What arbitration can and cannot decide
U.S. law expressly allows parties to arbitrate patent disputes, including questions of validity and infringement, and copyright and trademark disputes between contracting parties are routinely arbitrated as well. An award binds the parties, not the world: an arbitrator cannot cancel a registration on the public register or invalidate a patent against everyone else. Some countries are more restrictive about arbitrating the validity of registered rights, which matters when a dispute spans several jurisdictions. Interim relief, such as an order to stop sales, may be available from an emergency arbitrator or from a court, depending on the rules chosen.
Drafting the clause
Many problems with IP arbitration begin with a clause written in a hurry. The clause should name the institution and its rules, such as those of the WIPO Arbitration and Mediation Center, the ICC, the ICDR, or JAMS, along with the seat, the language, and the number of arbitrators. It also needs to say which disputes are covered, since a narrow clause may reach royalty payments but not a claim that the licensee infringed outside the license. Confidentiality is often assumed but should be stated, because institutional rules protect it to different degrees. Parties often want arbitrators with technical or industry background, and the clause can require it.
Enforcing the award and weighing the choice
Arbitral awards are enforceable in most countries under the New York Convention, often more easily than a U.S. court judgment, which is a large part of their appeal in cross-border licensing. Grounds for setting aside an award are narrow, so a mistaken award is usually final. Costs can be lower than litigation but are not always, especially with three-member tribunals and heavy technical evidence. In a first conversation we read the existing clause or the deal being negotiated, consider where the other party has assets, and discuss whether arbitration, mediation, or litigation fits the dispute.
