02 Sep, 2020

Intellectual Property Disputes – Suitable for Arbitration?

Natural persons and companies in Serbia have a large number of disputes, covering all areas of business and legal life, including disputes over intellectual property rights. Resolution of these disputes is usually sought in court, however there are also alternative solutions. As an alternative dispute resolution mechanism, arbitration could resolve disputes more quickly, in a more efficient way, and at a lower cost, compared to a resolution sought in courts. Prompt resolution of disputes before the arbitration is possible thanks to electronic correspondence, strict deadlines, and the limited number of hearings through which a resolution can be achieved so that the arbitrators reach a decision within one year from the submission of the request to the arbitration institution.

The benefits of arbitration can be used by all natural and legal persons in Serbia, however, the Serbian Arbitration Act (“AA“) explicitly imposes a limit to this rule when it comes to the issue of the subject matter of the dispute: arbitration can resolve property disputes and cases related to the rights that the parties are free to dispose of.  Also, disputes for which the state court has exclusive jurisdiction are excluded from the scope of arbitration.

However, the question arises if disputes related to intellectual property rights can be solved through arbitration, or if they are within the exclusive domain of courts?

Could you freely dispose of intellectual property rights?

The arbitral settlement of disputes may be arranged for disputes concerning property rights which the parties may freely dispose of.  Certain situations, such as, for example, contractual relations are clear: a party which undertook a certain obligation by contract and has performed it, may file a lawsuit in court if the other party failed to fulfill their obligations.

However, there are many cases when the concept of disposing of a right is blurry, and the question of whether disputes over such rights can be left to arbitration remains.  A typical example is intellectual property rights.

In order to answer this question correctly, it should be kept in mind that intellectual property law includes a number of rules which protect intellectual property, and those can be divided into two main groups: i) copyright and related rights and ii) industrial property rights, depending on the fact whether the involvement of state authority is necessary for one person to be recognized as a right holder.  For example, patent registrations require a decision of a competent authority  – Intellectual property office – confirm a right. 

On the other hand, copyright, as an intellectual property right, comes into existence simply through the creation of a work that meets the conditions prescribed by law that define which works can acquire the characteristics of an author’s copyright.  However, the Serbian law allows the author to deposit their work with the Intellectual Property Office: this does not affect the existence of the copyright but allows the author proof of authorship of the work.

Furthermore, we must note that the most common disputes brought before arbitrations are those that arise between companies.  Companies are in a constant struggle to secure a better position in the market and weaken their competitors.  In that struggle, industrial property rights can provide a great advantage and be a powerful weapon.  The importance of industrial property rights is reflected in the fact that the title-holding company can commercialize the subject of protection and prohibit all other entities from economically exploiting it (through obtaining a patent), for example, that goods or services of that economic entity have a new quality that will increase the number of customers (e.g. new plant varieties, topographies of the integrated circuit) or be simply recognizable on the market by being marked with a mark indicating the origin of the goods (e.g. trademark, geographical indication).  A brand can be so distinguished, that customers associate the brand with a special quality, which inevitably changes their consumer behavior, and ultimately, it is harder for the competitors of such a company to fight for a better market position.  In that sense, industrial property rights give companies a certain type of “monopoly” over the economic exploitation of protected goods, which stems from the administrative bodies which examine whether conditions prescribed by law are met to enable such a monopoly.

The behavior of companies on the market implies resorting to numerous means in order to attract as many customers as possible.  Contracts that allow other companies to use, for example, an invention or a trademark are concluded.  Numerous unauthorized actions, such as imitation or unauthorized production and placing on the market, are also taken.  Anyway, the economic exploitation of innovations is a fertile ground for different types of disputes.  The question which arises increasingly often is – can these disputes also be brought to arbitration?

Decision on the Intellectual property rights through arbitration: mission (im)possible?

Proceedings which concern origin, duration and termination of rights arising from a decision of a competent state body may not be initiated before arbitration.  These rights are not the one that parties can freely dispose of, which is a precondition for arbitration decisions and, secondly because their legal existence is decided by the competent authority, which examines the fulfillment of the conditions given by law for one holder to be the only one on the market.

The situation is different if a patent holder, for instance, concludes a license agreement with a third party.  All property aspects of such contracts can be subject to arbitration.  For instance, if there is a breach of a contractual obligation, the arbitral tribunal will be able to act in this dispute and to rule on whether there has been a breach of the contractual obligation, and the arbitral award will be equal to the court decision.

Nevertheless, it can be concluded that arbitration has its place in the world of intellectual property rights, although its jurisdiction is limited.  However, the parties to contracts that trade intellectual property rights should consider adding an arbitration clause, because arbitration as an alternative way of resolving disputes will show all of its qualities – professional, fast and efficient dispute resolution while ensuring the enforceability of the decision in most countries.

Despite these limitations, which owe their existence to the state and its special interest to keep the resolution of some disputes for itself, arbitration tribunals remain with their hands full of cases related to intellectual property

Authors: Danica Misojčić and Suzana Dončić