A look at arbitration’s role in resolving patent disputes

Few would argue the U.S. legal system is perfect. It is what we have and it is up to us to manage it in ways that achieve optimal justice. In recent years, the concept of arbitration has taken root. The idea being that by removing disputes from courts, resolution becomes more efficient and less costly.

Businesses seem to like these private venue methods. According to a recent study by the University of California Davis Law Review, 81 of the 100 biggest U.S. companies require arbitration of disputes. But not everyone agrees that this is a good thing. Critics say the arbitration destroys consumer rights.

What does this mean for patent law?

The move toward arbitration is as apparent in intellectual property law as any other practice area. Indeed, some legal observers say arbitration can be particularly beneficial in patent disputes because it allows for customizing resolution procedures before differences arise. Because of this, arbitration agreements are more common between patent holders and licensees.

The question this prompts some legal scholars to ask is, can such agreements be valid in the context of patent dispute resolution procedures created under the America Invents Act (AIA) – including inter partes reviews (IPR)?

The concern outlined in one Columbia Law Review analysis is this. Under a couple of 1990 court decisions, a party bound by an arbitration agreement can also request government administrative bodies, such as the U.S. Patent and Trademark Office, to investigate disputed issues. However, it’s conditional. The review process must be one that is examinational and in which the petitioner has little or no involvement outside of the initial filing.

The author notes that IPR and other reviews created by the AIA are conducted more like trials that require participation of all parties throughout the process. Because of that, he suggests patent holders could use arbitration agreements to block licensees from raising challenges through IPR. He says that threatens to erode the benefits lawmakers intended to create in passing the AIA, so he concludes that swift congressional or court action is needed to prevent arbitration agreements from being used to block access to IPR and other reviews.

It is not our purpose here to take a side on this issue. We raise the subject to observe that legal processes are complicated and because of the challenges involved, enlisting skilled counsel is important to effectively manage the system to optimal benefit.

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