International Arbitration Focus: Life Sciences

While market forces have been driving a significant increase in the number of commercial life sciences arbitrations globally for over a decade, the impact that the COVID-19 pandemic has had on that growth cannot be overstated. The pandemic has led to pharmaceutical supply chain pressures caused by global supply shortages beginning in the spring of 2020. It has given rise to issues caused by national export restrictions imposed as the pandemic took hold. It has contributed to an increased understanding of the benefits that international arbitration offers for resolving commercial life sciences disputes arising from cross-border collaborations. In short, the pandemic has resulted in a slew of new commercial life sciences arbitrations, the number of which will only increase in the future. Our panel of international arbitration lawyers from around the globe offers a host of fascinating insights on a number of current issues that parties commonly face in those disputes, as well as commentary on cutting-edge topics. For instance, this edition explores the numerous benefits that international arbitration offers for resolving multijurisdictional IP disputes, which are a vital facet of numerous commercial life sciences arbitrations. This issue also examines the role that Hong Kong, Singapore, and India play in commercial life sciences arbitrations, as well as the manner in which those jurisdictions handle significant issues, like award enforcement and interim relief in aid of arbitration. Authors from our global international arbitration group offer suggestions taken from the construction industry for how disputes boards could be employed in long-term life sciences collaborations to help avoid formal disputes without resorting to arbitration. Lastly, our guest editor, J.P. Duffy, discusses the crucial role that emergency arbitration plays in resolving commercial life sciences arbitrations, particularly when parties need multi-jurisdictional interim relief that they would otherwise have to seek from multiple national courts. Whether you handle commercial life sciences arbitrations every day or simply want to learn more about the topic, this edition of our newsletter has something for you. We hope you enjoy it, and we encourage you to reach out directly to the authors with any questions you might have. To access our previous newsletters, please click to view our editions on Asia, Investor-State, Latin America and Construction. Lucy Winnington-Ingram, Sub-editor Associate, London [email protected] Andrew Tetley, Editor Partner, Paris [email protected] J.P. Duffy, Guest Co-editor Partner, New York [email protected] International Arbitration Focus Reed Smith LLP 03 IP arbitration in the life sciences sector A more recent development For businesses from the construction, shipping, and energy sectors, arbitration has long been the dispute resolution mechanism of choice. The rise in arbitration in the life sciences sector, by contrast, is a more recent development. Given the limited statistical information available, identifying the underlying causes is somewhat speculative. However, it appears fair to say that the growth in life sciences arbitration goes hand in hand with globalization. Companies from the pharmaceutical, medical device, and biotech industries increasingly conclude crossborder commercial arrangements. It is not unusual for both parties to refuse acceptance of a dispute resolution clause that gives courts in the country of the opposite party jurisdiction. The reasons are manifold, ranging from a certain unease with differences in legal culture, or a perceived unfair advantage, to concerns about the rule of law. In such situations, dispute resolution via arbitration may be a viable option. Confidentiality considerations Confidentiality is paramount in the life sciences industries. Companies from the sector invest significant amounts of money in research and development. They protect the work results through a combination of intellectual property rights and know-how. Commercial arrangements with third parties therefore often relate to the creation, use, and commercialization of intellectual property (IP), such as licenses, research and development agreements, or collaboration agreements. In addition, corporate transactions, such as M&A deals or joint ventures, are often IP driven, in the sense that the acquisition or generation of IP assets is a key business goal. Depending on the nature of the specific project, disputes relating to such arrangements do not necessarily lend themselves to litigation. Companies from the life sciences sector and other entities engaged in research and development need to make sure that know-how relating to products or manufacturing methods remains secret, lest it lose trade secret protection. Even negotiation strategies or specific clauses in complex licenses may constitute proprietary information. For this reason, too, arbitration can be a preferred alternative to litigation and particularly litigation in courts that have extensive disclosure and public rights of access. This observation is in line with data published by the World Intellectual Property Organization (WIPO) Arbitration and Mediation Center. According to WIPO, 15 percent of cases filed with the Center relate to life sciences, and they are often international in nature.1 A significant number of cases concern patent licenses, non-disclosure, research and development agreements, and joint venture contracts.2 Single forum and choice of law Arbitration in the life sciences sector is not confined strictly to contractual disputes (e.g., disagreements about milestones achieved or best efforts to commercialize a new drug) and can be particularly useful in resolving multi-jurisdictional IP infringement cases. This is because IP rights, by their very nature, are territorial. Protection is generally limited to the individual states. For example, if a German court bars a defendant from distributing a drug that infringes a German patent, this does not necessarily have implications for activities in other states where corresponding patents exist. The defendant is free to continue distribution in these other states as long as the products in question are not intended for import into Germany. Given the importance of IP rights for the life sciences sector, and owing to the principle of territoriality, companies from that sector are frequently willing to bring parallel proceedings before multiple state courts, including in the United States, Germany, France, the UK, and China, to name a few. Multi-jurisdictional patent litigation can be costly and time-consuming, and it entails the risk of contradictory decisions. Towards the end of the global patent war of the last decade, stakeholders from the telecommunications sector increasingly opted for arbitration. This was, in part, due to the particularities of FRAND litigation (i.e., disputes about standard essential patents and fair, reasonable, and non-discriminatory licensing) and the fact that state courts were reluctant to set licensing rates for entire patent portfolios. However, it does not appear unreasonable to assume that the efforts involved in multi-jurisdictional disputes led to litigation fatigue. Arbitration, by contrast, allowed the parties to resolve complex patent infringement and licensing disputes in a single forum, under a single set of procedural rules, before a single tribunal that generally had industry expertise.