RESOLVING INTELLECTUAL PROPERTY DISPUTES THROUGH MEDIATION

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Ontario Legislation Makes Mediation Attractive For Intellectual Property and Technology Disputes
By Sheldon Burshtein
February 18, 2011

In late 2010, Ontario enacted the Commercial Mediation Act, 2010[1] (the “Act”). The purpose of the Act is to facilitate the use of mediation to resolve commercial disputes, including intellectual property and technology disputes.[2] Ontario is the second Canadian province after Nova Scotia[3] to adopt such legislation.

Many of the provisions of the Act merely codify current practice in mediations conducted by most experienced mediators. However, the Act also facilitates the enforcement of mediation settlements and thereby makes commercial mediation in Ontario an even more attractive alternative to dispute resolution.

Scope

The Act applies to a mediation of a commercial dispute if the mediation commences on or after the day the Act came into force,[4] which was October 25, 2010. The Act binds the Ontario government.[5]

A “mediation” is defined as a collaborative process in which: (i) the parties to a commercial dispute agree to request a neutral person, referred to as a “mediator”, to assist them in their attempt to reach a settlement in their dispute; and (ii) the mediator does not have authority to impose a solution to the dispute on the parties.[6]

A “commercial dispute” is defined broadly as a dispute between parties relating to matters of a commercial nature, whether contractual or not, such as trade transactions for the supply or exchange of goods or services, distribution agreements, commercial representation or agency, factoring, leasing, construction of works, consulting, engineering, licensing, investment, financing, banking, insurance, exploitation agreements and concessions, joint ventures, other forms of industrial or business co-operation or the carriage of goods or passengers.[7]

Commercial disputes include intellectual property and technology disputes, whether based on a contract or an intellectual property right. However, the definition excludes matrimonial, custody, estate, accident benefit and other disputes which may be mediated.

Exclusions from Act

The Act expressly excludes certain mediations. The Act does not apply to: (i) a mediation under or relating to the formation of a collective agreement;[8] (ii) a computerized or other form of mediation in which the mediation is not conducted with an individual as the mediator;[9] (iii) actions taken by a judge or arbitrator in the course of judicial or arbitral proceedings to promote settlement of a commercial dispute that is the subject of the proceedings;[10] or (iv) existing mandatory mediations for which procedures are prescribed[11] in the Ontario Rules of Civil Procedure.[12]

The Act also does not apply to the mediation of a commercial dispute to the extent that: (i) the Act conflicts or is inconsistent with the requirements of another statute or a regulation made under another statute;[13] or (ii) the application of the Act is excluded or modified by its regulations (the “Regulations”).[14]

The parties to a mediation of a commercial dispute may exclude or limit the application of the Act. They may agree: (i) not to have the Act apply to the mediation;[15] or (ii) to apply the Act with such modifications on which they have agreed.[16]

However, the parties may not exclude or modify the application of the statutory interpretive requirements discussed below.[17] Nor may the parties modify the obligation of the mediator to maintain fair treatment or relieve the mediator from the duty to comply with that obligation.[18]

International Basis

The Act is based on the United Nations Commission on International Trade Law UNCITRAL Model Law on International Commercial Conciliation (2002) (the “Model Law”), which has been adopted by several states in the United States. In interpreting the Act, consideration must be given to its international origin, the need to promote uniformity in its application and the observance of good faith.[19]

In interpreting the Act, recourse may be had to the Model Law[20] and the Report of the United Nations Commission on International Trade Law on its 35th session.[21] If a question arises during a mediation that no provision of the Act or the Regulations expressly covers, the question is to be settled in conformity with the general principles on which the Model Law is based.[22] The parties to a mediation to which the Act applies may not exclude or modify the application of these statutory interpretive requirements.[23]

Mediator

A mediation is to be conducted by a mediator appointed by agreement of the parties.[24] The parties may ask another person or entity to recommend or appoint a mediator and, if the person or entity agrees to do so, the person or entity shall make every effort to recommend or appoint a person who is impartial and independent.[25]

Unless all parties to a mediation otherwise agree, a mediator shall not act as both a mediator and an arbitrator or as an arbitrator after acting as the mediator with respect to: (i) the commercial dispute that is the subject of the mediation;[26] or (ii) another dispute that arises from the same contract or legal relationship or from a related contract or legal relationship between the parties.[27] Therefore, if the parties contemplate a combined mediation-arbitration (“med-arb”), the parties must agree before the mediator can act as an arbitrator. This agreement may be entered at the end of an unsuccessful mediation.

