Arbitration Gains Acceptance as a Means of Resolving IP Disputes

Part One of a Two-Part Series

Intellectual property disputes typically have been resolved through litigation rather than arbitration. Litigators have seen arbitration as a dispute resolution method geared at matters of private contract. Because intellectual property's very existence has been a product of public policies supporting invention, branding and creativity, the courts have seemed to be the more appropriate locale to handle these disagreements. In the last 20 years, however, arbitration has received increasing attention as an acceptable method of resolving intellectual property disputes.

Part one of this article examines the authorities in this country that permit arbitration of intellectual property matters. It considers arbitration's applicability to specific types of intellectual property disputes and how certain institutions have adapted the arbitration process to intellectual property disputes. Part two will detail factors to weigh when deciding to send an intellectual property claim to arbitration and drafting considerations for arbitration clauses.

Authorities for Arbitrating IP Disputes

Ample authority exists for handling intellectual property contract disputes in arbitration. In addition, statutes and case law in the past 20 years have paved the way for arbitrating disputes regarding the existence or scope of intellectual property.

For patent cases, statutes enacted in 1983 and 1984 respectively authorize the use of arbitration as a means of settling “any dispute relating to patent validity or infringement” and for resolving patent interference cases. 35 USC '294 and 35 USC '135(d). Congress imposed only minor limitations on the use of arbitration. If the arbitrator finds the patent invalid, the parties must notify the USPTO. In addition, the arbitration decision can only bind parties to the arbitration.

Since the passage of these two statutes, patent arbitration has become a highly utilized alternative to protracted litigation. Whereas the typical patent litigation could exceed 5 years by the time all appeal rights are exhausted, an arbitration can end in around a year's time.

With regard to copyright disputes, two landmark cases and their progeny support the use of arbitration to resolve contractual copyright disputes and to confirm the validity of copyrights. In Kamakazi Music Corp. v. Robbins Music Corp., 522 F. Supp. 125 (S.D.N.Y. 1981), the district court granted a motion to stay a copyright infringement trial pending arbitration of infringement and damages claims. The court then confirmed the arbitrator's award, affirming that there was no public policy against arbitration of a copyright infringement claim. The Kamakazi court itself confirmed the validity of the copyright.

The Seventh Circuit court went even further in Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir. 1987). Analogizing to the new patent statute that endorsed arbitration, the court upheld an arbitrator's right to decide the validity of copyright so long as the issue arises in the arbitration of a contract dispute.

While early case law in the area of trademarks and trade secrets frowned upon arbitration, the trend clearly shifted in the 1980s. Trademark disputes (including the validity of trademarks), trade dress disputes, and trade secret disputes have regularly been resolved through arbitration. Courts have upheld arbitrators' jurisdiction to resolve these matters and stayed trials pending arbitration results. See, e.g., Daiei, Inc. v. U.S. Shoe Corp., 755 F.Supp. 299 (D. Haw 1991).

Regardless of whether the case involves patents, trademarks, or copyrights, intellectual property disputes often have an international character. Arbitration remains a viable alternative in these instances. Under the 1938 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, contracting states, of which there are more than 120, must recognize and enforce foreign arbitral awards with certain limited exceptions (eg, the parties lacked capacity; the underlying arbitration clause was invalid; or the award was against public policy.) Thus, the Convention's authority protects the arbitration award and makes it automatically binding in many jurisdictions.

Arbitration as a Standard for Domain Name Disputes

Arbitration has become the preferred method of resolving cybersquatting claims. Cybersquatting has evolved with the Internet as a new form of trademark infringement. Cybersquatters register as domain names numerous versions of trademarks, trade names, brand names, or celebrity names, even though they have no intention of doing business under the domain names. They then sell off the domain names at a profit or use the misappropriated names to direct Internet traffic to their own business sites.

In response to complaints that the domain name registrars were enabling cybersquatting by not screening applications before registering new domains, the Internet Corporation for Assigned Names and Numbers (ICANN), which is responsible for managing the domain name system and accrediting domain name registrars, adopted the Uniform Domain Name Dispute Resolution Policy (UDRP) in 1999. This policy outlines a mandatory, expedited, nonbinding arbitration system to resolve claims of bad faith or abusive registration of trademarks, whether they be common law or registered, as domain names. Thus, arbitration has become a regularly used alternative to litigation because of expert qualified neutrals, speed (resolution within 2 months), and low costs (approximately $1500 to $3000 to challenge one to five domain names and up to $4000 for up to ten domain names).

