Article addresses the use of arbitration in connection with patent disputes, particularly with regard to international arbitration.

1. DEVOTED TO
INTELLECTUAL
PROPERTY
LITIGATION &
ENFORCEMENT
Edited by Gregory J. Battersby
and Charles W. Grimes
Litigator
SEPTEMBER/OCTOBER 2016
VOLUME 22 NUMBER 5

2. SEPTEMBER/OCTOBER 2016 I P L i t i g a t o r 1
Arbitration Saves
Money and Patents
in International
Disputes
The advantages and disadvantages
of arbitration versus litigation have
been long debated. Because arbitra-
tion is a matter of contract, parties
are free to adopt existing procedural
and substantive rules or invent their
own. This freedom can complicate
comparisons. For example, the parties
can include or exclude discovery, per-
mit or prohibit direct testimony, and
require prompt and detailed rulings—
or not. Arbitrations have one advantage
that is unquestioned—treaties make the
international enforcement of arbitra-
tion awards easier and more likely than
the enforcement of state judgments.
Arbitration has become a favored
provision in certain industry con-
tracts, including construction, secu-
rities, and labor. Arbitration, on the
other hand, rarely is used in relation
to patent disputes. While arbitration
provisions are a part of many patent
licensing agreements, most patent
disputes are not between licensees
and licensors. Even though the US
Supreme Court changed a pre-existing
Federal Circuit rule to permit patent
licensees to file declaratory judg-
ments seeking invalidity against
licensed patents in Medimmune,
Inc. v. Genetech, Inc. [549 U.S. 118
(2007)], this rule cannot prevent a
stay for any dispute falling within the
provisions of an arbitration clause.
If parties to a license or industry
dispute resolution agreement devote
appropriate time and effort to pre-
paring an arbitration provision to
meet their specific objectives, arbi-
tration can be a valuable tool in
resolving patent disputes. Trial law-
yers will tell you that the number of
documents introduced at trials is a
minuscule subset of those that are
categorized, reviewed, and consid-
ered. This search has become more
massive and only marginally more
productive with the vast eDiscov-
ery now accessible. The search for
smoking gun documents can drift
far afield at great expense to the
combatants. Similarly, both the num-
ber of witnesses questioned and the
length of the questioning contribute
to the skyrocketing costs of patent
litigation.
Arbitration, on the other hand,
allows the parties involved to
negotiate provisions that can bal-
ance the competing objectives
of thoroughness with cost and
speed. Significant items to consider
when negotiating arbitration provi-
sions are:
• limits to representative claims
and prior art
• specify the number and qualifica-
tions of arbitrators (take care not
to over-specify qualifications)
• limits on discovery or exclusion
• the convenience and expense of
the arbitration venue
• specify that the “loser” pays
(limits can also be placed on the
amount of payment)
• waiving a written decision or
requiring the arbitrator provide
an analysis of her reasoning.
The parties also can approve a
specific arbitration (or series of arbi-
trators) in the agreement, enabling
patent owners to gain some confi-
dence in allowing their patents to be
subject to an invalidity determina-
tion. However, the provision must
be clear on what procedures are
employed if the selected arbitrator(s)
fails to accept the appointment for
whatever reason. Invalidity determi-
nations also can be controlled by the
contract. For example, the parties
might agree that an invalidity deter-
mination by the arbitrator would
not become final for 30 days after
the issuance of the ruling and only
if the patent holder failed to grant
a covenant not to sue on the patent
at issue to the prevailing party prior
to the expiration of the 30 days. The
parties could provide that obviation
of an arbitrator’s invalidity ruling by
the covenant not to sue would not
affect other rulings of the arbitrator.
Use of arbitration is not limited to
pre-existing contractual provisions.
Because of its contractual nature, par-
ties can agree to arbitration after a dis-
pute arises. Furthermore, parties often
agree to modify existing arbitration pro-
visions to optimize an arbitration after
the details of the dispute are known.
With the soaring costs of litigation,
patent holders have become more
reluctant to enforce patent rights.
Evaluation of whether or not to pur-
sue an infringer is a business decision
that in many instances may turn on
factors other than the strength of
the case. Artful and careful use of
arbitration provisions can provide a
company with a before-the-fact or
even after-the-fact opportunity to
design a potential solution that fits
within the company’s objectives and
budget. Whether or not this tool is
appropriate for a particular contract
or other situation, it always should
be carefully examined.
Arbitration clauses often are one
of the last clauses negotiated in con-
tracts. This late treatment may lead
to failure to cover essential elements
Praxis
Arbitration
Kirk Watkins

3. for enforceability or mere adoption
of a form provision without careful
tailoring to the parties’ needs and
objectives. The decision to arbitrate
or not should be determined only in
the context of the specific provision
being chosen and the ability of that
provision to meet all of the objec-
tives of the parties.
Kirk Watkins is a partner with
Womble Carlyle Sandridge & Rice
LLP where he practices in the areas
of Intellectual Property Litigation
and International Arbitration. He is
the President-Elect of the Atlanta
International Arbitration Society
and is an editor and major contributor
to the Georgia Intellectual Property
Litigation Blog.
Copyright © 2016 CCH Incorporated. All Rights Reserved.
Reprinted from IP Litigator, September/October 2016, Volume 22, Number 5, pages 15–16,
with permission from Wolters Kluwer, New York, NY,
1-800-638-8437, www.wklawbusiness.com