ARBITRATION
When alliances fail, is arbitration the answer?
The global pandemic has increased collaboration and a new wave of disputes is likely. Arbitration is well placed to help, argue Kate Davies McGill, Gaela Gehring Flores and Paul Keller of Allen & Overy.
The COVID-19 global pandemic has seen alliances between pharmaceutical giants and, on the one hand, universities (Oxford University and AstraZeneca) and, on the other, small, family-owned biotechnology companies (BioNTech and Pfizer) to develop vaccines.
We have also seen institutions, governmental agencies, foundations and global vaccine alliances join forces with industry to manufacture and deliver the vaccines at a pace never seen before.
Partnership and collaboration is not new to the life sciences sector, however. They are established tools for sharing the know-how, skills and resources needed to conduct clinical trials, and then commercialise, market and distribute a product into the markets where it is most needed.
The collaboration benefits from the respective skills of each partner, be that proprietary technology, vaccine R&D, regulatory capabilities or a global manufacturing and distribution network.
Resolving collaboration disputes through international arbitration
In a continuously globalised world, these partnerships are increasingly cross border and built on a foundation of complex, heavily negotiated agreements, typically with valuable IP rights at their heart. International arbitration is often, and perhaps will increasingly become, the dispute resolution mechanism of choice. International arbitration’s global reach, the relative ease of enforcement, the neutrality of the venue and the potential for confidentiality are a hard combination to beat.
This need for partnership, collaboration and joint ventures is only going to increase, as is their complexity. The growing role of technology in the life sciences sector (medtech) means that pharmaceutical companies are increasingly having to deal with a sector (technology) that is outside their comfort zone. This heightens the risk of collaborations encountering difficulties, or even failing.
Expectations may be misaligned from the outset, parties may not perform as expected or the technology may never work. Again, arbitration provides an effective system for resolving these types of disputes—in addition to enforcement, confidentiality and neutrality, parties are able to select the tribunal with the skills and expertise relevant to the dispute that has actually arisen.
Government overreach in life sciences
Regulation has been a long-time burden in the life sciences sector but the COVID-19 pandemic has arguably increased the risk of government interference, whether by way of compulsory licensing or otherwise. While there is a legal framework that surrounds compulsory licensing (TRIPS), there may be circumstances where government actions in relation to IP rights amount to adverse interference in breach of international law.
This is potentially actionable under bilateral or multilateral investment treaties. Notable investment treaty cases in this area include Wellcome Limited v Ukraine (Notice of Investment Dispute, December 16, 2021), Diag Human SE and Josef Stava v The Czech Republic (PCA Case No. 2018-20), and Raimundo Santamarta Devis v Bolivarian Republic of Venezuela.
”The premium placed on maintaining the confidentiality of sensitive commercial information in the life sciences sector highlights the benefit of arbitration to resolve the dispute.”
Kate Davies McGill
Gaela Gehring Flores
Paul Keller
Renewed focus on trade secrets laws to protect IP
Those in the life sciences industry go to great lengths to protect their innovations through IP law. Undoubtedly, patents remain the most common approach to such protection. Recent developments, however, have led to a heightened focus on using trade secret rights to protect at least certain elements of life sciences IP.
In the US, for example, this has accelerated since the passage in 2016 of the Defend Trade Secrets Act, which provided trade secrets holders with the ability to address the misappropriation of their trade secrets on a national level, instead of through individual state courts. This legislative broadening of the trade secrets rights corresponded with the US Supreme Court and Federal Circuit narrowing the scope of patent eligibility.
As nearly all trade secret misappropriations involve an employee or a third-party partner—with whom there will be some contractual relationship—trade secret holders, including those in the life science space, are spending an increased amount of time and money protecting their innovations through trade secrets law.
Indeed, the increase in life sciences collaboration has seen a concomitant rise in disputes (and concerns about potential disputes) regarding trade secrets. This is unsurprising given the exchange of confidential information that takes place in these licence agreements, partnerships, collaboration or joint venture agreements.
The premium placed on maintaining the confidentiality of sensitive commercial information in the life sciences sector highlights the benefit of turning to arbitration to resolve the dispute. The proceedings can be kept confidential and this avoids the public disclosure of information, which is so common in the courts.
It is not the case, of course, that confidentiality is the default under the law of all arbitral seats, nor all arbitral rules. To ensure the parties take the maximum benefits that arbitration offers, a focus on, and deep understanding of, how to tailor the parties’ arbitration agreement to their specific needs is required when negotiating the collaboration agreement.
Should a dispute arise, it is equally important that the disputing parties engage counsel experienced in preserving the confidentiality of trade secrets during the arbitration proceedings.
Kate Davies McGill is a partner in the international arbitration practice at Allen & Overy. She can be contacted at: kate.davies@allenovery.com
Gaela Gehring Flores is a partner in the international arbitration practice at Allen & Overy. She can be contacted at: gaela.gehringflores@allenovery.com
Paul Keller is a partner in the litigation practice at Allen & Overy. He can be contacted at: paul.keller@allenovery.com
Images, from top: Shutterstock / Alexey Savchuk
