arbitration Center handled approximately 48,000 UDRP cases, including 3,693 UDRP cases in 2019 alone as compared to 179 IP ADR requests that same year. This disparity may reflect a different mindset when approaching IP disputes as compared to domain name disputes. UDRP disputants can obtain cost-effective dispute resolution solutions online in a matter of two months at a cost of US$1, 500. It should be possible for IP disputes to reach the same figures even if their costs will remain higher. It is paradoxical that the same disputants who are using these UDRP processes continue to rely primarily on traditional litigation or arbitration to handle their IP disputes, spending hundreds of thousands, if not millions, of US dollars per case, and incurring significant delays (one to four years). Yet they remain reluctant to use the proven services of a neutral, independent, culturally diverse and impartial centre, such as the WIPO Mediation and Arbitration Center, which has an established track record with settlement rates greater than 80 per cent (and significantly shorter deadlines) when combining mediation with arbitration.
Commonly cited reasons to resist non-adjudicative processes
Most IP practitioners are in favour of the concept of mediation or conciliation; however, they often provide reasons for not using mediation in specific cases where litigation or arbitration have already been initiated.
A typical reason for not trying mediation is that the parties already tried to settle through negotiation and failed, so there would be no point in trying mediation. This suggests that negotiation and mediation are the same thing. Recent experiments in neurosciences, however, demonstrate that they are not. Parties who have mediated tend to reach a significantly higher number of settlements than parties who only negotiated, are significantly more satisfied with the content and the process of their discussions in mediation than in negotiation, and have significantly lower levels of remaining disagreements post mediated discussions as compared to parties who only negotiated. Mediation appears to trigger not only different pro-social and in-group dynamics as discussed with respect to conciliation above, but it has also been associated with increased activity in the nucleus accumbens, a key region in the brain’s reward circuitry system, as compared to negotiation.
Another reason given for not trying ADR in IP disputes is that it likely to be premature to negotiate until discovery has been completed, or some further assessment of the case has taken place and its merits are better understood. This inherent reluctance to try mediation early on in IP disputes may be based on the misconception of mediation and conciliation as being the same thing, as discussed above. If the disputants think mediation is an evaluative process like conciliation, they may be justified in feeling they need to know the strengths and weaknesses of their own cases better, as well as that of their opponents, before sitting down to the negotiation table to discuss the relative merits of their case with the help of a neutral facilitator. But mediation (unlike conciliation) does not depend on knowing the strengths or weaknesses of one’s case. Only one’s future needs and interests, both procedurally (e.g., reducing time and costs to reach outcomes) and substantively. It is possible even in the early stage of conciliation to assume, for the sake of argument, a 50:50 win–lose probability rate for the parties in opening discussions, in view of global ‘win-rate’ IP litigation statistics. Putting relevant merits aside early on enables the disputants to discuss their mutual procedural needs, interests and concerns such as budgetary and time constraints, which can already be a basis for common ground and trigger an in-group pattern of behaviour.
Postponing the use of mediation to later stages in proceedings may also be counterproductive. While IP disputants are usually open to the idea that IP disputes are inherently unpredictable, the more time and money they spend gathering evidence, focusing on their cases’ strengths and weaknesses, the more likely they are to fall prey to cognitive biases such as anchoring, confirmation bias, sunk cost fallacy, in-group bias, belief bias, groupthink, optimism bias and reactance. This makes it increasingly difficult to shift to an interest-based dialogue as opposed to a positional debate as the case proceeds, save for at the eve of trial, or if additional external pressure is placed on the disputants. So much money and time have already been spent by that stage that reputations (including those of the external advisers) are felt to be on the line, and settlements are dominated by fear and loss aversion. Late-stage compromises before litigation can also lead to irretrievably damaged relationships, leaving the parties dissatisfied with one another, and having only debated a very narrow range of topics. They may never have discussed their views of the market or one another’s needs and interests, and what they could do cooperatively instead of only competitively. Focusing only on an application of the legal syllogism is a lost opportunity in such cases.
Another frequently given reason is that agreeing to mediation may be (mis)construed as a sign or weakness or a willingness to compromise. This, however, once again suggests a common misconception about the differences between mediation and conciliation. Mediation is not about compromising, but exploring faster, cheaper and better options, even if litigation or arbitration proceedings continue to exist in parallel.
