IP litigation or ADR: costing out the decision

Abstract

It is currently appropriate to discuss alternative dispute resolution (‘ADR’), while the global economy continues to experience a deep and widespread recession. This is because businesses mired in IP disputes are increasingly reluctant to expend ever-dwindling resources on protection and enforcement of their IP rights. In a similar vein, international patent and trade mark filings in 2009 have fallen by nearly 5 and 17 per cent, respectively [WIPO Press Release PR/2010/632 (patents). Geneva, CH., 8 February 2010; WIPO Press Release PR/2010/634 (trade marks). Geneva, CH., 18 March 2010]. Meanwhile, the IP field has not fully embraced ADR: the percentage of arbitrations has rapidly increased in other areas but not in IP, where it has remained stagnant [H Wei and W Yaxi, Exploration and Development of Arbitration on IP Rights (Part I and II) (2009). The Ministry of Information Industry, Advisory Service Center for Electronic IP Rights, American IP Protection and Antidumping]. A conventional litigation is long and costly, whereas ADR is relatively inexpensive and very fast. In the USA, the average cost of patent litigation is $2M, trademark litigation is $600K, and other types of IP litigation average between $500K and $800K. This, of course, does not include the price of an appeal, which may add another $2M to patent litigation. The time involved is possibly more astonishing: the average IP litigation lasts 2 years. Add an additional year for an appeal [Report of Economic Survey. American Intellectual Property Lawyers Association [2003]]. ADR can take as little as 5 or 6 months. If the time difference would come at a significant cost to your client, then consider ADR, preferably in the original contract. ADR is cost-efficient due, in large measure, to the curtailed procedure. In the case of arbitration, an appeal is rare, only the most serious cases alleging fraud get a second-look. Furthermore, ADR is confidential. For public firms, litigation could affect their ability to raise capital or acquire lucrative contracts because of the requirement that all litigation be disclosed to shareholders or potential shareholders.