Settling technology disputes out of court better and cheaper

See you in court.

It’s a phrase nobody likes to hear, and one that should be used less in the technology sector, say lawyers with experience in arbitration and mediation.

These alternative dispute resolution mechanisms are often cheaper and faster than litigation, make it easier to keep disputes confidential, and allow the parties to choose someone who understands technology to help resolve their differences.

But the time to think about alternative dispute resolution is when you sign a contract, not after problems arise.

Contracts should specify how to resolve disputes and lay out the ground rules. “Once the dispute arises it’s harder to agree on things,” says Barry Leon, senior partner at law firm Torys LLP in Toronto.

Arbitration is an alternative to litigation. Mediation is non-binding, so it can be a first attempt at resolving disputes, to be followed by either arbitration or a court date if it fails.

Tate McLeod, a lawyer with law firm Ogilvy Renault LLP in Ottawa, offers a handful of reasons for choosing arbitration over litigation. “Probably the most often cited advantage,” he says, is the ability to choose arbitrators with expertise in the subject of the dispute.

While parties in litigation can’t choose their judge, choosing an arbitrator knowledgeable in technology law can save time and may lead to a better decision, McLeod says.

Leon offers a technology analogy. “You don’t have to download the program. The arbitrator comes with it installed.”

This is one benefit of arbitration, but not the only one, and some say not even the biggest one.

Colm Brannigan, a Toronto-based arbitrator and mediator and co-chair of the Technology and Intellectual Property Section of the Alternative Dispute Resolution Institute of Ontario (ADRIO) maintains confidentiality and speed are even more important.

“Companies are dealing with time-sensitive products or ideas or projects,” he says, “where if you go to litigation, your trade secrets are going to be out there.”

You can keep some aspects of a court case private, McLeod notes. For instance, parties can appeal for sealing orders. But there is no guarantee such orders will be granted and no way of knowing when you begin litigation what you’ll be able to keep out of the public eye.

And with arbitration or mediation it’s usually possible to keep even the existence of a dispute secret.

Arbitration can be faster thanks to arbitrators with subject-matter expertise and because parties can agree on expedited procedures, Leon says. Whereas court rules are fixed, arbitration procedures can be defined in advance to limit the amount of information and paperwork involved.

And, Leon adds, the arbitrator works directly for – and is paid by – the parties involved, and has an interest in being available and expediting the process.

Speed often translates into lower cost. However, McLeod notes, the fact that the parties in the dispute pay their arbitrator or arbitrators – a single arbitrator and a panel of three are the most common models – offsets that to some extent.

Cost depends somewhat on the type of dispute, says Todd Burke, a lawyer with Gowling Lafleur Henderson LLP in Ottawa. “If you have a fairly narrow issue, you’re fairly likely going to be able to get it done in a fairly expedient way…. If you have a full-blown dispute it can be as expensive as moving through a trial, because in essence it is a trial.”

Arbitration typically works much like a courtroom trial, with lawyers representing both parties but before an arbitrator rather than a judge.

The rules of procedure can be different, and may follow federal arbitration law or procedures established by an organization like the Alternative Dispute Resolution Institute of Canada, another Canadian body called ADR Chambers, the American Arbitration Association or the International Chamber of Commerce.

One possible disadvantage of arbitration is that there is little opportunity to appeal the decision. Arbitrators’ decisions generally can only be appealed on significant issues of legal procedure, Leon says.

However, he says, a contract can specify an avenue of appeal. One common choice is to start with arbitration by a single arbitrator but build in the right to appeal that decision to a panel of three.

And Leon says the limit on appeals can be an advantage. “Often business people will say the most important thing we want is certainty,” he points out. A prompt and binding decision may be better than the possibility of appeals dragging through the courts for months or years.

While arbitration is an interesting alternative to litigation, Brannigan says mediation should usually be the first resort.

Essentially facilitated negotiation, mediation involves a mediator working with the parties to reach a mutually satisfactory solution. It isn’t binding, so it doesn’t always work, but Brannigan says it’s successful about 80 per cent of the time.

And if it doesn’t succeed, he says, you can still fall back on arbitration or litigation.

But mediation is usually faster and cheaper, it shares arbitration’s advantages of confidentiality and the ability to choose a mediator with subject-matter expertise, and “in a relatively small industry world, it allows you to preserve relationships.”

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