The Act sets out provisions governing conflicts of interest of a mediator. A person is deemed to have a conflict of interest with respect to a mediation if: (i) the person has a financial or personal interest in the outcome of the mediation;[28] or (ii) the person has an existing or previous relationship with a party or a person related to a party to the mediation.[29]

A person who is approached to be a mediator shall: (i) make sufficient inquiries to determine if he or she may have a current or potential conflict of interest or if any circumstances exist that may give rise to a reasonable apprehension of bias;[30] and (ii) without delay, disclose to the parties any such conflict of interest or circumstances.[31]

The mediator’s duty to disclose any conflict of interest or circumstances continues until the termination of the mediation.[32] A person who makes a disclosure of any conflict of interest or circumstances before or while acting as a mediator may subsequently act or continue to act as the mediator only with the consent of all parties given after full disclosure of the facts and circumstances.[33]

Mediation

The Act defines when a mediation commences. A mediation commences on the day on which the parties to a commercial dispute agree to submit the dispute to mediation.[34] A party who invites another party to mediate may consider its invitation rejected if the party does not receive acceptance within 30 days after the day on which the party sent its invitation, or within the period specified in the invitation.[35]

The parties and the mediator may agree on the manner in which the mediation is to be conducted and may agree to follow a set of existing rules or procedures unless prohibited from doing so under the Regulations, another statute or any regulations under another statute.[36]

To the extent that the parties have not agreed on the manner in which the mediation is to be conducted, the mediator may conduct the mediation in the manner the mediator considers appropriate, taking into account any requests by the parties and the circumstances of the dispute, including any need for speedy settlement.[37]

The mediator may: (i) meet or communicate with the parties together, separately or in any combination;[38] and (ii) make proposals for settlement of the dispute at any stage of the mediation.[39] The mediator shall maintain fair treatment of the parties throughout the mediation, taking into account the circumstances of the dispute.[40] As mentioned above, the parties shall not modify the obligation of the mediator to maintain fair treatment nor relieve the mediator from the duty to comply with that obligation.[41]

The parties may agree not to proceed with arbitral or judicial proceedings before the mediation is terminated.[42] However, an arbitrator or a court may permit such proceedings to proceed and may make any order necessary if the arbitrator or court considers: (i) that proceedings are necessary to preserve the rights of any party;[43] or (ii) that proceedings are necessary in the interests of justice.[44]

The Act also defines when a mediation terminates. A mediation terminates on the earliest of: (i) the day on which the parties reach a settlement agreement;[45] (ii) the day on which the parties jointly declare to the mediator that the mediation is terminated;[46] (iii) the day on which the mediator, after consultation with the parties, declares that further efforts at mediation are no longer justified and that the mediation is terminated;[47] and (iv) the first day that a party whose participation is necessary for the mediation to continue declares to the mediator and to the other party or parties that the mediation is terminated.[48]

A mediation may continue after the termination of a party’s participation in the mediation if the party’s participation is not necessary in order for the other parties to continue the mediation with respect to issues that are still in dispute.[49] Therefore, if a party settles out of a dispute with more than two parties, the mediation may continue for the remaining parties.

The commencement of any arbitral or judicial proceedings is not of itself to be regarded as a termination of the agreement to mediate the commercial dispute or as the termination of the mediation.[50]

Confidentiality

The Act also imposes obligations relating to confidentiality. A mediator may disclose to a party any information relating to the mediation that the mediator receives from another party unless that other party expressly asks the mediator not to disclose the information.[51]

Information relating to the mediation must be kept confidential by the parties, the mediator and any other persons involved in the conduct of the mediation unless: (i) all the parties agree to the disclosure and, if the information relates to the mediator, the mediator agrees to the disclosure;[52] (ii) the disclosure is required by law;[53] (iii) the disclosure is required for the purposes of carrying out or enforcing a settlement agreement;[54] (iv) the disclosure is required for a mediator to respond to a claim of misconduct;[55] or (v) the disclosure is required to protect the health or safety of any person.[56]

The requirement to keep information relating to the mediation confidential does not apply to information that: (i) is publicly available;[57] (ii) the parties, by their conduct, do not treat as confidential;[58] or (iii) is relevant in determining if the mediator has failed to make a required disclosure relating to a prior or existing relationship with a party.[59]