Despite the clear benefits of incorporating mediation into IP disputes, the adoption of mixed-mode ADR processes is unlikely to happen unless and until there is a paradigm shift, especially in the field of IP. This shift needs to be led by IP owners and in-house IP counsel, as well as by IP judges and arbitrators. Judges and arbitrators can and should endorse the use of non-adjudicative processes themselves, or provide incentives for doing so (e.g., refusing to award costs to a party who may have unreasonably refused to try a mediation or conciliation session earlier on). An example of a rule that should be used with greater frequency and by more ADR centres is Rule 9 of the AAA’s Arbitration Rules and Mediation Procedures imposing mediation by default. There could be a greater use of mediation, expert determination and arbitration services in all IP disputes, a field that the AAA believes is particularly apt for such mixed-mode processes.
Mediation is not a panacea. It may not always resolve substantive issues. It should, however, be used earlier on in all IP disputes, if only to help the parties discuss their procedural choices so that they can choose or design an optimal dispute resolution process, and appoint the appropriate neutrals together. A mediator focusing only on process issues can be beneficial, not only to help preserve good working relationships but to explore how to save time, costs and avoid the conflict from escalating. This is the primary goal of ‘guided choice’ processes, as described below.
Guided choice proceedings for mixed-mode IP disputes
The choice and range of ADR processes may at first appear to be overwhelming to IP owners and counsel, especially those who are not yet familiar with the broad range of processes available, and how to combine them. There are several ways of doing so quite easily, especially for IP cases, using the approach of guided choice dispute resolution processes. This is a process by which a mediator can be appointed early on in a complex commercial dispute to facilitate an discussion on procedural issues only (as opposed to substantive issues).
A guided choice processes affirms the parties’ autonomy and self-determination, and allows them to generate an in-group mindset early on in terms of their shared desire to reduce their risks, costs, management time and expenses, and to reach faster, cheaper and better outcomes. This is done by discussing and diagnosing the parties’ procedural needs, interests and concerns, and how to prevent the dispute and its costs from escalating. A guided choice process is a relatively simple seven-step process, which permits IP disputants to discuss, shape and tailor their proceedings, with the ability to include adjudicative rulings with determinative opinions (e.g., arbitration or expert opinions). This can be periodically reviewed as the case evolves. The seven steps of a guided choice process are as follows:
- early use of mediation and a commitment to focus on process issues first, rather than substantive outcomes;
- confidential discussions with the mediator as a ‘process facilitator’ and with the disputants and their designated participants (as well as any other stakeholders, if so desired) to diagnose the conflict and the parties’ procedural interests;
- tailored process design using option generation techniques based on the disputants’ facilitated discussions and diagnostics;
- a code of conduct for any neutrals hired, setting principles of relevant information exchange in accordance with agreed evidence-sharing processes;
- anticipating and overcoming impasses;
- the ongoing role (if any) of the guided choice mediator (even if negotiations are suspended); and
- identifying and handling topics requiring expertise and evaluative input (binding or non-binding).
The likelihood of success when using this process in IP disputes is already supported by WIPO’s recent statistics regarding the Good Offices services its Arbitration and Mediation Center already offers, which consist of assisting prospective IP disputants with their procedural choices before deciding on any one type of ADR process provided by WIPO. This includes going through a series of diagnostic checklists and flowcharts designed by WIPO to help identify the most appropriate dispute resolution process for each case. There has been a marked increase in the use of these Good Offices requests in recent years (e.g., fewer than 15 requests in 2013, and more than 85 cases in 2019). WIPO does not currently charge any fees for this service, which is particularly appropriate for small and medium-sized entities, artists, inventors, entrepreneurs, start-ups, R&D centres, universities, museums, producers, collecting societies and other IP stakeholders. This has led to an increase in post-dispute agreements to use WIPO ADR proceedings, as opposed to contractually-based ADR proceedings, where a previous dispute resolution clause existed.
