Voluntary patent arbitration is authorized by the Patent Act in the United States. This is something that may be pursued at the national and international level as recourse for patent infringement.

Arbitration is a method for resolving disputes. Each party submits their dispute to an impartial source who must then deliver a binding decision. When two parties enter into arbitration, they agree that, since they submitted themselves to the process, the decision delivered by the impartial source will be non-appealable, aside from any instances of invalidity in the arbitration clause.

Arbitration Clause

To enter into arbitration, you must sign a contract that contains an arbitration clause, indicating your desire to arbitrate. Alternatively, you can also produce a written agreement, indicating your desire to arbitrate. It is also possible to execute a written agreement independent of the contract, before or after the dispute.

One of the benefits of entering into a contract with a carefully constructed arbitration clause is the fact that it will provide a certain level of predictability regarding liability and investment in the patent license or research agreements. This helps to flush out any risk factors associated with the pending arbitration.

When two parties enter patent arbitration, an arbitration clause will provide a certain level of assurance that the dispute will be settled by a neutral arbitrator, and in a relatively inexpensive manner.

An assurance such as this offers stability for the business partnership which may be strengthened by the understanding that the proceedings will remain confidential and the awards will not be able to be appealed. That means each company may resume their business without worry over negative publicity or looming appeals.

Using arbitration to settle patent disputes benefits all parties because, if a dispute happens to arise, preemptive benefits are in place, even if the agreement to arbitrate is never enacted.

The Federal Arbitration Act

The Federal Arbitration Act (FAA) is in place to level arbitration agreements and codify the national policy which favors arbitration. As such, the FAA ensures all agreements to arbitrate are valid and enforceable, as long as they are dealing with commerce. Once commerce is addressed, the agreement to arbitrate will be considered valid and enforceable, assuming no law already exists in favor of the revocation of a contract.

As a matter of federal law, arbitration agreements are severable from the rest of the contract. This means two things:

  • The validity of the arbitration clause is independent of the validity of the contract.
  • Each challenge shall be decided separately.

You will find this principal referred to as the doctrine of separability. If a challenge arises as to the validity of the arbitration agreement, federal courts can adjudicate it. This may include questions that arise surrounding the development of the agreement to arbitrate.

It is important to note, however, that the language of the Federal Arbitration Act does not allow federal courts to review any challenges pertaining to the validity of the contract as a whole. An example of this would be fraud in the inducement.

A contract's validity must be reviewed by the arbitrator in its first instance. As such, the Federal Arbitration Act states that, if any issue containing an arbitration clause is brought before the United States court system, the courts will remain within the triad of the action until arbitration has been conducted in a manner that suits the terms of the agreement.

International Commercial Arbitration

International Commercial Arbitration applies a principle known as competence-competence. This represents the fact that the arbitrators have the authority within each of their parties to determine the validity of the arbitration agreement. Meanwhile, the United States court system does not generally recognize this principle. Instead, it relies on the Federal Arbitration Act to review such agreements.

The Supreme Court makes it clear, however, that if a challenge arises in the drafting of the arbitration agreement, or the inducing of the arbitration clause, then the federal court may adjudicate.

In 1982, the Patent Act was amended. It now recognizes voluntary arbitration as a method of remedy for patent disputes that relate to infringement or basic validity. This amendment also includes questions surrounding inventorship and claims of interference.

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