The UDRP is binding on all ICANN-accredited registrars of Internet domain names. It applies to generic top-level domains such as .com, .net, .org, .aero, .info, .pro, and .biz, as well as to approximately three dozen country code top-level domains (eg, .VE for Venezuela). A claimant under the UDRP must show that the domain name held by the respondent is identical or similar to a trademark held by the complainant, that the respondent has no legitimate rights to the domain name in question, or that the respondent registered and is using the mark in bad faith.

ICANN has designated several dispute resolution service providers to implement the UDRP, including the World Intellectual Property Organization (WIPO), CPR Institute for Dispute Resolution, National Arbitration Forum, and the Asian Domain Name Dispute Resolution Centre. All the providers have their own rules and fee structures for administering a challenge under the UDRP. WIPO, for example, appoints anywhere from one to three expert neutrals, depending on the requests of the parties, to review and resolve the dispute. Typically, there are no in-person hearings. Ultimately, neutrals will order that the domain name in question be cancelled, transferred, or sustained. There are no monetary damages or injunctive relief, but the ultimate business goal of resolving cybersquatting is addressed neatly. The registrars are bound to accept WIPO's resolution and implement the decision within 10 days unless an appeal is filed as an arbitration or in a traditional court setting. (It is noteworthy that a ruling under the UDRP does not prevent a claim under the Anti-Cybersquatting Consumer Protection Act. See, e.g. Storey v. Cello Holdings, L.L.C., 2003 WL 22309235 (2nd Cir., Oct. 9, 2003). This powerful tool is not subject to review in this article.)

In January 2004, WIPO heralded its success in fighting cybersquatting through arbitration under the UDRP, and it reported that cybersquatting remains mostly in the area of high-value brands. Approximately 6000 arbitrations covering 10,000 domain names had been implemented by WIPO under the UDRP, with the majority of such cases finding cybersquatting had existed. When WIPO first started implementing the UDRP, it received on average five filings per day. In 2002 and 2003, WIPO averaged three filings per calendar day. In addition, WIPO has administered the arbitration of more than 15,500 cybersquatting cases under specific dispute resolution policies of gTLDs. WIPO also announced that in 2003, it had a 40% increase in arbitrations involving ccTLDs (eg, bodyshop.as, yahoo.ph). The top five filing countries are the United States, the United Kingdom, France, Germany, and Spain.

WIPO's arbitration procedure has been used to resolve cybersquatting of celebrity names (eg, Piercebrosnan.com, Juliaroberts.com and Jimihendrix.com), entertainment properties (eg, jrrtolkien.com, thecatinthehat.com), and famous brands (calvinklein-watches.com, rolexgroup. com). In most cases, complaints result in the transfer of the domain name to the claimant. The claimant must, however, meet the standards of the UDRP. The singer Sting, for example, was unable to establish bad faith when he tried to effectuate the transfer of sting.com. The holder of the allegedly infringing domain name was also known by the same nickname, and the arbitration panel noted that the name is common in the English language and is not an exclusive trademark.

Complainants have also used the UDRP to resolve a form of cybersquatting called “typosquatting,” where a registrant deliberately misspells a famous trademark or popular domain name to divert Internet traffic. For example, nasdasq.com was transferred to the Nasdaq Stock Exchange, and as recently, as July 22, 2003, a WIPO arbitration panel ordered the transfer of the domain name arifrance.com to Air France, finding the name had been deliberately misspelled.

In spite of the success of the UDRP, some legal pundits have alleged it is unfair. In 2001, Professor Michael Geist of the University of Ottawa published two articles challenging the UDRP for favoring and encouraging forum shopping among UDRP providers. Geist claimed that because the complainants won most of the time, the policy was not fair. The International Trademark Association responded to Geist's allegations in May 2002. INTA explained that the system is designed to correct obvious bad faith acts of cybersquatting and was working efficiently to do so. In addition, respondents have a high default rate. These factors help to explain complainants' success at arbitration rather than bias. Furthermore, INTA combated Geist's forum shopping allegation by explaining that certain organizations like WIPO or the National Arbitration Forum (NAF) are chosen frequently, according to INTA, because of cost considerations or expertise. In sum, INTA endorsed the UDRP's implementation of arbitration procedures to resolve cybersquatting claims.