The Act prohibits discovery or admission in evidence of certain information relating to a mediation. None of the following information (collectively, the “Restricted Information”), in any form, is discoverable or admissible in evidence in arbitral, judicial or administrative proceedings:

(i) an invitation by a party to mediate a commercial dispute, a party’s willingness or refusal to mediate the dispute, information exchanged between the parties before the mediation commences and any agreement to mediate the dispute;[60]

(ii) a document prepared solely for the purposes of the mediation;[61]

(iii) views expressed or suggestions made by a party during the mediation concerning a possible settlement of the dispute;[62]

(iv) statements or admissions made by a party during the mediation;[63]

(v) statements or proposals for settlement made by the mediator;[64]

(vi) the fact that a party indicated a willingness to accept a proposal for settlement made by the mediator;[65] and

(vii) the fact that a party or the mediator terminated the mediation.[66]

However, Restricted Information may be admitted in evidence if all of the parties to the mediation consent and, if the information relates to the mediator, the mediator consents[67] or to the extent required: (i) by law;[68] (ii) for the purposes of carrying out or enforcing a settlement agreement;[69] (iii) by a mediator to respond to a claim of misconduct.[70]

Except for the Restricted Information or the restrictions on the use of other information, information created for purposes other than a mediation does not become inadmissible only because it was used in a mediation.[71]

Information about the conduct of a party to a mediation or the conduct of the mediator may be disclosed after the final resolution of the dispute to which the mediation relates for the purpose of determining costs of the mediation or of proceedings taken because the mediation did not succeed.[72] The foregoing rules apply whether or not the arbitral, judicial or administrative proceedings relate to a dispute that is or was the subject of the mediation.[73]

Enforcement of Settlement

One of the major advantages of the Act is that it is easier to enforce a party’s obligations in a settlement agreement. A “settlement agreement” is defined as an agreement signed by more than one party to the mediation, or minutes of settlement signed by more than one of the parties, that disposes of one or more issues in dispute in the mediation.[74] A settlement agreement is binding on the parties to the mediation who sign it.[75]

There is no need to commence a lawsuit for breach of contract to enforce a settlement agreement. If a party to a settlement agreement fails to comply with the terms of a settlement agreement, another party wishing to enforce the agreement may, on notice to all other parties who signed the agreement apply: (i) to a judge of the Ontario Superior Court of Justice for judgment in the terms of the agreement;[76] or (ii) to the Court for an order authorizing the registration of the agreement with the Court.[77] The Rules of Civil Procedure apply with respect to such an application.[78]

On an application for judgment, the judge may grant judgment in accordance with the terms of the settlement agreement.[79] On an application for registration of the agreement, the Registrar of the Court shall make an order authorizing the registration of the settlement agreement.[80]

No judgment or order shall be granted or made if it is shown to the Court that: (i) a party to the mediation against whom the applicant is seeking to enforce the settlement agreement did not sign the agreement or otherwise consent to the terms of the agreement that the applicant is seeking to enforce;[81] (ii) the settlement agreement was obtained by fraud;[82] or (iii) the settlement agreement does not accurately reflect the terms agreed to by the parties in settlement of the dispute to which the agreement relates.[83]

On the filing of a true copy of the settlement agreement with the Registrar pursuant to an order authorizing the registration of the agreement, the settlement agreement is registered with the court and has the same force and effect as if it were a judgment obtained and entered in the Court on the date of the registration.[84] The settlement agreement can then be registered in other provinces in Canada and in some foreign jurisdictions under applicable reciprocal enforcement of judgement rules.

On the filing of the settlement agreement, the costs, of and incidental to, the registration of the settlement agreement and the application for registration are recoverable as if they were sums payable under a judgment.[85] Such costs shall be in the amount: (i) that is prescribed by the Regulations or determined by the Registrar in accordance with the Regulations;[86] or (ii) that is determined by the Registrar, in his or her discretion, if no Regulation prescribing costs is in force at the time the settlement agreement is filed with the registrar.[87]

A mediator may enforce payment of his or her account under the Act in some circumstances. If a settlement agreement, minutes of settlement or other written agreement or document signed by one or more parties to a mediation of a commercial dispute: (i) contains an undertaking by one or more of the parties to pay the fees and expenses of the mediator for performing the functions of a mediator in the mediation;[88] and (ii) sets out the amount of fees and expenses payable or the manner of calculating the fees and expenses, all the rates and other variables of which have been agreed to in the agreement, minutes or other document;[89] the rules applicable to enforcement of a settlement apply with necessary modifications if a mediator is not paid his or her fees and expenses in accordance with the settlement agreement, minutes of settlement or other written agreement or document and wishes to enforce payment.[90]