The philosophy of guided choice process design is also supported by Article 14 of the WIPO Mediation Rules, which provides for the ability to use mixed-mode processes such as arb-med (arbitration with mediation) and MEDALOA (mediation followed by last-offer arbitration). While it is not the purpose of this chapter to explore specific mixed-mode processes, or whether the same neutral should be able or willing to swap hats, these two mixed-mode processes may be of particular interest for IP disputes where there are complex issues of quantum at stake. The idea of arb-med for quantum issues is to first conduct a rapid and ‘rough justice’ arbitration of quantum issues, accepting that quantum calculations are usually more an art than a science. The arbitral tribunal then writes its finding (which could simply be a number) in an envelope, which is sealed pending the outcome of a mediation that is started subsequently. If the mediation does not settle by a specific date and time, the envelope is opened and becomes a binding award. The idea of such a process is to create pressure and an incentive to settle, taking into consideration what happened during the arbitral hearing, but without knowing the outcome of that hearing. The purpose of a MEDALOA process is likewise to create pressure for the parties to settle, in view of discussions to date in the mediation. The parties make a binding offer at the end of the mediation process, which they consider to be the most reasonable for the other party to accept if the dispute did not settle. The mediator may then swap hats and select one of these final offers as a binding arbitral award. The settlements resulting from both of these processes can also be converted into consent awards that are enforceable under the New York Convention, or written up as settlement agreements enforceable under the Singapore Convention.
It is dangerous to generalise. Each IP dispute needs to be considered on its own merits. It is clear, however, that submitting IP disputes to standard litigation and arbitration processes without considering how to include mediation early on may be problematic in many cases. Disputants involved in IP disputes have little to lose and everything to gain from using mediation early on, or combining non-adjudicative ADR processes with litigation or arbitration. The potential for significant time and cost reductions from the use of mediation is evident. The inclusion of non-adjudicative windows or mixed-mode processes are likely to lead to faster, cheaper, better and more satisfying outcomes, taking into consideration a broader range of both subjective and objective factors.
The question for IP disputants, as well as the IP litigation and arbitration community, is not whether it is worth suggesting a mediation or conciliation window in adjudicative proceedings, but whether the parties can afford not to try one. Appointing a guided choice facilitator to guide the parties and their IP counsel in selecting the optimal process or combination of process options to resolve their dispute is practical and efficient. In the overwhelming majority of cases, the result would be a substantial increase in disputant satisfaction in IP dispute resolution. It would finally resolve the ADR paradox that IP disputants currently face.
1 Jeremy Lack is an ADR neutral and attorney-at-law at Lawtech. This article is contributed in memory of David Plant (1921–2012), a leading IP litigator, arbitrator and mediator and the author of the ICC’s publication We Must Talk Because We Can: Mediating International Intellectual Property Disputes (2009), who famously said: ‘We have to start by defining the process as part of the problem.’
2 See Benchmarking IP Litigation in 2019, a study commissioned by Morrison Foerster available at https://media2.mofo.com/documents/benchmarking-ip-litigation-2019.pdf. It is notable that this study does not mention mediation or other non-adjudicative ADR proceedings as possible solutions to the problems identified in this report, underscoring the paradox of the low use of ADR in IP proceedings by IP experts.
4 A new term referring to the growing integration of diagnostics as part of therapy in the life sciences.
5 See Hatter J, ‘The Doctrine of Equivalents in Patent Litigation: An Analysis of the Epilady Controversy’, Ind. Int’l & Comp. L. Rev, Vol. 5:2 (1995), pp. 461–94, at https://journals.iupui.edu/index.php/iiclr/article/download/17577/17681).
7 e.g., copyrights versus designs versus trade secrets versus utility patents or models versus trademarks versus domain names versus sui generis database rights.
8 For a recent analysis of this recurring problem, see Tamar Khuchua, ‘Different “Rules of the Game”– Impact of National Court Systems on Patent Litigation in the EU and the Need for New Perspectives’, Journal of Intellectual Property, Information Technology and E-Commerce Law, Vol. 10 (2019), available at https://www.jipitec.eu/issues/jipitec-10-2-2019/4918.
