What Should Your SME Do to Resolve Disputes Related to Intellectual Property?

Arbitration and Mediation

Enforcing the Intellectual Property Rights of Your SME

The more valuable the intellectual property assets of your SME, the greater the possibility that others would want to make use of them, if possible, without having to pay for them. Do you have a strategy to prevent this? If despite your best efforts, someone is imitating, copying or infringing the intellectual property rights of your SME without your authorization, then what should you do? What are your options? How do you weigh the costs and benefits of various alternatives? Or would you simply rush to court?

You have the option to "ignore" the violation of the IP rights of your SME if the loss of income, sales or profits appears to be negligible from your point of view. If the scale of violation is already significant or will soon be so, then you must find out, as soon as possible, the culprits and deal with them expeditiously but methodically. At other times, however, you may be accused of stealing or infringing the IP rights of someone else intentionally or unknowingly.

If you have a dispute with a party to a contract with your SME, or a dispute in a business venture where there is no contract, it would be prudent to have included special provision in the pre-existing contract (if there is one) or, alternatively, to make a contract after the dispute arises, for the dispute to be referred for arbitration or mediation.

In those situations where there is an alleged infringement or a dispute, before taking any formal action, it would be prudent to seek legal counsel from a competent IP professional to more accurately assess the likelihood of a favorable outcome for your SME, at the lowest possible cost. The cost could be calculated in terms of the time that may be taken to obtain such a decision, the fees that you would have to pay to the court(s) and to your attorney(s), and the direct and indirect costs of alternatives that you would have to explore and follow in the event of a negative decision. You also have to assess the chances of winning your case, the amount of compensation and damages that you can reasonably expect to get from the infringing party as well as the likelihood and extent of reimbursement of attorney’s fees in case the final decision is in your favor.

It is obvious that dealing with these kinds of situations requires a careful weighing of the pros and cons of different alternatives.

In many instances, the most expensive way to deal with infringement may be litigation in a court of law that has jurisdiction over the issue, in particular, when IP rights of your SME have been violated by a number of ‘competitors’ in the same or different jurisdictions.

In the latter situation, your SME would have to enforce its rights in different places before different courts. For this reason, you may want an alternative dispute resolution mechanism - usually "arbitration" or "mediation" - which may be less costly and less time-consuming for your SME. Arbitration generally has the advantage of being a less formal procedure than court proceedings, and an arbitral award is more easily enforceable internationally. An advantage of mediation is that the parties retain control of the dispute resolution process. As such, it can help to preserve good business relations with another enterprise with which your SME may like to collaborate in the future.

Depending on the merits of your case, mediation (or conciliation) and/or arbitration may be a good alternative to court proceedings. These alternative options are, however, generally available only when the dispute over IP rights is between parties to a contract, for example, between a licensor and a licensee, or between joint venture partners, who have agreed to take recourse to mediation and/or arbitration in preference to adjudication in a competent court of law. It is prudent to consider the possibility of a dispute and provide means for its settlement at the time of drafting the original contract. Once a dispute has arisen, it is more difficult and sometimes even impossible to reach an agreement to settle the dispute by mediation and/or arbitration. Your SME may wish, however, to use the option to request the WIPO Arbitration and Mediation Center to contact the other enterprise, with which the dispute has arisen, in order to help the parties to agree to the submission of the dispute to the Center for settlement under the WIPO Mediation, Arbitration or Expedited Arbitration Rules. Often, mediation and arbitration are a very good substitute or at least, in the case of mediation, a less expensive prelude to formal litigation. As part of your business strategy, your SME would be well advised to incorporate appropriate clauses in agreements so that the option of dealing with IP disputes first (and possibly only) by recourse to mediation or arbitration if available.

Amongst a number of institutions that your SME can address for seeking assistance in resolution of its dispute without recourse to court proceedings, the WIPO Arbitration and Mediation Center is one that provides a variety of services for the resolution of commercial disputes between private enterprises, including SMEs. The Center provides services in relation to

Acquisition and maintenance of an intellectual property right is meaningless if that right cannot be enforced in the marketplace. It is the threat of enforcement which allows an intellectual property right to be exploited as a commercial asset. When viewed in this context, the existence of an effective enforcement regime becomes a central aspect of a well-functioning IP system.

