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7 September, 2017
The protection of intellectual property rights ("IPRs" or "IP") across the globe is not an easy task. Cross-border IP litigation has led to some of the most contentiously fought disputes in courts around the world, many of which last for years and result in significant legal costs. A number of jurisdictions have recently taken steps to promote arbitration as an alternative means of resolving IP disputes, and Hong Kong is at the forefront.
Presently, Hong Kong's Arbitration Ordinance (Cap. 609) (the "Arbitration Ordinance") has no specific provisions dealing with the question of arbitrability of IPRs.
On 14 June 2017, the Arbitration (Amendment) Bill 2016 was passed in Hong Kong and the Arbitration (Amendment) Ordinance 2017 ("Amendment Ordinance") was subsequently published in the Hong Kong Gazette on 23 June 2017. It is due to come into operation in January 20181. Once in operation, the Amendment Ordinance will clarify that disputes over IPRs may be resolved in Hong Kong by arbitration, and it shall not be considered contrary to Hong Kong public policy to enforce this type of arbitral award.
IP disputes in Asia
The number of applications for IP registrations in Asia has steadily increased year on year, which has inevitably led to an increase in the number of IP disputes in Asia. Despite many jurisdictions establishing specialist IP courts (including most recently, Mainland China) many local courts still lack the specialism required to deal with the complexities raised by IP disputes. Moreover, there are a number of inherent difficulties in pursuing proceedings in multiple courts, including differences in legal systems and procedures and problems with enforcement of foreign judgments.
Arbitration, on the other hand, provides parties with the autonomy to select a neutral forum for the resolution of the dispute, the governing law of their choice and specialist arbitrators to determine the merits.
Arbitrability of IP disputes
Doubts have historically been raised by IP practitioners about the arbitrability of IP disputes, particularly where the validity of registered IPRs is concerned. There is also a question mark over the interplay between arbitrability and public policy, given the State's involvement in the creation, registration and protection of IPRs. This can lead to uncertainty around the enforcement of awards and whether an award may be contrary to public policy due to registered IPRs being granted and maintained by separate state agencies or government authorities.
Some jurisdictions, such as the United States, have expressly clarified that disputes concerning the validity and infringement of IPRs, including patents, for example, may be arbitrated. Conversely, in mainland China, the issue of patent validity remains an administrative matter that cannot be submitted to arbitration.
Arbitration (Amendment) Ordinance 2017
The Amendment Ordinance clarifies the position regarding the arbitrability of IPRs in Hong Kong, by introducing, among others, the following amendments:
- a definition of IPRs, to include both registered and unregistered IPRs (new section 103B);
- clarification that all types of IP disputes, including those relating to the subsistence, scope, ownership, validity and infringement of IPRs, are indeed capable of resolution by arbitration in Hong Kong (new section 103D); and
- confirmation that any award would subsequently be enforceable and not contrary to public policy (new section 103G).
It is hoped that the Amendment Ordinance will help facilitate arbitration to become a more favourable option for resolving IP disputes in Hong Kong.
Advantages of arbitrating IP disputes
Other developments in Hong Kong offer further benefits for choosing arbitration as a means to resolve IP disputes.
Choice of Arbitrator. Arbitration allows parties the freedom to select an arbitrator or alternatively to put forward specific criteria for the choice of arbitrator with relevant expertise. The Hong Kong International Arbitration Centre (HKIAC) has a specific Panel of Arbitrators for Intellectual Property Disputes that includes experienced arbitrators, senior counsel, former judges and a variety of IP professionals. The benefit of this panel is that parties can choose from a selection of neutral arbitrators with expertise in the relevant area of the IP rights in dispute.
Availability of interim measures. Given the nature of IP infringement, time is often of the essence. It is expressly permitted by the Arbitration Ordinance to ask arbitrators to make interim awards, including for the preservation of assets and to refrain from taking action. The Hong Kong courts can also provide access to urgent interim relief in support of arbitration.
Confidentiality. As a general rule, the arbitral process, including the existence of the proceedings, is confidential. A key attraction of arbitrating IP disputes is the ability to keep sensitive and/or technical information confidential.
Awards. Arbitral awards are typically not subject to appeal or review on the merits, whereas litigation can last for many years once a party invokes an appeal process. Under the Arbitration Ordinance, arbitral awards can provide for any relief that may be ordered by a court. Typical remedies in IP disputes such as permanent injunctions, findings of infringement, declarations of invalidity and damages or royalties will therefore also be available.
Enforcement of awards. Under the New York Convention, to which Hong Kong is a signatory, over 155 contracting states globally have agreed to recognise and enforce foreign arbitral awards as they would a domestic court judgment.
Hong Kong is repeatedly ranked as one of the world's most preferred seats of arbitration in light of its well-developed arbitration system and significant number of experienced arbitrators. It is expected that the clarification to the Arbitration Ordinance will cement Hong Kong's status as a leading venue for the arbitration of IP disputes.
1. The Amendment Ordinance is to come into operation on the first day of the seventh month immediately following the month during which the Ordinance is published in the Gazette.
