Intellectual property infringement litigation comes with a hefty price tag – to the tune of millions of dollars. That’s why more and more companies are seeing the advantages of alternative dispute resolutions (ADR). Are they a viable alternative?

Resolving international intellectual property disputes is not easy – or cheap. On the one hand, brand owners can rely on national authorities but this opens the door to myriad problems. Among them, lax enforcement of IP provisions (in spite of the TRIPS Agreement), differing interpretations in different countries as to what "infringement" means, clashing legal cultures between continents and between countries, and political resistance that see TRIPS as just another form of "Western imperialism."

On the other hand, there's traditional litigation. Aside from the problem of differing interpretations, litigation can be too slow (sometimes continuing even beyond the term of IP protection), too public (risking exposure of trade secrets), and very, very expensive. In the US in 2005, litigating a patent infringement case in which less than $1 million was at risk cost $650,000. The cost rose to $2 million when the amount at risk was between 1 and $25 million and to $4.5 million when there was more than $25 at risk. And that does not even include award damages or appeal costs. And when it comes to multiple litigation (when a patentee has protected his invention in three countries, he must institute parallel proceedings for full protection), one faces even more lost time, money and the possibility of conflicting outcomes.

But there's a third option. ADR or alternative dispute resolution is a way to solve conflicts without court litigation. There are several types of ADR procedures and they share several advantages.

* Control. The parties to the dispute control its settlement. They (not the courts or the lawyers) decide who will arbitrate or mediate the dispute, how and where, and the language to be used in the procedure (critical in cross-border disputes). Additionally, even if the IP in dispute may be protected under different national legal systems, there is just one outcome.

* Expertise. The third party (the arbitrator or mediator) is a leading expert in the technical field of the dispute, usually chosen by the parties themselves. (In litigation, judges lacking knowledge in IP matters may have to consult experts during the proceedings; in ADR, the expert is the person settling or helping to solve the dispute.)

* Cost- and time-effectiveness. Many mediations end, successfully, after the parties' first meeting with the mediator and electronic advances integrated to the ADR mechanisms make communications between the parties easier. Cost-wise, ADR costs usually depend on the complexity of the matter and the amount in dispute, are generally paid with a 50/50 cost sharing and, even a fairly expensive procedure, may still be cheaper than litigation.

* Confidentiality. This is one of the reasons that leads companies to choose ADR. Many firms prefer, in cases where internal issues would be discussed, not to be involved in public hearings that could damage their image. In cases concerning trade secrets, for example, confidentiality is crucial.

There are many types of alternative dispute resolution, including negotiation and early neutral evaluation (ENE), but these the best-known forms are arbitration and mediation. Arbitration is a procedure in which the dispute is settled by an impartial expert (the arbitrator) who gives a binding and final decision (arbitral award) that can be enforced in many countries without a review of the merits. In many cases, it is cheaper and faster than litigation. One chooses arbitration over mediation because: if binding, it ends the dispute; it allows discovery and is not dependent on voluntary disclosure; it can evaluate the merits of the case in non-binding arbitration.

Mediation is a more amicable system because there is no binding decision. Instead, a third party (also an expert on the matter being disputed) helps the parties to bring their positions closer, helping the parties involved to preserve or even improve their business relationship. One chooses mediation over arbitration because: the parties have greater control, the parties know sooner when the matter will be resolved, the process is quicker and less expensive.

Is ADR for everyone? ADR is not suitable in the following instances: piracy or counterfeit cases that involve an element of criminal behavior and therefore require some kind of punishment; cases where one or both parties need a legal precedent that can only be gotten by a court judgment; cases where a stronger party may coerce a weaker party (since ADR is interest-driven and not rights-driven); and multiple litigation cases where unrelated infringers infringe the same IP right in different countries.

In spite of some unanswered questions – and the fact that it does not guarantee a solution to every IP dispute – ADR's benefits cannot be ignored and many believe that it decreases the problems of litigation. In fact, the US Congress has endorsed the arbitration of patent disputes (35 USC 135(D) and 294) and the Supreme Court has held that trademark disputes can be arbitrated (Scherk v Alberto-Culver Co).

The WIPO Arbitration and Mediation Center offers ADR services, as do the International Trademark Association (INTA) and the CPR Institute for Dispute Resolution.