Why life sciences businesses are looking to arbitration to resolve disputes

Major arbitral institutions including the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), American Arbitration Association-International Centre for Dispute Resolution (AAA-ICDR) and WIPO Arbitration and Mediation Center have all reported on the growing prominence of life sciences disputes coming before them.

While in some jurisdictions, like China and France, courts have been encouraging intellectual property (IP) infringement cases to be resolved in other forums, and there is anecdotal evidence of a move away from traditional ‘carve outs’ in arbitration clauses for IP disputes. The trend reflects the innovative and dynamic nature of the $2.83 trillion global life sciences industry, as well as the advantages that arbitration can provide life sciences companies embroiled in dispute.

Life sciences companies commonly engage in cross-border collaborations that last years. They do this to pool capital and access talent, new technologies and materials, share risks, and find the next innovation in medicine or medical technology to commercialise. The international nature of these collaborations can lead to jurisdictional issues in the event of a dispute.

Disputes can arise in a variety of contexts in life sciences, including on commercial matters and issues pertaining to regulatory compliance, the failure of joint ventures or other partnerships, and ownership, use and disclosure of IP and trade secrets.

Contractual disputes can also arise on issues such as royalty rates and payments, product liability, contractual milestone breaches, ownership of IP that attaches to product improvements, use of licenced products, and indemnification. This reflects the multitude of often intricate contracts that can exist to address activities such as research and development, licensing, acquisitions, technology transfer, and distribution. Disputes arising can therefore be complex and highly technical. 

A high value attaches to protecting valuable knowhow and IP in the life sciences sector – inadvertent disclosure of breakthrough R&D findings, established after significant investment and time has gone into the R&D process and potentially multiple other projects have already failed, for example, can undermine patent applications. Industry relies so heavily on patents to be able to commercialise their inventions free from competition and obtain a return on their substantial investment.

Arbitration provides a single neutral forum for resolving disputes, with the ability to enforce arbitral awards on a cross-border basis.

Life sciences companies can choose experienced decision-makers with industry knowledge and experience to act as arbitrators in their case. They can also choose the arbitration rules they want to govern proceedings, giving them more control over the process. The arbitration process can be adapted by parties, who can narrow the scope of evidence collection and the scope of issues to be examined by the arbitrators.

With the subject matter of disputes often commercially sensitive in the life sciences sector, the option to resolve those disputes in confidential arbitration proceedings can be attractive for the industry, where the main alternative would be to litigate via court proceedings heard in public.

The limited scope for decisions made by arbitral tribunals to be appealed increases the likelihood of a final decision in the case being reached earlier than would be if the case was subject to multiple potential rounds of litigation, providing often valuable, early commercial certainty for life sciences companies.