Hong Kong has introduced amendments to its Arbitration Ordinance (Cap. 609) (Ordinance), clarifying that disputes over intellectual property rights (IPRs) may be resolved by arbitration and that it is not contrary to Hong Kong public policy to enforce arbitral awards involving IPRs.
The Arbitration (Amendment) Bill 2016 (Bill) will be introduced into the Legislative Council (LegCo), with both the first reading and the commencement of a second reading debate, scheduled for 14 December 2016.
Arbitrability of the subject matter of a dispute is an important issue which must be clear before the commencement of arbitration. The Ordinance does not currently include any specific provision dealing with the question of arbitrability of disputes over IPRs. Further, there is no authoritative judgment in Hong Kong concerning the arbitrability of IPR disputes. To put the matter beyond doubt, the amendments will make clear that IPR disputes, whether they arise as the main issue or are incidental to another dispute, are capable of settlement by arbitration, and that it is not contrary to the public policy of Hong Kong to enforce the ensuing award.
The main provisions of the Bill are summarised below:
- Clause 5 adds a new Part 11A to the Ordinance which provides for an arbitration relating to an IPR. The new Part 11A contains the new sections 103A, 103B, 103C, 103D, 103E, 103F, 103G, 103H, 103I and 103J of the Ordinance.
- Sections 103A, 103B and 103C of the Ordinance deal with the interpretation of terms and expressions referred to in Part 11A. An IPR dispute includes a dispute over the enforceability, infringement, subsistence, validity, ownership, scope or duration of an IPR.
- Section 103D confirms that IPR disputes may be arbitrated.
- Section 103E clarifies the status of licensees who are not party to the arbitration. The fact that an entity is a licensee does not make it a person "claiming through or under a party to the arbitral proceedings", for the purposes of section 73(1)(b) of the Ordinance. This does not affect any existing rights or liabilities of the licensee that arise under contract, or by operation of law.
- Section 103F clarifies that an arbitral award may not be set aside only because the award involves an IPR. Similarly, Section 103G confirms that enforcement of an arbitral award may not be refused only because the award involves an IPR. In both cases, the Bill states expressly that an award is not "incapable of settlement by arbitration under the law of Hong Kong" pursuant to the sections of the Ordinance that set out grounds for set aside and refusal of enforcement.
- Section 103I empowers parties to put the validity of a patent in issue in arbitral proceedings.
The Bill has been in the pipeline for almost two years. In May 2015, Hong Kong's Department of Justice set up a working group on arbitrability of IPRs, to consider and advise the government on the need for, and extent, of legislative amendments to address the arbitrability of IPRs. A consultation paper was published in December 2015, and on 25 January 2016, the Department of Justice informed LegCo that amendments would be introduced. On 22 August 2016, further consultation took place with the Law Society of Hong Kong, the Hong Kong Bar Association and the Hong Kong Institute of Trade Mark Practitioners.
The Bill comes in line with the steadfast policy of the government to "enhance Hong Kong’s status as a leading centre for international legal and dispute resolution services and a premier hub for intellectual property (IP) trading in the Asia- Pacific region". The proposed amendments also coincide with the recent initiative of the Hong Kong International Arbitration Center (HKIAC) to create a panel of arbitrators for IP disputes. HKIAC's new panel is composed of thirty-plus experts with expertise in handling IP cases.