HK AS AN INTERNATIONAL ADR CENTRE WHY AND WHEN TO USE IP ARBITRATION. Andrew Liao 4 December 2015

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1 HK AS AN INTERNATIONAL ADR CENTRE WHY AND WHEN TO USE IP ARBITRATION Andrew Liao 4 December 2015

2 IP Arbitration- Context DOJ continues to support the development of Hong Kong s ADR (arbitration and mediation) services. (2015 Policy Initiatives) HKSAR Gov. s policy to promote HK as an international IP trading hub- arbitration and mediation services are indispensable components (today s focus) Post CJR, HK courts promote mediation to resolve disputes.

3 Outline 1. HK as an IP Trading Hub 2. Advantages of IP Arbitration over IP Litigation 3. Comparing IP Arbitration with IP Litigation

4 1. IP Trading New initiatives in IP trading in recent years- from conventional mode of transactions (buying and selling, licensing of IPRs, tech transfer, character merchandising, franchising etc.) to transactions through M&A, joint R&D, technical support etc. We also see intermediaries playing a major role in facilitating IP transactions. There is a need to connect IP owners with users through development of centralized or clustered IP trading platforms, marketplace, centre or hub.

5 Examples of IP trading initiatives: Asia IP Exchange- a free online IP trading platform developed by HKTDC WIPO Green- online trading platform for commercialization and licensing of green technology A large number of IP (including patented technology, cultural assets) exchanges and centers have been set up in various places in China (including Beijing, Shanghai, Tianjin, Shenzhen), providing business matching and professional support services for building a countrywide IP trading market.

6 The Danish Patent & Trademark Office has set up an IP Marketplace, an online platform listing patents, utility models, designs and trademarks offered for sale or licence, at the same time listing technology required by potential buyers or users. Private firms offering online IP trading platforms and supporting services.

7 Opportunities: the latest trends indicate new opportunities in global IP trading IP & economic growth IP & business value WTO-TRIPs & tech transfer Trend of IP owners involved in trading Narrowing of gap between North & South China s economic development

8 Why Hong Kong? World s freest economy, simple tax system & low tax rate, availability of excellent business and professional services Clean government, rule of law & independent judiciary with power of final adjudication, international arbitration/mediation centre, sanctity of contract World class IP regime & ecosystem, attracting IP intermediaries International business centre

9 Gateway between China & the world proximity to and strong network in the Mainland market Springboard for Mainland enterprises going out

10 HK as an IP trading hub The Chief Executive established the Economic Development Commission (on 17 January 2013). Under which, there are four Working Groups dedicated to studying specific industries in an indepth manner including Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries. In March 2015, the Working Group on IP Trading released a report with recommendations and strategies to further promote Hong Kong as an IP trading hub in the region. The Working Group has drawn up 28 recommended measures which fall under 4 strategic areas. Fostering IP intermediary services and manpower capacity is one of the 4 strategic areas.

11 IP intermediary services include: Advice & Consultancy Agency & Brokerage Valuation & Due Diligence Financing & Insurance Legal & Accounting Dispute Resolution Our focus today is on alternative dispute resolution (ADR).

12 ADR is a major part of the IP Intermediary Services. Why is ADR important? Increased IP transactions and volume in recent years bring about a higher chance of dispute. While IP litigation is common for resolving domestic IP disputes, increasing use of ADR is inevitable for resolving international IP disputes. The most common forms of ADR are arbitration and mediation.

13 2. Arbitration Arbitration is a consensual and confidential procedure in which a dispute is submitted to 1 or more arbitrators who make a binding decision on the dispute. There are numerous advantages in employing arbitration as a mean of dispute resolution.

14 Advantages of arbitration Most suitable for resolving international IP disputes It is consensual and confidential Arbitration is based on the consent of the parties to submit their disputes to be resolved by 1 or more arbitrator(s). There must be an agreement to arbitrate. Arbitration proceedings are conducted in private. As such, parties can avoid disclosure of technical and trade secrets, and risk to reputation.

15 Flexibility of Procedures- Parties are free to chose: The applicable procedures and law The seat of arbitration The place of hearing Their lawyers and advisers The arbitrator(s) The procedure therefore is neutral to the law, language and culture of the parties and thereby avoiding any home court advantage that one of the parties may enjoy in a court-based litigation.

16 Ability to appoint experts in the relevant field Parties can appoint arbitrators who are experts in the relevant IP area. This is different to court litigation where judges are usually of a more general background. Finality and Enforceability Award is usually final and binding on the parties. It is not subject to review on the merits. Award is enforceable in more than 150 jurisdictions (including the Mainland) which have acceded to the New York Convention

17 3. Arbitration vs Court Litigation Arbitration 1. For both domestic (commercial disputes) and international IP disputes 2. Award only binding on parties to the arbitration 3. Limited appeal option 4. Parties can select arbitrators with relevant expertise Court 1. For domestic IP validity & infringement cases; if involves international element, local court may not have jurisdiction 2. Judgment on validity affect third parties 3. Possibility of appeal 4. Judges may not have relevant expertise

18 Arbitration 5. Enforcement of award in contracting states of the New York Convention, and in the Mainland under Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the HKSAR 6. Ongoing business relationshipmay still remain on amicable terms 7. Confidential- avoid disclosure of technical and trade secrets Court 5. Judgments enforceable in countries like Australia, Austria, Belgium, Bermuda, Brunei, France, Germany, India, Italy, Israel, Malaysia, Netherlands, New Zealand, Singapore and Sri Lanka: [Foreign Judgments (Reciprocal Enforcement) Order Cap 319A] 6. Hostile breakdown of business relationships 7. Public proceedings though Court may order a controlled method of disclosure to protect confidentiality

19 IP Mediation Facilitative model is commonly used. Report of the Working Group on IP Trading recommends using the evaluative model of mediation for IP disputes, particularly for disputes involving complex legal and technical issues. Advantage of evaluative model: non-binding evaluative opinion Mediation (including evaluative model) is appropriate for multi-jurisdictional IP disputes.

20 IP ADR and IP Trading Hub The HKSAR Government is committed to developing Hong Kong as an international IP trading hub and a leading dispute resolution centre in Asia. IP dispute resolution is an important component of and goes hand in hand with IP trading. A more effective dispute resolution regime would naturally attract more IP transactions to be carried out in HK.

21 Thank you