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Profile: Allen C Turner
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| Allen C
Turner |
Allen C Turner is a registered patent
attorney and a shareholder with the intellectual
property law firm TraskBritt. Before joining the
firm, Mr Turner worked for three years in the
Netherlands as in-house patent counsel for Akzo
Pharma BV (now Akzo Nobel). His practice involves
all areas of intellectual property law, with
special emphasis on obtaining protection for
chemical and pharmaceutical patents. Mr Turner has
participated in various litigation matters, both in
the US and Europe, has conducted various due
diligences, and has extensive experience analyzing
worldwide patent positions of various parties. He
has participated in various patent interference
proceedings at the USPTO, and has received training
in WIPO mediation and arbitration. Mr Turner is
also a registered pharmacist.
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Some of the most common yet overlooked provisions of licence
agreements are the dispute resolution and forum selection clauses.
Perhaps negotiating parties are focusing too much on the royalty
rate and milestone payments for the deal.Perhaps it is because at
the beginning of the licensing relationship, the parties are
optimistic, hoping to have a profitable relationship with one
another. Or, the parties may just assume that everything will work
out and hope that no disputes arise. Unfortunately, that is not
always the case, and when a dispute arises, these two provisions
can take on a life of their own.
Classically - at least in the US - resolving licensing disputes
has involved negotiations and litigation. For instance, the
licensee fails to make payments; the licensor reviews the licence
agreement's dispute resolution and forum selection clauses, and
sues the licensee for breach of the licence agreement, trade secret
violations, and patent, copyright and/or trade mark
infringement.For licence agreements covering more than one country,
the infringement proceedings might take place worldwide.
Weighing up options
Where disputing parties do not have a pre-existing business
relationship, or hold out the prospect for a future one, litigation
does have some positive aspects. For example, litigation will
eventually resolve the matter one way or another.Interim relief
(for example, a preliminary injunction) is available, at a cost, if
one is so entitled.The rules of litigation are generally well
known, and the costs associated with litigation, although high
(especially in the US) can be fairly well predicted.Large companies
often perceive that having a large war chest available for
litigation is an advantage over smaller, less well-financed
parties, which can be used to the larger company's
advantage.Finally, most cases settle before a trial of the issues
ever takes place, so many of the problems associated with at least
the courtroom aspects of litigation are usually avoided.
Litigation has problems as well.It can be very expensive and
time consuming, especially if it is occurring in more than one
forum as is often the case with, for example, patent litigation
arising out of a licensing dispute.In the US, discovery procedures
are expensive and intrusive.Nearly everywhere the process is
slow.With a scientifically naive judge or a lay jury deciding the
case at the trial level, litigation of technical issues sometimes
leads to what can be perceived as less than rational decisions,
especially when complicated technology or business structures are
involved.This situation can lead to a later reversal on appeal, as
oftentimes is the case in patent litigation in the US.If litigation
takes place in a country having a language or legal system
different than one's own the entire process can take on surreal
tones.If the litigation does not settle by negotiation before the
judicial decision, the chance of a future business relationship
between the parties is extremely low.Further, litigation is a very
public matter, and notwithstanding the use of protective orders to
protect confidential information, much of the parties' business
ends up laundered in a very public arena.
With this in mind, alternative dispute resolution, or ADR, can
have particular advantages, especially in international
transactions when the US market is involved.There are generally two
types of ADR - mediation and arbitration.
Mediation examined
Mediation involves negotiation between the parties aided by a
neutral intermediary, the mediator.Typically, the parties choose a
mutually acceptable mediator, prepare for the mediation, meet with
each other and the mediator, and, with the aid of the mediator, try
to resolve the dispute without going further down the litigation or
arbitration trail.Each mediator brings his or her own style to the
mediation, trying to resolve the dispute by, for example, pointing
out to each party the other side's case and position.In some
courts, particular judges are well known for their ability to bring
disputing parties to a mutually acceptable resolution using a
similar approach.
The costs of preparing for and participating in a one-week
mediation are pale in comparison to the preparation for a trial or
significant hearing.Mediation is intended to be
non-confrontational, so the prospects for a future business
relationship between the parties can be preserved.The parties may
select a neutral mediator by whatever criteria they choose and, if
desired, may select one with the desired technical and/or legal
background to assist them in resolving the dispute. The entire
process can be completed within a very short time of realizing that
a dispute requiring resolution exists.The process is not public and
is confidential.Non-classical remedies (for example, something
other than money) can be used as bargaining tools to resolve the
matter.Practically, mediation is the only chance parties have for a
win-win resolution to their dispute.Finally, a party cannot be
forced to resolve a dispute by mediation, so if the party does not
like the way the mediation is going the party can simply opt out of
the process. Mediation is the dispute resolution tool of choice in
some Asian countries and many courts require parties to participate
in mediation before proceeding with litigation.
The advantage mentioned above is also one of mediation's
weaknesses. No matter how good a mediator or how suitable the
dispute is to mediation, a party cannot be forced to resolve the
dispute by mediation. Before a dispute can be resolved, the party
must conclude that it is in his or her best interests to do
so.Otherwise, litigation or arbitration still ensues.
