THE AUTHOR:
James R. Ferguson, Partner at Mayer Brown
The IBA Arb40 Subcommittee launched a competition to compile and publish poignant stories from this period, forming a distinctive compendium of shared experiences. Exploring the depths of the international arbitration community, the IBA Arb40 Common Heritage of International Arbitration Competition for the Most Meaningful Personal Stories unfolds a tapestry of diverse narratives.
Spanning the globe, these stories capture the human side of international arbitration, showcasing triumphs, challenges, and the interconnectedness that defines our professional journey. Each article in this collection offers a unique lens into our Common Heritage of International Arbitration, underscoring the significance of camaraderie, mentorship, and shared experiences within our global community.
The following article received high commendation in the competition.
One of the great strengths of international arbitration is its ability to adopt flexible procedural rules to accommodate changing circumstances. This advantage became clear in a recent case in which the Arbitral Tribunal elected to depart from conventional procedures so that it could obtain all the evidence relevant to the underlying dispute.
The case involved a patent license in which Respondent (the patent owner) granted Claimant (the licensee) exclusive rights to a French patent covering a major drug. The license required Respondent to “maintain the patent in force” and to promptly advise Claimant of any lapse or revocation of the patent. To “maintain the patent in force,” Respondent engaged a British patent agent who, in turn, instructed a French patent agent to pay the annuities on the French patent.
Several months before the patent’s expiration, the French patent office (“INPI”) mistakenly issued a notice stating that Respondent owed additional annuities. When Respondent failed to respond to the notice, the INPI cancelled the patent, even though Respondent did not actually owe any additional payments. The cancellation of the patent allowed generic manufacturers to immediately enter the market, thereby depriving Claimant of millions of Euros in lost profits. After incurring this harm, Claimant filed a Request for Arbitration with the ICC, asserting that Respondent had breached the license by failing to “maintain the patent in force.”
The major issue at the hearing was whether Respondent received the INPI annuity notice and then failed to promptly correct the INPI’s mistake. In discovery, Claimant made repeated requests for any INPI notice provided to Respondent or its agents, but Respondent insisted it had received no notice. Consequently, in advance of the hearing, the Tribunal granted Claimant’s request to direct the two non-party patent agents to appear at a hearing in Paris. This order was an unusual procedural step because international Tribunals rarely direct non-parties to testify at a hearing, particularly if the appearance requires international travel. Nevertheless, in this case, the Tribunal agreed to issue the order because of the importance of the agent’s testimony.
At the hearing, the French agent declined to appear on the grounds of “professional secrecy,” but the British agent did appear and gave surprising—and dramatic—evidence. Just minutes before beginning his testimony, the agent produced, for the first time, correspondence he had received several months earlier from the French patent agent. In the correspondence, the French patent agent attached two letters he had sent to the British agent notifying both Respondent and the British agent of the INPI annuity notice. The two letters were both dated prior to the INPI’s cancellation of the patent. The letters, therefore, appeared to show that Respondent and its British agent had received timely notice of the INPI’s mistake.
However, at the hearing, the British agent proceeded to testify that, even after conducting a thorough search, he could not find the two letters in his own records. Based on this testimony, Respondent claimed that the French patent agent had fabricated the letters in an effort to divert blame from himself.
This testimony provided a dramatic highlight at the hearing, but it was only the beginning. Two months after the hearing ended, the French patent agent learned of Respondent’s claim that the French agent had fabricated the two notice letters. Stung by these charges, the French agent—a non-party—petitioned the Tribunal to re-open the hearing so that the French agent could give evidence. Once again, the Tribunal agreed to an unusual procedural step so that it could ensure a complete factual record.
At the second hearing—held six months after the first hearing concluded—the French patent agent produced electronic and paper copies of the two notices he had sent to the British agent. The French agent also disclosed the results of a forensic analysis of his electronic records, showing a 90 percent probability that the two letters sent to the British agent had been created on the dates reflected on the letters. The analysis, therefore, proved that the French patent agent had not fabricated the two letters at a later date, as Respondent had alleged.
All this evidence came to light only because the Tribunal was willing to depart from conventional procedures to ensure the development of a complete factual record. The case thus serves as an important reminder of how the flexible procedural rules of international arbitration can be used to promote the discovery of truth.
ABOUT THE AUTHOR
James R. Ferguson is a partner with Mayer Brown LLP. He focuses his practice on U.S. and international arbitration, where he represents multi-national companies in the pharmaceutical, medical device, information technology and financial services industries. These matters include license disputes, patent claims, joint ventures, trade secret claims, IT disputes and many other breach-of-contract issues. James also maintains an active practice as a registered neutral with the ICC, the ICDR, the AAA, the Silicon Valley Arbitration Center and many other arbitral institutions.
This article was first published on the website of the Arbitration Committee of the Legal Practice Division of the International Bar Association, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association.
Available at: https://www.ibanet.org/Arb40-Competition
