Arbitration (Amendment) Bill 2016

The second reading of the Arbitration (Amendment) Bill 2016 was commenced at the Legislative Council meeting on 14 December 2016. One of the main objectives of the Bill is to clarify that disputes over intellectual property rights (“IPRs”) are capable of settlement by arbitration as between the parties and to confirm that it would not be contrary to public policy to enforce an arbitral award involving IPRs.

Arbitration has been increasingly used as a means to resolve IPR disputes. It has greater “flexibility” compared to traditional legal proceedings. For example, parties with rights in multiple jurisdictions can have their disputes determined in a single proceeding, which avoids conflicting results. The proceeding and the arbitral award remain confidential, but they will be binding on the parties. The parties can also select their preferred experts as arbitrators.

Despite these advantages, there has been, real or perceived, uncertainty as to whether IPR disputes are arbitrable (which may have an impact on the enforceability of an arbitral award, if successfully challenged). The present Arbitration Ordinance does not specifically deal with this issue, and there is also no authoritative judgment in Hong Kong addressing the point. The Bill, for the first time, stipulates clearly that “IPR disputes” may be arbitrated. The definition of “IPR disputes” under the new Bill is sufficiently broad to cover disputes of whatever nature, whether related to enforceability, infringement, subsistence, validity, ownership, scope, duration or any other aspect. It also clarifies that a third party licensee (whether or not an exclusive licensee) will not be bound by the arbitral award if it is not a party to the arbitral proceeding.

As an illustration of the above, we may refer to an example of a dispute over trade mark infringement. A party which is accused of trade mark infringement will usually challenge the validity of the trade mark registration in question. In the case of arbitration, if the arbitrator decides that the trade mark registration is invalid, the trade mark will be considered invalid as between the parties to the arbitration. However, it remains valid as far as third parties are concerned. The winning party may, however, frame its relief in such a way as to seek an order from the arbitral tribunal against the registered trade mark owner directing him to surrender the mark or to assign it to a particular party. If the losing party refuses to execute the order, the party may apply to the Court for leave to enforce the arbitral award. Under the current Ordinance, there has been some uncertainty whether the registered owner may challenge the order by questioning the arbitrability of IPR disputes. The Bill aims to ensure that an arbitral award will not be unenforceable simply because the subject matter concerns the validity of a trade mark.

The Bill has been widely welcomed by the intellectual property sector and is in line with the stated policy of the Hong Kong government to develop Hong Kong as a leading centre and hub for intellectual property trading by providing an ideal platform for parties to resolve their multinational disputes with certainty.

Jurisdictions: 

Norton Rose Fulbright, Associate