Resolving Fashion and Luxury Disputes through WIPO Mediation and Arbitration
By Chiara Accornero, Representative of the WIPO Arbitration and Mediation Center in Singapore, IP Disputes Section | WIPO Arbitration and Mediation Center
Growth in international fashion transactions and global challenges – digitalization, artificial intelligence and the economic downturn – have multiplied the potential for cross-border intellectual property (IP) e technology disputes. Disputes and disruption in this area can cause serious damage. A strategy to manage such risks and to resolve any potential disputes rapidly and cost-effectively, therefore, is crucial.
Stakeholders in the fashion and luxury industry seek more efficient and affordable means of resolving and area increasingly turning to alternative dispute resolution (ADR) mechanisms to resolve issues that were previously directed to the courts.
Mediation and Arbitration
ADR refers to mechanisms such as mediation and arbitration that allow parties to solve their disputes outside of court in a private forum, with the assistance of a qualified mediator or arbitrator of their choice.
Mediation is an informal procedure in which the parties request the mediator to assist them to settle their dispute. The mediator facilitates the settlement process by furthering dialogue between the parties and helping them to identify their underlying interests and to reach mutually satisfactory solutions. Arbitration is a more formal procedure, whereby parties submit their dispute to one or several arbitrators who render a final and binding decision, the arbitral award, which is normally final and not subject to appeal.
Mediation and arbitration differ in terms of procedural formality, party control and finality, and each option offers benefits uniquely appropriate to particular circumstances: they can also be combined to accommodate the advantages of the different procedures, by having for instance a first mediation phase, followed, in the event of a failure to reach settlement within a designated period of time, by arbitration.
Advantages of ADR for Fashion and Luxury Disputes
The potential of ADR in the field of fashion and luxury is significant. Mediation and arbitration have features that, if well managed, can translate into substantial time and cost savings and commercially useful outcomes, making them a more affordable and flexible avenue for resolving disputes. They include:
Time and Cost: mediation and arbitration allow parties to save significant costs that the parties would otherwise incur in multi-jurisdictional court proceedings; this is particularly relevant for fashion disputes, as the fashion lifecycle can be relatively short and therefore, avoiding costly and lengthy litigation is of prime interest for all parties involved. A typical WIPO Mediation takes four months, but may be completed more rapidly at the request of the parties, for instance to ensure compliance with timelines in court referrals. Parties may also opt for the procedural framework established by the WIPO Expedited Arbitration Rules;
A single procedure: Parties can resolve disputes covering issues protected in several jurisdictions in a single proceeding making it possible to avoid the expense of multi-jurisdictional litigation and eliminating the risk of inconsistent results across national borders.
Party autonomy and Expertise: parties can select a mediator or arbitrator who is a specialist in the subject matter in dispute. Parties can also select the applicable law, location, and language of proceedings and can determine their time-frame.
Confidentiality: mediation and arbitration allow parties to keep the proceedings and the outcome confidential. Confidential dispute resolution helps parties to focus on the merits of their dispute without fear of adverse publicity and to preserve the parties’ business relationships and reputations.
Preserving Business Relationship: mediation gives the parties the opportunity to go beyond the legalistic resolution of the dispute to negotiate creative solution that satisfy their business interests, including preserving existing business relationships, or forging new ones. 70% of WIPO mediation procedures settle and even in arbitration, 33% of WIPO cases are settled by the parties before any formal decision was issued.
The WIPO Arbitration and Mediation Center
The WIPO Center was established in 1994 as an independent and impartial body which forms part of World Intellectual Property Organization. The WIPO Center’s role is to facilitate the time and cost-effective resolution of commercial IP and technology disputes through ADR mechanisms such as mediation and arbitration. Developed by leading experts in cross-border dispute settlement, the procedures offered by the WIPO Center are recognized as particularly appropriate for international IP and technology disputes.
The WIPO Center is also the leading global provider of mechanisms for resolving internet domain name disputes without the need for court litigation. This service includes the Uniform Domain Name Dispute Resolution Policy, under which the WIPO Center has so far processed nearly 50,000 cases related to the abusive registration and use of Internet domain names.
WIPO Fashion Panel of Neutrals and Online Tools
In its role as administering institution, the WIPO Center administers mediation and arbitration cases under the WIPO Rules. This includes assisting in the selection of mediators and arbitrators, facilitating communication, enforcing timelines, coordinating finance-related issues, and arranging meeting and other support services. The WIPO Center maintains a database of over 2,000 dispute resolution practitioners and with expertise in IP and technology, including in the area of fashion and luxury.
The WIPO Center also makes available online case administration options, including an online docket – WIPO eADR – and videoconferencing facilities. While these tools have been used occasionally in the past, we observe a growing interest and use by parties in most recent cases.
WIPO Cases in the Area of Fashion and Luxury
The WIPO Center has administered over 700 mediation, arbitration, expedited arbitration, and expert determination cases.
Over the last years, an increasing number of cases relates to the fashion and luxury industries. Such disputes relate to, among others, trademarks, patents, industrial design, copyright, software, product development, internet retail and e-commerce as well as IP infringements. Disputes have arisen out of licensing agreements, distribution and franchising agreements, manufacturing agreements, software agreements, sponsorship and marketing agreements.
These cases have involved large-sized companies and SMEs in the fashion and luxury industries, manufacturers, inventors, retailers and service providers. The following case examples administered by the WIPO Center illustrate the issues that can arise in such disputes and how they can be addressed by mediation and arbitration.
A WIPO mediation of a Distribution Dispute for Luxury Goods
A European watchmaking company and a US-based company signed an exclusive distributorship agreement. The agreement included a dispute resolution clause providing that all dispute shall be submitted to WIPO Mediation followed, in the absence of a settlement, by WIPO Expedited Arbitration. In view of a dispute relating to unpaid bills and orders withheld by the US company, the parties submitted the dispute to WIPO Mediation. The WIPO Center suggested to the parties a list of candidates with specific expertise in trademarks and in the watch industry and appointed a mediator in accordance with the parties’ preferences.
Following private conference calls between the mediator and each party, a one-day mediation session took place in Geneva. With the mediator’s help, the parties concluded a settlement agreement at the end of the session.
WIPO Arbitration of a Trademark Coexistence Dispute for Luxury Goods
A European company had registered a trademark for luxury goods in different countries. An Asian manufacturer started to sell fashion products under a similar registered trademark. The Asian company filed court cases in two European countries alleging non-use by the European company of its trademark. After the court cases went to appeal, the parties settled their dispute by concluding a trademark coexistence agreement which included a WIPO expedited arbitration clause. When the European company used its trademark in a trade fair, the Asian company initiated WIPO expedited arbitration proceedings claiming infringement of the coexistence agreement.
Following consultations between the parties and the WIPO Center, a trademark specialist was appointed as sole arbitrator. After two rounds of pleadings, the arbitrator conducted a one-day hearing and issued an award six months after the commencement of the proceedings. Finding partial infringement of the coexistence agreement, the arbitrator granted the primary remedy claimed and ordered the European company to refrain from such infringing behavior.