This year, I had the honor of representing Osgoode Hall at the 2021 Willem C. Vis Moot alongside Delila Bikic, Camille Chen, Harleen Kaur and Frances Wu. The Vis Moot is the largest International Commercial Arbitration moot in the world. It is typically annually held in Vienna where around 350 law schools from all over the world as well as many international arbitrators participate. The moot involves the resolution of a fictitious international commercial dispute via arbitration. The 2021 moot has been especially unique. Not only because the moot was held virtually, but also because it was the first moot in recent memory whose underlying substantive issue was IP based. In this blog post, I will explore the topics that the issue raises, the different perspectives that it generated, and the lessons to be learned.
This year’s problem was extremely timely to the pandemic-pervaded world that we find ourselves in. The topic is a dispute arising from research and development into the COVID-19 vaccine. The fictional problem involves Respondents granting Ross Pharmaceuticals (a third-party to the arbitration) an exclusive license to use a viral vector for the development of vaccines in the field of “malaria and related infectious diseases”. It is later discovered that the vector in question has a high potential of being used in respiratory vaccine development research. With the advent of COVID-19, Ross claimed that the arguably vague language used in the original licensing agreement allows them to carry out vaccine development for respiratory diseases using the vector. Later, the respondents granted the Claimant the rights to use that viral vector for vaccine development in the area of “respiratory infectious disease”. Once the claimants became aware of Ross’ allegation, they initiated an arbitration claiming that the Respondents had violated their contract by providing goods encumbered by a third-party IP claim in contravention of Article 42 of the United Nations Convention on Contracts for the International Sale of Good (CISG), which the Claimant believes applies to its contract with the Respondents.
In a nutshell, the claimants alleged that the respondents signed an agreement that Ross claimed gives them the right to carry out respiratory disease research using the viral vector; then, knowing of this claim, the respondents promised those very same rights to the claimant in violation of Article 42 of the CISG. As such, the Claimant request that the arbitral tribunal declare that the respondents breached their contractual responsibilities. In reply, the respondents allege that the claimant is relying of a frivolous claim in order to skirt their contractual responsibilities. This year’s dense fact pattern generates various interesting sub issues including: is Ross’ claim frivolous? Were the respondents obligated to inform the claimant of a third-party allegation that they consider spurious? Should the claimant have been aware of Ross’ claim before entering into the contract considering that an article published in a popular industry journal made the allegation public? I will answer these questions and give practical advice that flows from this hypothetical.
So, is Ross’ claim frivolous?
On its face, it would appear so as COVID-19 does not neatly fit into the category of infectious diseases related to malaria: COVID-19, unlike malaria is a respiratory disease. COVID-19, unlike malaria, is caused by a virus rather than by a parasite. COVID-19, unlike malaria, directly and primarily affects the respiratory system. However, the Claimant posits that as COVID-19 is an infectious disease with almost identical primary symptoms to malaria including fever, shaking, chills, headaches and muscle aches the question of whether COVID-19 is related to malaria is neither frivolous nor unfounded. Ultimately, while the underlying facts suggest that the intentions of Ross and the respondents were not to extend the license to respiratory disease research, the ambiguity of the language may be enough to justify a valid claim pursuant Article 42 of the CISG, thereby triggering a breach of contract.
So, were the respondents obligated to inform the claimant of a third-party claim that they consider spurious?
The claimants argue that since the respondents had actual knowledge of Ross’ allegation, they should have communicated this allegation to the claimants so that they may have availed themselves of their responsibility under the CISG. The respondents argue that as Ross’ allegation is a frivolous negotiation tactic which poses no serious legal risk, they did not have this responsibility. While Ross’ claim is not the strongest, ultimately the respondents should have communicated Ross’ allegation to the claimants in order to avoid further fallout from their poorly worded initial agreement. While conveying this information may have allowed the claimants to negotiate a better deal, the risk of being pulled into a costly legal dispute and the tarnishing one’s reputation outweigh any benefit that is to be had by remaining silent on inconvenient allegations.
Finally, should the claimant have been aware of Ross’ claim before entering into the contract considering that an article published in a popular industry journal made the allegation public?
The statutory responsibility that buyers have to investigate the status of the IP they are purchasing is low under the CISG. Sellers are only exempted from their responsibility of delivering goods free from an IP claim if the buyer “knew or could not have been unaware of the right or claim”. However, as this hypothetical reveals, lacking information about the products one is purchasing can be highly prejudicial and unnecessary when there is publicly available information.
The main lessons to take from this hypothetical are threefold. First, the wording of IP transfer agreements should leave no room for ambiguity. Misunderstandings regarding IP rights are likely to result in not only disputes within the contracting parties, but with all other parties that have a stake in the IP in question. Second, transparency is key when transferring IP and one should not bank on inconvenient information remaining hidden. Third, although the licensor holds the greatest responsibility to ensure that the transfer of products does not lead to a subsequent IP dispute, the licensee is well to take reasonable steps to investigate publicly available information about the IP rights they are purchasing. In the modern world, having full information is key when it comes to making effective business decisions and doubly so when those decisions involve IP.
On a final note, I would like to extend my heartfelt appreciation to my teammates whose hard work has made Osgoode Hall proud. I would also like to thank our phenomenally dedicated coaches: Lauren Tomasich, Mani Kakkar and Sarah Firestone. They not only taught us how to be great advocates but also inspired us with their outstanding mentorship, passion and skill.
Written by Joaquin Arias, JD Candidate 2022, enrolled in Professor D’Agostino’s Directed Reading: IP Innovation Clinic course at Osgoode Hall Law School. As part of the course requirements, students were asked to write a blog on a topic of their choice.