Another perceived weakness of mediation is that the adversary
will learn what one thinks his or her case is worth or will learn
the merits of an opponent's case and use this information in
subsequent litigation or arbitration if the mediation fails.To
prevent unnecessary disclosure during mediation, as with any other
dispute resolution process, it is best for a party to be
represented by someone, such as an attorney, to assist the party in
presenting its case to the mediator and other party.Also, one
should keep in mind that, to the extent it is not already known,
the other party is most likely eventually going to discover this
information in litigation and arbitration.It is, in part, by
cutting to the chase that the cost savings of mediation are
realized.
To prevent biasing a later arbitration should the mediation
fail, it is probably best to conduct the subsequent arbitration
before a neutral arbitrator other than the one who conducted the
mediation.
Arbitration analyzed
Arbitration is much like private litigation.The parties - as per
the pre-agreed arbitration clause in their licence agreement -
select their arbitrator or panel of arbitrators, decide if they are
going to have discovery and other procedural matters, prepare their
respective cases, and present them to the arbitrator(s).The parties
determine if they want a reasoned award or just an award to the
licensor or licensee.The arbitration can be non-binding or binding
(that is, not able to be appealed).
Picking panel members is crucial.If the proceeding is to be
before a single arbitrator, the parties agree to the arbitrator,
generally someone having the requisite legal, scientific, and
experiential background.With three-member arbitration panels, each
party picks one arbitrator, and these two pick the third neutral
arbitrator.One point that parties using arbitration should
understand and review carefully with their respective counsel is
the role of the arbitrator they choose to serve on the panel.This
role can vary culturally, and the party should understand the
particular situation involved before making a choice.
Although sometimes touted as a low-cost dispute resolution
process, arbitration can be expensive.The arbitrator or arbitrators
must be paid, the body administering the arbitration (for example,
WIPO) must be paid, and the costs associated with litigation such
as expert witnesses, attorneys' fees and so forth all need to be
paid.
That being said, one might wonder what the advantages of
arbitration are over litigation.I believe that the primary
advantage is that one should at least get a rational decision from
an arbitrator who was selected based on his or her background.While
it may not be the decision a party wants (as with litigation, there
will be a winner and a loser in an arbitration), the decision
should at least be rational.This advantage may seem trivial until
one considers the example of a recent US court case.The litigation
involved very complicated biotechnology.The parties had spent
literally years (and undoubtedly millions of dollars) preparing for
trial in the US and other countries.In the US, the matter was tried
to a jury.The first question sent to the judge from the jury was
"Why is this case being tried to a jury?"Not surprisingly, the case
ended up with a hung jury and the parties had to go back and start
all over.The case reportedly eventually settled, but not before the
parties had probably each spent millions.
Other reasons exist for choosing arbitration over
litigation.Being a private dispute resolution process, the entire
matter remains confidential.One's trade secrets and documents
remain confidential.The parties can agree to limit discovery and
defences.Needless fights on procedural matters are avoided.Since
both parties agree on the forum for resolving the dispute, forum
shopping can be prevented and getting a local judge or jury can be
avoided.Numerous smaller actions that would normally be litigated
piecemeal in various countries can be combined into a single
proceeding.Interim relief such as a preliminary injunction can be
awarded if a party is otherwise entitled.The entire procedure can
be expedited and resolved much sooner than litigation.All in all,
the parties generally make the rules.
Another ADR option to seriously consider is "Med/Arb", where a
mediation is first conducted, then, if that is not successful, an
arbitration takes place.
Provisions and clauses
There are several agencies and rules that administer ADR.Besides
WIPO, there are, for example, the American Arbitration Association
(AAA) and the International Chamber of Commerce.Several US courts
have made separate arbitration arrangements.Who you use is usually
dependent on the particular dispute resolution clause used in your
licensing agreement.It is best to consult your attorney in this
regard.If the parties agree that arbitration should take place, the
arbitration provisions of the agreement should be drafted to ensure
that jurisdiction is properly conferred, especially in the case
where binding arbitration is desired.Otherwise one might end up
litigating anyway.
ADR clauses can be very simple.They should, however, also
include choice of law provisions and a forum for the ADR.For
instance, a mediation clause can be along the lines of: "If a
dispute arises out of or relates to this licensing agreement, or
the breach thereof, and if the dispute cannot be settled through
negotiation, the parties agree to try in good faith to settle the
dispute by mediation through the Commercial Mediation Rules of the
American Arbitration Association (or whichever forum chosen) before
resorting to arbitration."
An arbitration clause suitable for the AAA is something along
the lines of: "Any controversy or claim arising out of or relating
to this agreement, or the breach thereof, shall be settled by
binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon
the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof."Again, various entities could be used
to arbitrate the matter. Please consult with your attorney when
preparing the clause.
Parties drafting and entering into licence agreements and those
about to enter into a dispute regarding a licensing agreement
should consider alternative dispute resolution.Properly
implemented, mediation and arbitration can save everyone
significant time and money.If the parties cannot agree via
mediation to resolve their dispute, arbitration provides a
confidential forum to resolve differences.
Trask Britt, PC
PO Box 2550
Salt Lake City, UT 84110
United States
Tel: +1 801 532 1922
Fax: +1 801 531 9168
Email:
acturner@traskbritt.com
Website:
www.traskbritt.com
