Provisions mean IP disputes arbitrable in Hong Kong

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New provisions in the Arbitration Ordinance came into force on 1 January 2018 to confirm that all disputes relating to intellectual property rights (IPR), whether registered or subsisting within or outside Hong Kong, will be arbitrable as between the parties to an arbitration, and that any arbitral award will not be contrary to public policy only because it concerns a dispute relating to IPR.

The reform is part of the Hong Kong government’s continuing efforts to enhance Hong Kong’s attractiveness as a leading arbitration centre.

WHAT THIS MEANS

In many jurisdictions, certain aspects of IPR disputes are considered non-arbitrable, i.e., not capable of being finally resolved by arbitration. For example, in Mainland China, the Copyright Law expressly provides for copyright disputes to be arbitrable if this is agreed in writing by the parties involved, whereas the validity of patents and registered trademarks would be treated as administrative matters that are non-arbitrable.

In Hong Kong, the legal position was previously uncertain. The new provisions provide certainty in this regard, especially on issues relating to the validity of registered patents, trademarks and designs.

The new provisions confirm that under Hong Kong law all disputes relating to IPR can be arbitrated between the parties to the dispute. By choosing to arbitrate their IPR disputes, parties can benefit from advantages such as appointing arbitrators with specialist IP knowledge, or maintaining confidentiality over the process, which would help reduce any impact of the dispute on their brand, corporate image or reputation.

Parties with disputes across multiple jurisdictions (for example, in trademark infringement cases) can also agree to resolve all those disputes in a single arbitration, saving substantial time and costs, and avoiding inconsistent outcomes.

KEY FEATURES OF AMENDMENTS

Scope of IPR disputes. An IPR is given a very broad definition. It includes patents, trademarks, designs, copyrights, domain names, trade secrets and any other IPR of whatever nature. The new provisions apply to any type of dispute relating to any IPR, irrespective of whether it is protectable by registration and registered, or whether it subsists in Hong Kong.

IPR disputes include disputes over: (1) the enforceability, infringement, validity, ownership, scope or duration of an IPR; (2) a transaction in respect of an IPR; and (3) any compensation payable for an IPR.

Arbitral awards – final, binding and enforceable. Arbitral awards are only final and binding on the parties to the arbitral proceedings. This extends to any person claiming through or under any of the parties that have assumed the legal rights and obligations of that party. Accordingly, an award is usually not binding on third parties − for example a licensee − that are not parties to the arbitration, unless the parties have agreed, or later agree, to confer the benefits of an award on that third party.

Due to this limited effect of an award, an award cannot be registered or recorded by the registries of the Intellectual Property Department in Hong Kong. So while an arbitral tribunal may find that a registered IPR is valid or invalid, as between its owner and the other party, the courts or the IP registrar may reach a different conclusion, as between the owner and a third party.

The new provisions also confirm that Hong Kong courts may not set aside or refuse the recognition and enforcement of arbitral awards only because they involve IPR disputes.

Enforcement in foreign jurisdictions and Mainland China. Hong Kong awards are enforceable overseas under the auspices of the New York Convention, a multilateral treaty that facilitates recognition and enforcement of arbitral awards among signatory states. As between Hong Kong and Mainland China, awards are enforceable through a separate mutual legal arrangement.

However, both the New York Convention and the mutual arrangement allow a court to refuse enforcement if the subject matter of the dispute in question is non-arbitrable under the law of that country. So whether an award in relation to an IPR is enforceable in a particular jurisdiction depends on the law of that jurisdiction. For example, certain jurisdictions may refuse enforcement of an arbitral award on the validity of a registered IPR on the basis that this issue is non-arbitrable, as only state authorities and/or the courts are competent to determine it.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com