Mediation vs. Arbitration in Technology-Related Disputes

Key Differences Between Mediation and Arbitration

Some key differences between mediation and arbitration are control and finality. Mediation is a voluntary process in which a neutral third party facilitates negotiation to seek a mutually acceptable resolution to a dispute. A mediator does not impose a decision. The parties retain control over what constitutes an acceptable resolution.

Control and Finality in Mediation

Because the parties can reject a settlement at mediation, the process can end with some or all of the issues in dispute unresolved. This is called an “impasse.” Although studies suggest that mediation is successful in resolving a dispute most of the time, additional processes, such as arbitration or litigation, might be required if the parties reach an impasse. That is, the process is only final if the parties reach agreement on a full resolution of the dispute.

Arbitration Agreements, Rules, and Awards

In arbitration, the parties submit the dispute to an arbitrator or a group of arbitrators for a decision. The parties can set limits in their agreement. For example, they can specify that patent disputes will be resolved by a specialized agency, such as the patent office. As another example, they may prohibit an arbitrator from making one party pay another party’s attorneys’ fees. The arbitrator is obliged to honor those limitations, as well as applicable law and any rules, such as the AAA or CPR rules, agreed to by the parties. Within those bounds, the arbitrator is ultimately responsible for decisions about both the process for resolving the dispute and its resolution. At the end of the proceeding, the arbitrator issues a decision, called an “award,” that is final and enforceable.

Two-Step Dispute Resolution in Technology Agreements

Technology-related agreements, such as patent licenses, outsourced development, or contract manufacturing, often require a 2-step dispute resolution process, in which a dispute first goes to mediation and then, if no resolution is reached, to litigation or arbitration for a final decision. If that first step is successful, it is normally much less time-consuming and expensive than an adversarial process. Further, a judge or arbitrator will enforce a contract but will typically be reluctant to impose new terms on the parties. Because a mediator does not impose terms on the parties, the parties can explore solutions that are well outside what a judge or arbitrator might be comfortable awarding.

Flexible Resolution Options in Mediation

For example, when technology-related agreements end, there is often a necessary “wind-down” process to address incomplete work in progress, materials on hand, and other matters. The general contours of that wind-down might be described in the agreement, without details about scope or cost. It might not have been possible when the agreement was signed to foresee exactly what would be needed many years later, and if the agreement has specific wind-down provisions, the parties might find they have different needs when the agreement comes to an end. Mediation provides the flexibility to renegotiate terms or negotiate entirely new arrangements while working to resolve disputes. Arbitration provides a final answer if the parties cannot agree on how to resolve the dispute, with or without the assistance of a mediator, but that final answer might be based on arrangements that no longer meet the parties’ needs as well as a newly negotiated arrangement could.

Reviewing Written Agreements and Court Orders

Some agreements or court orders modify this general background, for example, by requiring “non-binding arbitration”. If you have a written agreement or court order, read it carefully and consider consulting a lawyer to discuss whether you are committed to a specific dispute resolution process.

Need a Neutral for a Technology Agreement Dispute?

For disputes involving patent licenses, outsourced development, contract manufacturing, or other technology-related agreements, Foust IP Law provides neutral services to help parties evaluate process options and address complex business and technical issues.