9 For examples of recent publications on the variability and national subjectivity of patent disputes, see the Annual Global Patent Litigation Report 2014, Global IP Project, Patent, Trademark & Copyright Journal (2015), available at http://globalpatentmetrics.com/wp-content/uploads/2014/04/GIPAnnualReport2014-Feb-2015.pdf; and the chapter in WIPO’s World Intellectual Property Indicators 2018 report entitled ‘An overview of patent litigation systems across jurisdictions’, available at: https://www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2018-chapter1.pdf.
10 J. Lack, ‘National Intellectual Property Rights: The Importance of Mediation in an Increasingly Global and Technological Society’, Arbitration (2006) 72 (4). See http://lawtech.ch/wp-content/uploads/2016/03/Lack-CIArb-Offprint-2006.pdf.
11 This 60 per cent figure is the result of interviews of several IP litigation experts by the author, including a renowned expert IP judge who provided a 55 per cent ‘best case’ figure for the best odds of winning a strong IP case.
12 Examples of varying interpretations of ‘objective norms’ as facts or laws can be found in the fragmented rulings of national courts of successful appeals from lower instance decisions. See, for example, the en banc decision of the US Federal Circuit in CLS Bank v. Alice Corp. summarised by E. Harmon Arner & L. Freyer in ‘CLS Bank v. Alice Leads to an Even Murkier Morass’, available at https://www.finnegan.com/en/insights/articles/cls-bank-v-alice-leads-to-an-even-murkier-morass.html (28 May 2013). While the case was ultimately resolved by a unanimous decision of the US Supreme Court in 2014 the application of that unanimous decision remains unpredictable. See: J. Saltiel, ‘In the courts: five years after Alice - five lessons learned from the treatment of software patents in litigation’, WIPO Magazine (August 2019), available at https://www.wipo.int/wipo_magazine/en/2019/04/article_0006.html. They also can be found in the politically shaped language of Article 69(1) of the European Patent Convention 1973, which sought a compromise between common law and civil law approaches to patent claim interpretation, stating that ‘The extent of the protection conferred by a European patent or a European patent application shall be determined by the claims. Nevertheless, the description and drawings shall be used to interpret the claims.’ (See https://www.epo.org/law-practice/legal-texts/html/epc/2016/e/ar69.html). This confusing language led to the equally confusing and vague Protocol on the Interpretation of Article 69 EPC in November 2000, which states; ‘Article 69 should not be interpreted as meaning that the extent of the protection conferred by a European patent is to be understood as that defined by the strict, literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Nor should it be taken to mean that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patent proprietor has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patent proprietor with a reasonable degree of legal certainty for third parties.’ See https://www.epo.org/law-practice/legal-texts/html/epc/2016/e/ar164.html. The famous statement by the late English IP judge Hugh Laddie that ‘Intellectual Property litigation in general and patent litigation in particular in Europe is in a state of some disarray’ continues to apply to this day, especially post Brexit. See Sepracor Inc. v. Hoecsht Marion Roussel Limited et al. (1999), https://www.casemine.com/judgement/uk/5a8ff8cf60d03e7f57ecdb65. This was recently confirmed as being the case in K. Cremers et al., ‘Patent litigation in Europe’, European Journal of Law and Economics, Vol. 44 (2017), pp. 1-44 (see https://link.springer.com/article/10.1007/s10657-016-9529-0). The statement applies not only to European patents, but also to EU community trademarks and designs as well. It is equally true for EU copyrights, despite 11 Directives and two Regulations, which have sought to harmonise and reduce national inconsistencies in this field. See https://ec.europa.eu/digital-single-market/en/eu-copyright-legislation.
13 FRAND licences create problems when trying to work out royalties in an industry where there may be thousands of essential patents that need to be licensed for a single product to get to market.