Arbitration as a Possible Remedy for Markman Hearing Inefficiencies

Patent practitioners may see an expansion of arbitration with regard to Markman hearings. Pursuant to a 1996 Supreme Court case, Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), district court judges make pretrial decisions to delineate the meaning or scope of the patent in question. The reversal rate by the Court of Appeals for the Federal Circuit, however, is high, somewhere around 50%. (See the Dec. 2003 Intellectual Property Strategist in which Richard C. Komson and Jessica L. Rando reported on the high reversal rate of Markman decisions.) Consequently, instead of the Markman decisions making patent litigation more efficient, the Markman process has come under fire as having the opposite effect.

Arbitration may become a partial solution to the Markman problem. In arbitration, the parties have the benefit of choosing a neutral arbitrator with an extensive technical background to interpret the patent, resulting in an informed decision. In court, on the other hand, the parties have to rely on district judges who typically do not have technical backgrounds, resulting in reversals. Some litigators have turned to arbitration before a panel of experts to help resolve their claim construction issues more efficiently.

The now defunct National Patent Board (NPB) tried to address the inefficiency of Markman hearings through nonbinding arbitration. The organization promulgated rules for the arbitration of Markman issues. In 2001, the American Arbitration Association (AAA) assumed ownership of the NPB's assets and established the National Patent Board Center for Dispute Resolution (NPBCDR). The AAA announced that it would administer cases with contractual obligations to use the NPB rules and apply the NBP rules unless the parties agreed otherwise. No cases were filed requiring NPB procedures through January 2004. The AAA is currently soliciting feedback from the patent community with an eye toward revising NPBCDR rules and generating more interest in using the NPBCDR to resolve claim construction and other patent disputes.

Institutional Responses to Arbitration of IP Cases

Several ADR providers have adopted arbitration rules to assist specifically in the resolution of intellectual property disputes. Organizations like WIPO, AAA, and the National Arbitration Forum have sample clauses for inclusion in contracts to ensure that their particular rules and procedures would govern any future conflict. They offer standard arbitration rules and expedited arbitration rules for faster resolution to conflicts that meet certain monetary damage limits.

WIPO, in particular, established its Arbitration and Mediation Center in 1994 for the resolution of private commercial disputes concerning intellectual property. WIPO also offers free assistance to parties who may require modification of WIPO's standard rules and development of customized rules and procedures for “specific circumstances or industry characteristics.” For example, WIPO developed custom rules for online resolution of disputes for an Internet directory service contracting with customers.

WIPO's Web site includes several case examples of its administration of arbitrations to resolve intellectual property disputes. These include disputes over international registration of trademarks, patent license disputes, and software development contracts. Most have an international component to them. For a full review of the types of intellectual property cases WIPO has resolved through arbitration, see www.WIPO.org.

While WIPO only administers intellectual property cases, the AAA hears a wide variety of disputes and administers its intellectual property disputes throughout its overall caseload. While the AAA has specific rules governing international disputes and patent arbitrations, the majority of cases involving intellectual property issues are filed under the AAA's Commercial Arbitration Rules and Mediation Procedures. Some copyright cases regarding architectural drawings have been brought under the AAA's Procedures for the Resolution of Construction Disputes.

Within the Commercial Rules, the AAA has made provisions for large, complex cases, meaning cases in which the disclosed claim or counterclaim is at least $500,000. Assuming the dollar amount is met, these rules are particularly well suited for intellectual property claims because of the highly qualified roster of neutrals available to hear them and the broader arbitrator authority with regard to discovery and depositions. Discovery may be crucial in an intellectual property case.

The AAA reports that from 2002 through 2003, it handled more than 350 cases in the areas of patent, licensing, trademark, and copyright issues, not including domain name disputes. This represents a 20% increase over the previous 2 years' filings. Eighty-one percent of the cases filed in 2002-2003 sought specific monetary relief (not including counterclaims) ranging from $200,000 to more than $50 million. The rest of the claims presented unspecified damages claims or requested nonmonetary relief, such as declaratory judgments or cease and desist orders.

Conclusion

Statutory authority and case law regarding intellectual property issues have legitimized the use of arbitration as a viable alternative to litigation. Success in arbitrating domain name disputes and the increasingly international component of intellectual property contracts have led to the popularization of arbitration. As arbitration of all types of intellectual property disputes grows, institutional providers of arbitration are examining closely how their rules and procedures can be adopted specifically for intellectual property disputes. They are also developing panels of experts specifically trained to hear intellectual property cases. The next part of this article will examine the decision to include arbitration clauses in intellectual property contracts, and the drafting of such clauses to maximize their efficacy.

