With effect from January 2018, the Hong Kong Arbitration Ordinance was changed to make all IP issues arbitrable in Hong Kong. Both IP (which includes all registered and unregistered rights) and the scope of a dispute are defined extremely broadly in the Ordinance (to include disputes that are incidental to the main dispute).
Most significantly for this issue, article S.103D(4) stipulates that an IPR dispute may be handled by arbitration even if the matter is assigned to a specific entity in Hong Kong or abroad. Thus, even if the law of another nation-states that another organization (such as a patent office) has exclusive competence to deal with validity, a Hong Kong seated tribunal may settle a dispute over the validity of IP rights.
The validity of IP Rights in Hong Kong is arbitrable
Parties may not arbitrate problems that are to be settled by administrative authorities, according to Article 3(2) of the PRC Arbitration Law. Administrative organizations on the Chinese mainland assess the validity of trademark and patent rights. The China National Intellectual Property Administration (“CNIPA”) has granted the Trademark Review and Adjudication Department (“TRAD”) and the Re-Examination and Invalidity Department (“RID”) the exclusive authority to assess the validity of patents and trademarks in mainland China.
While a Hong Kong-seated tribunal can decide whether IP rights are legitimate or violated under article S.103D(4), the judgment may not be enforceable in Mainland China. A People’s republic of china court may refuse enforcement on the basis that the Tribunal’s decision on validity was contrary to public policy. For instance, if a Tribunal found certain patents to be illegitimate but still made an award on other patents, a People’s republic of china court may refuse enforcement on the basis that the Tribunal’s decision on validity was contrary to the public policy. There are numerous options to avoiding these issues. These are some of them:
- If the dispute is over damages or royalties, the parties may draft a clause that allows the arbitrator to determine the amount to be paid, taking into account her views of infringement and validity, but not making a final determination as to infringement or validity.
- Alternatively, the parties may simply ask the arbitrator to decide on an amount to be paid. The parties, in such a case, could also agree to a cap/floor number in advance to ensure some minimal award is made and limit the maximum amount to be paid.
Many Mainland Chinese corporations now hold assets outside of China, and a judgment may be enforced against assets in Hong Kong or other countries even if it is not enforceable in China.
You can find the list of China IP Firms here.