14 To quote the Hon. Chief Justice Menon: ‘[T]he acronym “ADR” is commonly understood as a reference to “Alternative Dispute Resolution”. This is a reflection of the widely held notion that such mechanisms are merely alternatives to the mainstream and conventional method of court-based dispute resolution. However, retaining the terminology of “alternative” might mislead us, consciously or otherwise, into believing that the default – or even the best – approach is to be found in litigation. While the court-based approach to dispute resolution certainly has its strengths, it may not always be appropriate in every case. . . . An ideal system of justice is one that delivers justice that is customised to each type of case, keeping in mind the subject matter, the parties, and the desired outcomes. This is a situation where one size does not always fit all. In this regard, it would perhaps be timely to embrace a paradigm shift and understand “ADR” as a reference to “Appropriate Dispute Resolution” instead. This requires us to move away from our traditional and rigid ideas of how disputes should be resolved, towards a flexible and option-laden model where disputants are well placed to choose the ideal mode of dispute resolution from a suite of options. Let me emphasise that the call for “Appropriate Dispute Resolution” should not be seen as suggesting a reduced role for the courts. Even with the development of other dispute resolution options, the courts retain a special place in society as the guardians of the rule of law and, oftentimes, the principal and authoritative resolver of legal disputes. As such, quite the opposite of taking a reduced role, courts should embrace the reality that different disputes call for different measures, and be equipped or even redesigned to resolve disputes as appropriately as possible.’ See https://imimediation.org/research/gpc/. The Hon. Chief Justice Menon’s comments are particularly appropriate, given his experience and expertise in international arbitration. He has written extensively not only to suggest that arbitration also needs to be more reflective of the needs of disputants, but also considers mediation to be part of the rule of law owing to its affordability, efficiency, accessibility, flexibility and effectiveness. See https://www.arbitration-icca.org/AV_Library/AV_Library_textformat/ICCA_2012_Singapore_Keynote_Menon.html.
15 See https://imimediation.org/research/gpc/series-data-and-reports/. For the GPC series’ raw data, see https://imimediation.org/wp-admin/admin-ajax.php?juwpfisadmin=false&action=wpfd&task=file.download&wpfd_category_id=907&wpfd_file_id=35505.
16 The GPS Series Report, ‘Global Pound Conference Series – Global Data Trends and Regional Differences’ (2018), p. 3, which may be downloaded from https://imimediation.org/wp-admin/admin-ajax.php?juwpfisadmin=false&action=wpfd&task=file.download&wpfd_category_id=909&wpfd_file_id=35507.
17 For a general discussion on differences between these procedural options and how they relate to IP disputes, see J. Lack, ‘The growing need for ADR in IP disputes’, Intellectual Property Magazine, December 2010 pp. 19–10, available at http://lawtech.ch/wp-content/uploads/2016/03/J.-Lack-article-Intellectual-Property-Magazine-december-2010-019....pdf.
18 Harvard Law School’s Program on Negotiation offers a wide range of seminal publications on this topic, starting with Fisher, Ury and Patton’s famous book Getting to Yes: Negotiating Agreement Without Giving In, Penguin Group (1981). For an excellent book providing an overview of negotiation, and different approaches to negotiation that focuses on the negotiation of better deals and settlements from an in-house lawyer’s perspective, see M. Leathes, Negotiation: Things Corporate Counsel Need to Know but Were Not Taught, Wolters Kluwer Law & Business (2017).
19 As a precautionary note, the distinctions made between mediation and conciliation in this chapter should not be taken as universally accepted. Conciliation is often referred to as ‘evaluative mediation’ in common law countries, which is an oxymoron in several civil law countries. This can be a great source of confusion when appointing an IP neutral for a non-adjudicative IP process. For a more detailed discussion on the confusion between mediation, conciliation and other forms of non-adjudicative ADR, see M. Schonewille and J. Lack, ‘Mediation in the European Union and Abroad: 60 States Divided by a Common Word?’, The Variegated Landscape of Mediation: A Comparative Study of Mediation Regulation and Practices in Europe and the World (Ed. M. Schonewille and F. Schonewille), Eleven International Publishing, the Netherlands (2014), Chapter 2, pp. 19–44, available online at http://lawtech.ch/wp-content/uploads/2016/03/Chapter-Schonewille-Lack-from-The-variegated-landscape-of-mediation_vier....pdf.