The main objective of acquiring IP protection is to enable your SME to reap the fruits of those inventions and creations of its employees which resulted in IP rights for your SME. Its intellectual property assets can only lead to benefits when the acquired intellectual property rights can be enforced, otherwise, infringers and counterfeiters will always take advantage of the absence of effective enforcement mechanisms to benefit from your hard work. In a nutshell, the enforcement of IP rights is essential for your SME in order to:

The burden of enforcing IP rights is mainly on the holder of such rights. It is up to your SME as an IP right holder to identify any infringement/counterfeiting of its IP rights and to decide what measures should be taken. Whereas in most cases you would initiate civil proceedings, in the case of counterfeiting and piracy you may consider initiating criminal procedures, if that option is available.

However, it is the responsibility of the national or state governments to establish institutions which facilitate the enforcement of intellectual property rights. The judiciary and, in some cases, the administrative bodies like intellectual property offices or customs authorities are government institutions which may have to deal with infringement or counterfeiting cases. Where border measures are available to prevent the importation of counterfeit trademark goods or pirated copyright goods, customs authorities have a major role to play when it comes to IP enforcement at the international border(s) of your country. According to the provisions of the applicable legislation, the customs authorities have to take action at their own initiative, on request of the right holder, or execute court orders. Furthermore, in some countries, there are industry associations which assist their members in enforcing their IP rights (see Business Software Alliance  or Recording Industry Association of America).

In addition, there is also the option to seek enforcement between parties by a private arbitration or mediation where your contract provides for a dispute to be settled by that means.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) obliges members of the World Trade Organization  (industrialized countries and many developing countries) to provide the prescribed mechanisms for enforcement of intellectual property rights. The relevant provisions of the TRIPS Agreement seek to ensure that civil, administrative and criminal procedures and remedies meet the prescribed minimum standards regarding evidence and availability of injunctions, damages, other remedies, right of information, indemnification of the defendant and administrative procedures.

For your SME as an IP right holder, it is of great practical importance to know that judicial authorities in a large number of countries are vested with powers to order prompt and effective provisional measures aimed at stopping an alleged infringement.

In order to prevent the importation of counterfeit trademark and pirated copyright goods, border measures (at the international border) are available to the right holder in many countries through the national customs authorities . As an IP right holder your SME can be helped more easily by the customs authorities at the border; because otherwise you would have to deal with many infringers once the goods have been distributed in the country.

It is always useful and often necessary to seek expert advice once you have established that someone is infringing your IP rights.

In order to avoid tying up the limited financial and human resources of your SME in formal proceedings, once you have found out that someone is infringing the IP rights of your SME, you should first think of sending a letter (commonly known as “cease and desist letter”) to the alleged infringer informing him/her of the possible existence of a conflict between the IP rights of your SME and his/her business activity (identifying exact area of conflict) and suggest that a possible solution to the problem be discussed.

It is advisable to seek the assistance of an attorney when one writes such a “cease and desist” letter in order to avoid court proceedings initiated by the alleged infringer protesting that no infringement has taken place or is imminent. This procedure is often effective in the case of non-intentional infringement since the infringer will in most such cases either discontinue his activities or agree to negotiate a licensing agreement.

When you are faced with intentional infringement, including, in particular, counterfeiting and piracy, you are well advised to seek the assistance of law enforcement authorities to surprise the infringer at his/her business premises in order to prevent an infringement and to preserve relevant evidence in regard to the alleged infringement. Furthermore, the infringer may be compelled by the competent judicial authorities to inform you of the identity of third persons involved in the production and distribution of the infringing goods or services and their channels of distribution. As an effective deterrent to infringement, the judicial authorities may order, upon request of your SME, that infringing goods be destroyed or disposed of outside the channels of commerce without compensation of any sort.

If you consider it in your interests to avoid court proceedings, you may consider making use of available alternative dispute mechanisms such as arbitration or mediation (see “Arbitration and Mediation”).