Regulations

The Lieutenant Governor in Council may supplement the provisions in the Act by making Regulations: (i) excluding or modifying the application of all or part of the Act;[91] (ii) prescribing the amount of costs recoverable by a party incidental to the registration of a settlement agreement or principles to be applied by the registrar to determine the amount of those costs;[92] (iii) defining any word or expression used but not defined in the Act;[93] and (iv) respecting any matter considered necessary or advisable to carry out effectively the intent and purpose of the Act.[94]

* * *

The Act is yet another indication of the growing trend to use mediation and other forms of alternative dispute resolution to resolve commercial disputes. The new legislation may provide additional reasons for parties to mediate commercial disputes to develop business solutions.


[1] S.O. 2010, c. 16, Schedule 3.
[2] s. 1.
[3] S.N.S. 2005, c. 36.
[4] s. 2 (1).
[5] s. 2 (3).
[6] s. 3.
[7] s. 3.
[8] s. 2 (4)(a).
[9] s. 2 (4)(b).
[10] s. 2 (4)(c).
[11] s. 2 (4)(d).
[12] R.R.O., Reg. 194, as amended, made under the Ontario Courts of Justice Act, 2010, R.S.O. 1990, c. C-43, as amended.
[13] s. 2 (5)(a).
[14] s. 2 (5)(b).
[15] s. 2 (2)(a); and see the discussion below.
[16] s. 2 (2)(b).
[17] s. 4 (4).
[18] s. 7 (5).
[19] s. 4 (1).
[20] s. 4 (2)(b).
[21] s. 4 (2)(a).
[22] s. 4 (3).
[23] s. 4 (4).
[24] s. 6 (1).
[25] s. 6 (2).
[26] s. 10(a).
[27] s. 10(b).
[28] s. 6 (6)(a).
[29] s. 6 (6)(b).
[30] s. 6 (3)(a).
[31] s. 6 (3)(b).
[32] s. 6 (4).
[33] s. 6 (5).
[34] s. 5 (1).
[35] s. 5 (2).
[36] s. 7 (1).
[37] s. 7 (2).
[38] s. 7 (3)(a).
[39] s. 7 (3)(b).
[40] s. 7 (4).
[41] s. 7 (5).
[42] s. 11 (1).
[43] s. 11 (2)(a).
[44] s. 11 (2)(b).
[45] s. 5 (3)(a).
[46] s. 5 (3)(b).
[47] s. 5 (3)(c).
[48] s. 5 (3)(d).
[49] s. 5 (4).

[50] s. 11 (3).
[51] s. 8 (1).
[52] s. 8 (2)(a).
[53] s. 8 (2)(b).
[54] s. 8 (2)(c).
[55] s. 8 (2)(d).
[56] s. 8 (2)(e).
[57] s. 8 (3)(a).
[58] s. 8 (3)(b).
[59] s. 8 (3)(c).
[60] s. 9 (1)(a).
[61] s. 9 (1)(b).
[62] s. 9 (1)(c).
[63] s. 9 (1)(d).
[64] s. 9 (1)(e).
[65] s. 9 (1)(f).
[66] s. 9 (1)(g).
[67] s. 9 (2)(d).
[68] s. 9 (2)(a).
[69] s. 9 (2)(b).
[70] S. 9 (2)(c).
[71] s. 9 (4).
[72] s. 9 (3).
[73] s. 9 (5).
[74] s. 13 (1).
[75] s. 12.
[76] s. 13 (2)(a).
[77] s. 13 (2)(b).
[78] s. 13 (3).
[79] s. 13 (4).
[80] s. 13 (5).
[81] s. 13 (6)(a).
[82] s. 13 (6)(b).
[83] s. 13 (6)(c).
[84] s. 13 (7)(a).
[85] s. 13 (7)(b).
[86] s. 13 (8)(a).
[87] s. 13 (8)(b).
[88] s. 14 (1)(a).
[89] s. 14 (1)(b).
[90] s. 14 (2).
[91] s. 15(a).
[92] s. 15(b).
[93] s. 15(c).
[94] s. 15(d).

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