20 Switzerland is a civil law jurisdiction that has such an approach. Mediation is a purely voluntary process in Switzerland, where the parties always have to opt in to mediation proceedings by mutual consent or if it is suggested by a judge (which is rare), whereas conciliation is a compulsory stepping stone on the way to litigation under the Swiss Code of Civil Procedure (SCCP) and is non-voluntary. Conciliation is dealt with at Part 2, Title 1, Articles 197–212 of the SCCP and mediation is dealt with in Part 2, Title 2, Articles 213–218. The conciliator is usually another magistrate, who will spend a few hours but not more with the parties to help them discuss the strength and weakness of their case. Swiss conciliators are also not used to having caucuses or separate meetings with the parties. Many Swiss arbitrators also hold conciliation sessions with the parties following evidentiary hearings (usually after they have written a first draft of their award) and may even present their thinking (and possibly the draft award itself) to the parties before issuing it, to facilitate possible settlement discussions before rendering their award. This practice may be frowned on in certain common law jurisdictions as a form of ‘appeal before verdict’, but it is very much in line with the GPC Series’ findings, and may explain the disproportionate popularity of Swiss arbitration and Switzerland as a venue for international commercial disputes. Unfortunately, mediation remains relatively unknown and unused in commercial and IP disputes in Switzerland, despite being significantly faster and cheaper, and taking into consideration a broader range of issues for international and cross-cultural disputes.
21 The Swiss Chambers’ Arbitration Institution (SCAI) in its 2019 Mediation Rules succinctly defines the distinction between mediation, expert opinions and conciliation as follows: ‘Mediation is a method of dispute resolution whereby the parties attempt to reach an amicable settlement of their dispute or avoid future conflicts with the assistance of a neutral third party, the mediator. The mediator facilitates the exchange of information and perspectives between the parties and encourages them to explore solutions that meet their needs and interests. Unless specifically requested by the parties, the mediator does not give his or her own views (as would an expert) and abstains from making proposals (as would a conciliator).’ See https://www.swissarbitration.org/Mediation/Mediation-rules. This is again an example of how mediation is distinguished from conciliation in some civil law jurisdictions, which can be useful for international IP disputes.
22 The 2018 UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation unfortunately contributes to this confusion. While the definition of ‘mediation’ at Article 1.3 of the Model Law clearly states that it is ‘a process, whether referred to by the expression mediation, conciliation or an expression of similar import, whereby parties request a third person or persons (“the mediator”) to assist them in their attempt to reach an amicable settlement of their dispute’, Article 7.4 of the Model Law clearly states: ‘The mediator may, at any stage of the mediation proceedings, make proposals for a settlement of the dispute’, which is only something a conciliator should be doing. Fortunately this language does not appear in the United Nations Convention on International Settlement Agreements Resulting from Mediation (New York, 2018) (the Singapore Convention on Mediation).
23 For an interesting consideration of human social plasticity and ‘in-group’ versus ‘out-of-group’ behavioural patterns in this context, see O. Klimecki, ‘The plasticity of social emotions’, Journal of Social Neurosciences, Vol. 19, No. 5 (2015), pp. 466–73, and O. Klimecki, ‘The Role of Empathy and Compassion in Conflict Resolution’, Emotion Review (2019), pp. 1–16, which provide new insights into how mediation and conciliation may prime different heuristics and pro-social as opposed to anti-social patterns of behaviour. See https://www.researchgate.net/publication/282037760_The_plasticity_of_social_emotions and https://www.researchgate.net/publication/334178052_The_Role_of_Empathy_and_Compassion_in_Conflict_Resolution.
24 For further discussion of some of these considerations, see J. Lack, ‘A mindful approach to evaluative mediation’, Mfn Tijdschrift Conflicthantering, No. 3 (2014), pp. 18–23 (http://lawtech.ch/wp-content/uploads/2016/03/J.-Lack-Evaluative-Mediation-Mfn.-Tijdschrift-No.-3-2014.pdf), and J. Lack and F. Bogacz, ‘The Neurophysiology of ADR and Process Design: A New Approach To Conflict Prevention And Resolution?’, Cardozo Journal of Conflict Resolution, Vol. 14 (2012), pp. 33–80 (http://lawtech.ch/wp-content/uploads/2016/03/J.-Lack-F.-Bogacz-The-Neurobiology-of-Conflict-2012-Cardozo-JCR.pdf). It should be stated, however, that this field is still in its infancy, and great caution needs to be applied when considering if and how to apply some of these ideas. Suffice it to say that conciliation and mediation may not only differ procedurally, but also in terms of the outcomes they may generate.