Part One of a Two-Part Series

Intellectual property disputes typically have been resolved through litigation rather than arbitration. Litigators have seen arbitration as a dispute resolution method geared at matters of private contract. Because intellectual property's very existence has been a product of public policies supporting invention, branding and creativity, the courts have seemed to be the more appropriate locale to handle these disagreements. In the last 20 years, however, arbitration has received increasing attention as an acceptable method of resolving intellectual property disputes.

Part one of this article examines the authorities in this country that permit arbitration of intellectual property matters. It considers arbitration's applicability to specific types of intellectual property disputes and how certain institutions have adapted the arbitration process to intellectual property disputes. Part two will detail factors to weigh when deciding to send an intellectual property claim to arbitration and drafting considerations for arbitration clauses.

Authorities for Arbitrating IP Disputes

Ample authority exists for handling intellectual property contract disputes in arbitration. In addition, statutes and case law in the past 20 years have paved the way for arbitrating disputes regarding the existence or scope of intellectual property.

For patent cases, statutes enacted in 1983 and 1984 respectively authorize the use of arbitration as a means of settling “any dispute relating to patent validity or infringement” and for resolving patent interference cases. 35 USC '294 and 35 USC '135(d). Congress imposed only minor limitations on the use of arbitration. If the arbitrator finds the patent invalid, the parties must notify the USPTO. In addition, the arbitration decision can only bind parties to the arbitration.

Since the passage of these two statutes, patent arbitration has become a highly utilized alternative to protracted litigation. Whereas the typical patent litigation could exceed 5 years by the time all appeal rights are exhausted, an arbitration can end in around a year's time.

With regard to copyright disputes, two landmark cases and their progeny support the use of arbitration to resolve contractual copyright disputes and to confirm the validity of copyrights. In Kamakazi Music Corp. v. Robbins Music Corp., 522 F. Supp. 125 (S.D.N.Y. 1981), the district court granted a motion to stay a copyright infringement trial pending arbitration of infringement and damages claims. The court then confirmed the arbitrator's award, affirming that there was no public policy against arbitration of a copyright infringement claim. The Kamakazi court itself confirmed the validity of the copyright.

The Seventh Circuit court went even further in Saturday Evening Post Co. v. Rumbleseat Press, Inc. , 816 F.2d 1191 (7th Cir. 1987). Analogizing to the new patent statute that endorsed arbitration, the court upheld an arbitrator's right to decide the validity of copyright so long as the issue arises in the arbitration of a contract dispute.

While early case law in the area of trademarks and trade secrets frowned upon arbitration, the trend clearly shifted in the 1980s. Trademark disputes (including the validity of trademarks), trade dress disputes, and trade secret disputes have regularly been resolved through arbitration. Courts have upheld arbitrators' jurisdiction to resolve these matters and stayed trials pending arbitration results. See, e.g., Daiei, Inc. v. U.S. Shoe Corp., 755 F.Supp. 299 (D. Haw 1991).

Regardless of whether the case involves patents, trademarks, or copyrights, intellectual property disputes often have an international character. Arbitration remains a viable alternative in these instances. Under the 1938 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, contracting states, of which there are more than 120, must recognize and enforce foreign arbitral awards with certain limited exceptions (eg, the parties lacked capacity; the underlying arbitration clause was invalid; or the award was against public policy.) Thus, the Convention's authority protects the arbitration award and makes it automatically binding in many jurisdictions.

Arbitration as a Standard for Domain Name Disputes

Arbitration has become the preferred method of resolving cybersquatting claims. Cybersquatting has evolved with the Internet as a new form of trademark infringement. Cybersquatters register as domain names numerous versions of trademarks, trade names, brand names, or celebrity names, even though they have no intention of doing business under the domain names. They then sell off the domain names at a profit or use the misappropriated names to direct Internet traffic to their own business sites.

In response to complaints that the domain name registrars were enabling cybersquatting by not screening applications before registering new domains, the Internet Corporation for Assigned Names and Numbers (ICANN), which is responsible for managing the domain name system and accrediting domain name registrars, adopted the Uniform Domain Name Dispute Resolution Policy (UDRP) in 1999. This policy outlines a mandatory, expedited, nonbinding arbitration system to resolve claims of bad faith or abusive registration of trademarks, whether they be common law or registered, as domain names. Thus, arbitration has become a regularly used alternative to litigation because of expert qualified neutrals, speed (resolution within 2 months), and low costs (approximately $1500 to $3000 to challenge one to five domain names and up to $4000 for up to ten domain names).

