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Arbitration of Disputes over Intellectual Property Rights in Hong Kong
1 January 2017

The present Hong Kong Arbitration Ordinance does not contain any specific provision dealing with the question of arbitrability of disputes over intellectual property rights (“IPRs”). There is also no authoritative judgment in Hong Kong regarding IPR disputes. The law is widely regarded as unclear on this issue. As a result, Hong Kong legislators have proposed amendments to the Arbitration Ordinance to clarify that IPR disputes can be the subject matter of arbitration and it is not contrary to the public policy of Hong Kong to enforce arbitral award solely because the award concerns dispute or matter relating to IPRs. The goal is to remove any ambiguity in the law and to attract parties to resolve their IPRs disputes in Hong Kong by arbitration.

After further consultations and amendments, the Arbitration (Amendment) Bill was gazetted on 2 December 2016. The Bill, if passed, would come into operation on 1 October 2017 for most of its provisions.

Present Arbitration Ordinance

Section 81(1) of the Arbitration Ordinance adopts Article 34 of the UNCITRAL Model Law and provides that an arbitral award may be set aside if the court finds that (i) the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Hong Kong; or (ii) the award is in conflict with the public policy of Hong Kong.

Further, under section 86(2) of the Arbitration Ordinance, enforcement of an award referred to in section 85 may be refused if (i) the award is in respect of a matter which is not capable of settlement by arbitration under the laws of Hong Kong, or (ii) it would be contrary to public policy to enforce the award.

The above sections therefore create an ambiguity as to whether disputes involving IPRs are capable of resolution by arbitration and there is also no definition or reference as to what types of subject matter are not capable of resolution by arbitration.

Major Proposed Amendments

The Bill seeks to provide specific statutory provisions to clarify the ambiguity in the above position.

Section 103B of the Bill provides a clearer and wider non-exhaustive definition of IPRs which include patent, trade mark, design, copyright, right in confidential information, trade secret or know-how or “any other IPR of whatever nature”.

Under section 103C of the Bill, IPR disputes is defined to include disputes over (a) the enforceability, infringement, subsistence, validity, ownership, scope, duration or any other aspect of an IPR; (b) a dispute over a transaction in respect of an IPR; and (c) a dispute over any compensation payable for an IPR.

Section 103D of the Bill confirms that IPR disputes referred to in section 103C can be settled by arbitration as between parties to the IPR dispute despite the fact that a law of Hong Kong or elsewhere gives jurisdiction to decide the IPR dispute to a specified court or tribunal and does not mention possible settlement of the dispute by arbitration.

Section 103E of the Bill has the effect that third party licensees do not directly benefit from or be subject to the liabilities of an arbitral award involving IPR unless they have been joined as parties to the arbitral proceedings. The right and liability between a third party licensee and a party to the arbitral proceedings arising in contract or operation of law will not be affected.

Sections 103F and 103G of the Bill clarify that an arbitral award will not be set aside only because the award involves an IPR. Also, the enforcement of an arbitral award will not be refused only because the award involves an IPR.

S103H confirms the finality and binding effect of an arbitral award to the parties to the arbitration and not beyond. This follows from Section 103E.

In addition, section 103I of the Bill provides that a party may put the validity of a patent in issue in arbitral proceedings, which was previously unclear.

Conclusion

In short, the amended Arbitration Ordinance will allow more parties to resolve their IPR disputes through arbitration in Hong Kong. It clarifies the ambiguity in relation to the arbitrability of IPR disputes when Hong Kong has been chosen as the place of arbitration and/or the governing law of arbitration. It is hoped that the amendments will enhance Hong Kong’s competitiveness as an alternative dispute resolution centre involving IP matters as well as becoming an IP trading hub in the region.

Parties to any IP agreement may now insert an arbitration clause in the agreement involving IPRs such as assignment, licensing, distribution, franchising etc and choose Hong Kong as the place of arbitration and the governing law of arbitration. They may also be motivated to settle their disputes involving IPRs through arbitration in Hong Kong as a result of the amendments.

If you have any queries regarding the above eNews or case or any other questions relating to intellectual property rights’ registration, enforcement or dispute matters, experienced lawyers in our Intellectual Property department will be pleased to assist you.

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