Arbitration Clauses in License Agreements (Part 3)

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We have reviewed a few decisions relating to arbitration clauses in intellectual property license agreements (see here). Courts in the US have shown that they are willing to uphold arbitrator’s decisions. What is the law in Alberta?

The court in TheraVitae Ltd. v. Kwalata Trading Limited, 2011 ABQB 626 (CanLII) dealt with alleged breaches of stem cell therapy licencing agreements. The licensing agreements contained arbitration clauses and a dispute arose between the parties, which was referred to arbitration.

Under the Arbitration Act (Alberta), a party must demonstrate that they are entitled to appeal an arbitrator’s decision. If the arbitration agreement includes the right of appeal to court, then either party can appeal the arbitrator’s decision on a question of law, on a question of fact or on a question of mixed law and fact. If the arbitration agreement is silent on the topic of appeal, then Section 44(2) of the Act allows for appeals on questions of law, provided certain criteria are met. Those criteria are:

  1. the importance to the parties of the matters at stake in the arbitration justifies an appeal, and
  2. whether the determination of the question of law at issue will significantly affect the rights of the parties.

In those two situations, a court may review the arbitrator’s decision. However, Section 44(3) prohibits a court from granting leave where the question being appealed was specifically referred to the arbitral tribunal for decision. In other words, where the arbitrator was asked to rule on a particular question of law, the decision of the arbitrator will not be reviewed by the court. In the TheraVitae decision, the court decided that the question was specifically referred to the arbitrator, so the decision was not reviewable by the court.

Lessons for business?

  • Arbitrator’s decisions will be given deference, so if you want to refer your disputes to binding arbitration, be aware that there may be no right of appeal to the courts if you are not happy with that decision.
  • Arbitration clauses and agreements must be reviewed carefully to ensure that the parties are aware of the scope of the arbitrator’s authority, and the rights of appeal that may be available.

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, Intellectual Property Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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