The UDRP is binding on all ICANN-accredited registrars of Internet domain names. It applies to generic top-level domains such as .com, .net, .org, .aero, .info, .pro, and .biz, as well as to approximately three dozen country code top-level domains (eg, .VE for Venezuela). A claimant under the UDRP must show that the domain name held by the respondent is identical or similar to a trademark held by the complainant, that the respondent has no legitimate rights to the domain name in question, or that the respondent registered and is using the mark in bad faith.

ICANN has designated several dispute resolution service providers to implement the UDRP, including the World Intellectual Property Organization (WIPO), CPR Institute for Dispute Resolution, National Arbitration Forum, and the Asian Domain Name Dispute Resolution Centre. All the providers have their own rules and fee structures for administering a challenge under the UDRP. WIPO, for example, appoints anywhere from one to three expert neutrals, depending on the requests of the parties, to review and resolve the dispute. Typically, there are no in-person hearings. Ultimately, neutrals will order that the domain name in question be cancelled, transferred, or sustained. There are no monetary damages or injunctive relief, but the ultimate business goal of resolving cybersquatting is addressed neatly. The registrars are bound to accept WIPO's resolution and implement the decision within 10 days unless an appeal is filed as an arbitration or in a traditional court setting. (It is noteworthy that a ruling under the UDRP does not prevent a claim under the Anti-Cybersquatting Consumer Protection Act. See, e.g. Storey v. Cello Holdings, L.L.C., 2003 WL 22309235 (2nd Cir., Oct. 9, 2003). This powerful tool is not subject to review in this article.)

In January 2004, WIPO heralded its success in fighting cybersquatting through arbitration under the UDRP, and it reported that cybersquatting remains mostly in the area of high-value brands. Approximately 6000 arbitrations covering 10,000 domain names had been implemented by WIPO under the UDRP, with the majority of such cases finding cybersquatting had existed. When WIPO first started implementing the UDRP, it received on average five filings per day. In 2002 and 2003, WIPO averaged three filings per calendar day. In addition, WIPO has administered the arbitration of more than 15,500 cybersquatting cases under specific dispute resolution policies of gTLDs. WIPO also announced that in 2003, it had a 40% increase in arbitrations involving ccTLDs (eg, bodyshop.as, yahoo.ph). The top five filing countries are the United States, the United Kingdom, France, Germany, and Spain.

WIPO's arbitration procedure has been used to resolve cybersquatting of celebrity names (eg, Piercebrosnan.com, Juliaroberts.com and Jimihendrix.com), entertainment properties (eg, jrrtolkien.com, thecatinthehat.com), and famous brands (calvinklein-watches.com, rolexgroup. com). In most cases, complaints result in the transfer of the domain name to the claimant. The claimant must, however, meet the standards of the UDRP. The singer Sting, for example, was unable to establish bad faith when he tried to effectuate the transfer of sting.com. The holder of the allegedly infringing domain name was also known by the same nickname, and the arbitration panel noted that the name is common in the English language and is not an exclusive trademark.

Complainants have also used the UDRP to resolve a form of cybersquatting called “typosquatting,” where a registrant deliberately misspells a famous trademark or popular domain name to divert Internet traffic. For example, nasdasq.com was transferred to the Nasdaq Stock Exchange, and as recently, as July 22, 2003, a WIPO arbitration panel ordered the transfer of the domain name arifrance.com to Air France, finding the name had been deliberately misspelled.

In spite of the success of the UDRP, some legal pundits have alleged it is unfair. In 2001, Professor Michael Geist of the University of Ottawa published two articles challenging the UDRP for favoring and encouraging forum shopping among UDRP providers. Geist claimed that because the complainants won most of the time, the policy was not fair. The International Trademark Association responded to Geist's allegations in May 2002. INTA explained that the system is designed to correct obvious bad faith acts of cybersquatting and was working efficiently to do so. In addition, respondents have a high default rate. These factors help to explain complainants' success at arbitration rather than bias. Furthermore, INTA combated Geist's forum shopping allegation by explaining that certain organizations like WIPO or the National Arbitration Forum (NAF) are chosen frequently, according to INTA, because of cost considerations or expertise. In sum, INTA endorsed the UDRP's implementation of arbitration procedures to resolve cybersquatting claims.