25 R. Dendorfer and J. Lack, ‘The Interaction Between Arbitration and Mediation: Vision v Reality’, Dispute Resolution International, Vol. 1 No. 1 June 2007, pp. 73–98. See http://lawtech.ch/wp-content/uploads/2016/03/jl_2007_The_Interaction_Between_Arbitration_and_Mediation-1.pdf.
26 J. Lack, ‘Appropriate Dispute Resolution (ADR): The Spectrum of Hybrid Techniques Available to the Parties’, Chapter 17 in ADR in Business, Practice and Issues Across Countries And Cultures (Kluwer Law International, edited by A. Ingen-Housz, 2011), pp. 339–79. See http://lawtech.ch/wp-content/uploads/2016/03/Ingen-Housz-9789041134141_Chapter-17-J-Lack.pdf.
27 The United Nations Convention on International Settlement Agreements Resulting from Mediation. See https://imimediation.org/about/who-are-imi/mixed-mode-task-force/.
30 For two recent publications on the Singapore Convention and its future applicability, see N. Alexander and S. Chong, The Singapore Convention on Mediation: A Commentary, Wolters Kluwer (2019) and H. Abramson, Singapore Mediation Convention Reference Book, Benjamin N. Cardozo School of Law (2019).
31 For model escalation clauses including mediation and arbitration, the following serve as good examples: WIPO (https://www.wipo.int/amc/en/clauses/med_arb/); ICC model mediation clause D (https://iccwbo.org/publication/suggested-icc-mediation-clause-english-version/); SCAI model mediation clause 3.1 (https://www.swissarbitration.org/Mediation/Mediation-clauses); AAA-ICDR (https://www.adr.org/Clauses); Rule 9 of the AAA’s Rules provides that a mediation shall always be started in parallel with an arbitration whenever the value of a dispute exceeds US$75,000 (which is almost inevitably the case in IP disputes), unless a party opts out of doing so (see https://www.adr.org/sites/default/files/Commercial%20Rules.pdf). The Singapore International Arbitration Centre and the Singapore International Mediation Centre have also combined to offer a joint arb-med-arb process. See https://www.siac.org.sg/model-clauses/the-singapore-arb-med-arb-clause.
32 These considerations are well explained and set out by the consultation document issued by the CEDR Commission on Settlement in International Arbitration in 2009, chaired by Lord Wolf of Barnes and Professor Gabrielle Kaufmann-Kohler, whose findings are available at https://utcle.org/conferences/IA09/get-asset-file/asset_id/14178.
37 The distinction between mediation and conciliation is something that may be worth thinking about when interviewing prospective neutrals for a WIPO mediation process.
39 For example, in 2009, the ACB Foundation in the Netherlands reported 92 per cent satisfaction ratings and a 79 per cent settlement rate for commercial disputes having an average value greater than US$5 million, which were usually completed within four half-day sessions (i.e., two days on average). Including legal and institutional fees, this comes to 1.3 per cent of the average value of a dispute. A 2013 online report by a America’s Small Business Development Network claims average settlement rates of 85 per cent, and claims that mandatory mediation is only 10 per cent less effective than voluntary mediations (i.e., 75 per cent settlements even when the parties initially did not wish to mediate). For the source of these data and for a broader discussion on when, why and how to consider using negotiation, mediation, conciliation, arbitration or other ADR proceedings, see: http://lawtech.ch/wp-content/uploads/2016/03/LAWTECH-Presentation-Using-Appropriate-Dispute-Resolution-When-to-use-what-why-and-how-much.pdf and https://americassbdc.org/is-mediation-your-best-option/.
40 For the data on which these numbers are based, see http://lawtech.ch/wp-content/uploads/2016/03/LAWTECH-Presentation-Using-Appropriate-Dispute-Resolution-When-to-use-what-why-and-how-much.pdf at slides 13–17. The data are based on the author’s own calculations and estimates from the sources cited in that presentation.
41 The UDRP process is incorporated by reference into the domain name registration agreements for generic top-level domains and many country code top-level domains. For more information, see https://www.wipo.int/amc/en/domains/.
44 This fee increases to US$5,000 for a case involving 10 domain names, which is still remarkably low. The time period remains two months. See https://www.wipo.int/amc/en/domains/fees/ and https://www.wipo.int/export/sites/www/amc/en/docs/guide-en-web.pdf.
