Current Legal Position
Furthermore, under section 86(2) of the Ordinance, enforcement of an award 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. Accordingly, there has been concern as to whether enforcement of an award involving intellectual property rights (particularly on issues of validity) would be refused in Hong Kong by virtue of section 86(2) of the Ordinance.
Justifications of the Proposed Amendments
In relation to the enforcement of an arbitral award, to put the matter beyond doubt, it is proposed to clearly provide that disputes involving intellectual property rights, whether they arise as the main issue or an incidental issue, are capable of resolution by arbitration and it would not be contrary to public policy to enforce the ensuing award. As regards the reasons for setting aside an arbitral award, similar positions are suggested to be adopted.
Definition of “intellectual property rights”
Awards not binding on licensees of intellectual property rights
Under the current proposal, if a dispute concerning infringement and validity of a registered trade mark is to be resolved by arbitration, and the arbitrator decides that the trade mark is invalid and the infringement claim fails, the effect of the arbitral award under the proposed Arbitration (Amendment) Bill 2016 is that the trade mark would only be considered invalid as between the parties to the arbitration only; nevertheless, it remains validly registered as against any third party. The winning party can frame the relief such that the arbitral tribunal can make an order against the losing party to surrender the trade mark or to assign it to the winning party. If the losing party in the arbitration files a notice to the Registrar of Trade Marks to surrender or assign the trade mark pursuant to the award, the Registrar of Trade Marks will make the appropriate entry in the register. Even if the losing party refuses or fails to file a notice of surrender or assignment, the winning party may apply to the court for leave to enforce the arbitral award under Part 10 of the Ordinance, and upon leave being granted, the Registrar of Trade Marks will alter the register or enter the particulars of the court order as a registrable transaction accordingly.
While the proposed amendments are yet to be enacted, there remains uncertainty as to the arbitrability of disputes involving intellectual property rights in Hong Kong. In negotiating the dispute resolution clause in an agreement involving intellectual property right transaction(s), parties to the agreement should be minded to such uncertainty. Parties should seek competent legal advice to minimise the risks of potential issues as to the mode of dispute resolution and associated costs, should disputes arise out of such agreement in the future.
The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.
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