Arbitration as a Possible Remedy for Markman Hearing Inefficiencies

Patent practitioners may see an expansion of arbitration with regard to Markman hearings. Pursuant to a 1996 Supreme Court case, Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), district court judges make pretrial decisions to delineate the meaning or scope of the patent in question. The reversal rate by the Court of Appeals for the Federal Circuit, however, is high, somewhere around 50%. (See the Dec. 2003 Intellectual Property Strategist in which Richard C. Komson and Jessica L. Rando reported on the high reversal rate of Markman decisions.) Consequently, instead of the Markman decisions making patent litigation more efficient, the Markman process has come under fire as having the opposite effect.

Arbitration may become a partial solution to the Markman problem. In arbitration, the parties have the benefit of choosing a neutral arbitrator with an extensive technical background to interpret the patent, resulting in an informed decision. In court, on the other hand, the parties have to rely on district judges who typically do not have technical backgrounds, resulting in reversals. Some litigators have turned to arbitration before a panel of experts to help resolve their claim construction issues more efficiently.

The now defunct National Patent Board (NPB) tried to address the inefficiency of Markman hearings through nonbinding arbitration. The organization promulgated rules for the arbitration of Markman issues. In 2001, the American Arbitration Association (AAA) assumed ownership of the NPB's assets and established the National Patent Board Center for Dispute Resolution (NPBCDR). The AAA announced that it would administer cases with contractual obligations to use the NPB rules and apply the NBP rules unless the parties agreed otherwise. No cases were filed requiring NPB procedures through January 2004. The AAA is currently soliciting feedback from the patent community with an eye toward revising NPBCDR rules and generating more interest in using the NPBCDR to resolve claim construction and other patent disputes.

Institutional Responses to Arbitration of IP Cases

Several ADR providers have adopted arbitration rules to assist specifically in the resolution of intellectual property disputes. Organizations like WIPO, AAA, and the National Arbitration Forum have sample clauses for inclusion in contracts to ensure that their particular rules and procedures would govern any future conflict. They offer standard arbitration rules and expedited arbitration rules for faster resolution to conflicts that meet certain monetary damage limits.

WIPO, in particular, established its Arbitration and Mediation Center in 1994 for the resolution of private commercial disputes concerning intellectual property. WIPO also offers free assistance to parties who may require modification of WIPO's standard rules and development of customized rules and procedures for “specific circumstances or industry characteristics.” For example, WIPO developed custom rules for online resolution of disputes for an Internet directory service contracting with customers.

WIPO's Web site includes several case examples of its administration of arbitrations to resolve intellectual property disputes. These include disputes over international registration of trademarks, patent license disputes, and software development contracts. Most have an international component to them. For a full review of the types of intellectual property cases WIPO has resolved through arbitration, see www.WIPO.org.

While WIPO only administers intellectual property cases, the AAA hears a wide variety of disputes and administers its intellectual property disputes throughout its overall caseload. While the AAA has specific rules governing international disputes and patent arbitrations, the majority of cases involving intellectual property issues are filed under the AAA's Commercial Arbitration Rules and Mediation Procedures. Some copyright cases regarding architectural drawings have been brought under the AAA's Procedures for the Resolution of Construction Disputes.

Within the Commercial Rules, the AAA has made provisions for large, complex cases, meaning cases in which the disclosed claim or counterclaim is at least $500,000. Assuming the dollar amount is met, these rules are particularly well suited for intellectual property claims because of the highly qualified roster of neutrals available to hear them and the broader arbitrator authority with regard to discovery and depositions. Discovery may be crucial in an intellectual property case.

The AAA reports that from 2002 through 2003, it handled more than 350 cases in the areas of patent, licensing, trademark, and copyright issues, not including domain name disputes. This represents a 20% increase over the previous 2 years' filings. Eighty-one percent of the cases filed in 2002-2003 sought specific monetary relief (not including counterclaims) ranging from $200,000 to more than $50 million. The rest of the claims presented unspecified damages claims or requested nonmonetary relief, such as declaratory judgments or cease and desist orders.

Conclusion

Statutory authority and case law regarding intellectual property issues have legitimized the use of arbitration as a viable alternative to litigation. Success in arbitrating domain name disputes and the increasingly international component of intellectual property contracts have led to the popularization of arbitration. As arbitration of all types of intellectual property disputes grows, institutional providers of arbitration are examining closely how their rules and procedures can be adopted specifically for intellectual property disputes. They are also developing panels of experts specifically trained to hear intellectual property cases. The next part of this article will examine the decision to include arbitration clauses in intellectual property contracts, and the drafting of such clauses to maximize their efficacy.