45 Bogacz, Pun and Klimecki, ‘Improved conflict resolution in romantic couples in mediation compared to negotiation’, Humanities and Social Sciences Communications, Vol. 7, Article No. 131 (2020); https://doi.org/10.1057/s41599-020-00622-8.
46 H. Rafi, F. Bogacz, D. Sander and O. Klimecki, ‘Impact of couple conflict and mediation on how romantic partners are seen: An fMRI study’, Cortex, Vol. 130 (2020), pp. 302–17.
48 Rule 9 of the AAA’s Rules reads as follows: ‘In all cases where a claim or counterclaim exceeds $75,000, upon the AAA’s administration of the arbitration or at any time while the arbitration is pending, the parties shall mediate their dispute pursuant to the applicable provisions of the AAA’s Commercial Mediation Procedures, or as otherwise agreed by the parties. Absent an agreement of the parties to the contrary, the mediation shall take place concurrently with the arbitration and shall not serve to delay the arbitration proceedings. However, any party to an arbitration may unilaterally opt out of this rule upon notification to the AAA and the other parties to the arbitration. The parties shall confirm the completion of any mediation or any decision to opt out of this rule to the AAA. Unless agreed to by all parties and the mediator, the mediator shall not be appointed as an arbitrator to the case.’ See https://adr.org/sites/default/files/Commercial%20Rules.pdf.
49 See the AAA’s report ‘“Products of the Mind” Require Special Handling: Arbitration Surpasses Litigation for Intellectual Property Disputes’ (2017) at https://www.adr.org/sites/default/files/document_repository/AAA192_Intellectual_Property_Disputes.pdf.
50 For more information on this process, see P.M. Lurie and J. Lack, ‘Guided Choice Dispute Resolution Processes: Reducing the Time and Expense to Settlement’, Dispute Resolution International, Vol. 8, No. 2, October 2014, pp. 167–177 and P.M Lurie and J. Lack, ‘The Seven Principles of Guided Choice Dispute Resolution Processes’, Who’s Who Legal: Mediation 2014. See https://www.imimediation.org/wp-content/uploads/2017/11/P.-Lurie-J.-Lack-Dispute-Resolution-International-October-2014.pdf, and https://whoswholegal.com/features/the-seven-principles-of-guided-choice-dispute-resolution-processes.
51 For more information on process design, especially in the context international IP disputes, see: J. Lack and A. Goh, ‘The Importance of Process-Design when Selecting a Mediator for Cross-Border Disputes’, Who’s Who Legal: Mediation 2019, available at https://whoswholegal.com/features/the-importance-of-process-design-when-selecting-a-mediator-for-cross-border-disputes.
55 To request Good Offices Services from WIPO, it is possible to do so online by filling out the form available on its website at https://www.wipo.int/amc-forms/adr/good-offices-services.
56 Article 14 of the WIPO Mediation Rules (Role of the Mediator) reads as follows: ‘(a) The mediator shall promote the settlement of the issues in dispute between the parties in any manner that the mediator believes to be appropriate, but shall have no authority to impose a settlement on the parties. (b) Where the mediator believes that any issues in dispute between the parties are not susceptible to resolution through mediation, the mediator may propose, for the consideration of the parties, procedures or means for resolving those issues which the mediator considers are most likely, having regard to the circumstances of the dispute and any business relationship between the parties, to lead to the most efficient, least costly and most productive settlement of those issues. In particular, the mediator may so propose: (i) an expert determination of one or more particular issues; (ii) arbitration; (iii) the submission of last offers of settlement by each party and, in the absence of a settlement through mediation, arbitration conducted on the basis of those last offers pursuant to an arbitral procedure in which the mission of the arbitral tribunal is confined to determining which of the last offers shall prevail.’ See https://www.wipo.int/amc/en/mediation/rules/#14.
57 For an article describing such an arb-med process, see M. Leathes et al, ‘Einstein’s lessons in mediation’, Managing IP, Jul/Aug 2006, pp. 23–26, available at https://www.imimediation.org/wp-content/uploads/2017/11/einsteins-lessons-in-mediation-article-.pdf.