Arbitration opens up avenues in intellectual property and competition law

Conflicts in Patents, Trademarks, Intellectual Property, Unfair Competition or Competition Law are regulated in specific laws which traditionally have been considered ‘public order’ because they defend public interest: freedom of competition, consumer rights of knowing what they are buying, etc. So, therefore, only the courts could resolve them.

This situation is changing. For example, the Trademark Law allows companies who dispute a brand registration, to submit the dispute to arbitration. These possibilities are beginning to be applied in practice. Therefore, if the parties have a dispute about trademarks, patents or intellectual property they can submit the dispute to arbitration. The award that the arbitrators determine is as legally binding as a court order.

1.- Arbitration and Competition Law

1.1.-Jurisprudence, first in the USA and later in ECJ, has been admitting the application of Competition Law through arbitrators.

Therefore, it is not against Public Order that the arbitrators examine if the contract on which they are arbitrating is against Competition Law. Not only can they but they also ought to do it. It would contradict ‘Public Order’ if the arbitrators decided whether the parties complied or not with the contractual obligations, if the latter were contrary to Competition Law; arbitration would be void.

1.2.- It is more to do with whether one company denounces another for abusing a dominant position or agreements against competition, then arbitration can resolve the problem. Arbitration is already accepted at Community level, in these matters, and could be extended through Spain.

2.- Distribution/Franchise Contracts

2.1.- Distribution or franchise contracts have the same problem with clauses about Intellectual or Intellectual  Property (patents or trademarks). Traditionally, arbitrators could only resolve conflict in the contract, but not the dispute about trademarks, patents or intellectual property. It was a paradoxical situation: the arbitrator left half the questions unresolved.

If arbitration was to be extended to all conflicts, the same arbitrator could resolve them all (contracts and intellectual/Intellectual property).

2.2- It is usually sustained that patents, trademarks, intellectual property, rights, etc. cannot be arbitrated upon because they are included in public registers and, therefore, have an effect on third parties: it is not merely a debate between parties about a contract.

What happens if the claim is answered by alleging lack of validity of the brand which is being claimed? First, it is necessary to make a distinction between: the contract itself and the relationship between the parties (unquestionably arbitral) and the registered rights which can affect a third party.

The stance which sustains that arbitrators can also make awards on registration validity is being extended, if they allege material to be exceptional (which does not need a declarative statement) but cannot enter if they counter-claim on this invalidity. It is more the case, in our understanding, that the award could also be extended to validity inefficiency, not erga omnes but inter partes, that is, that the arbitrators can establish that – independent of registrability or not of the title – one of the parties cannot claim against the other.

3.- Arbitration without previous contract

Arbitration could also be extended to cases in which the parties are arguing directly over a problem about the registration validity of a brand or patent. All that would be needed would be to submit the conflict, in written arbitral agreement, to the corresponding arbitrators.

As we have said, these arbitrations which ‘brush Public Order’ are allowed by the Trademark Law and by European Competition regulation – and practice.

Along the same lines, for example, two companies in conflict about unfair competition could resort to an arbitrator: he could study the case, arrive at a rapid solution smoothing the process and avoiding costs for both parties and at the same time he would ensure compliance of the Law, and Public Order.