The Impact of Public Policy Considerations - Chapter 9 - Arbitration of International Intellectual Property Disputes, Second Edition
Richard Kreindler is a partner of Cleary Gottlieb Steen & Hamilton LLP in Frankfurt and New York and has specialized in international disputes matters since 1985. He is a US national, was educated in the US and Germany, is admitted to the Bar in New York and Paris, and is a professor of law in Germany. He has acted as counsel, arbitrator, expert and mediator in numerous commercial and investment-treaty based arbitrations, focused on IP, energy, infrastructure, post-M&A, and public international law. He has authored numerous treatises and other publications and lectures; his lectures in 2012 at the Hague Academy of International Law are published in Volume 361 of the Collected Courses. He chaired the global working group resulting in the International Bar Association (IBA) Rules on Taking of Evidence in International Arbitration (2010). He is a Fellow and Chartered Arbitrator of the Chartered Institute of Arbitrators, London. He has served in an editorial, board or other advisory capacity for, among others, Arbitration International, German Arbitration Journal, German Institution of Arbitration, Global Arbitration Review, ICC Institute of World Business Law, International Arbitration Law Review, Swedish Arbitration Association and Vienna International Arbitration Centre.
Jean-Yves Garaud is a partner based in Cleary Gottlieb’s Paris office. His practice focuses on international arbitration as well as on related court litigation. He regularly acts as arbitrator in commercial disputes. He has long experience in IP related disputes both in court and in arbitration. Mr. Garaud has been published by Les Echos Executives and Le Club des Juristes, among other outlets. He has also been recognized by Benchmark Litigation Europe as a “Dispute Resolution Star,” and by Chambers Global, Chambers Europe, IFLR 1000: The Guide to the World’s Leading Law Firms, The Legal 500 EMEA, and Who’s Who Legal as a leading lawyer for Dispute Resolution (including Commercial and Transactions, Antitrust and Competition, Restructuring and Insolvency), International Arbitration, and White-Collar Crime, for regions including France, Europe, and Africa.
Arbitration is essentially private dispute settlement based on party autonomy. Party autonomy, however, is not without its limits. There are important limitations on party autonomy, most notably, on grounds of public policy. The importance of this limitation is demonstrated by the fact that public policy is only one of two grounds expressly set forth in the New York Convention by which a court may, under its own law, refuse to enforce an arbitral award, the other being arbitrability. It is this intersection of party autonomy and public policy that is of particular interest, and a special challenge, in the area of arbitration of intellectual property disputes.
First, there may be public policy limitations to the general right to submit disputes to arbitration. In the public interest, a state can reserve certain subject matters to the exclusive domain of the national courts and thereby exclude or severely circumscribe arbitrability. Moreover, depending on the applicable law and the specific circumstances, public policy considerations may also render an arbitration agreement void or voidable. Since the arbitration agreement is the basis for any international IP arbitration, voidness or voidability of the arbitration agreement may well translate into an undermining or lack of jurisdiction of the arbitral tribunal and, hence, to a lack of basis for the arbitration proceedings overall.
Second, there may be public policy limitations to both the substantive and the procedural laws that may be applicable to the dispute. So-called mandatory laws may limit the parties’ freedom of choice of the substantive law or laws. So-called procedural public policy, overlapping in large part with concepts of due process, may restrict the arbitral tribunal’s otherwise existing discretion to determine the procedural course of the arbitration.
Third, there may be public policy limitations to the enforcement of an arbitral award. National arbitration laws typically include public policy issues among the grounds for challenging international arbitral awards at the seat of the arbitration. Public policy violations are, as previously noted, also a ground for refusal of enforcement pursuant to Article V of the New York Convention.
In the context of IP disputes, public policy considerations can be of particular relevance inasmuch as the existence of certain IP rights, such as patents and, in almost all countries, trademarks, is entirely dependent on a state grant of protection, and thus particularly implicates public interest. Therefore, certain IP disputes can give rise to questions of arbitrability; this issue is discussed in more detail in chapter 2. In addition, due to the public interest relevance of IP rights for the public good, illicit behavior in the application for, or in the use of, IP rights can result in a defense of substantive invalidity or unenforceability as to the IP right in question (e.g., if a patent was obtained through fraud on the patent office or if its use gives rise to a violation of applicable antitrust law). Moreover, such conduct can also result in a public policy defense at the subsequent vacatur and/or enforcement stage.
This chapter discusses, first, the meaning, function and relevance of public policy considerations in international arbitration in general and with respect to IP disputes; second, specific public policy limitations to international arbitration and third, the practical relevance of public policy considerations at different stages of the arbitration including the post-award stage. It concludes with a summary and practical considerations.