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Having developed mechanisms to handle dispute resolution in the domain name space, the World Intellectual Property Organisation (WIPO) has moved on to develop tailor-made guidelines for dispute avoidance and resolution in the Application Service Provider industry. See also the interview of Arif Ali of WIPO called "Tailor-made Dispute resolution".

Catering for dispute resolution in new business models - the example of ASPs

Why should the World Intellectual Property Organisation (WIPO) be interested in Application Service Providers (ASPs)?

ASPs are interested in software and software is protected by intellectual property rights. In addition, the use of software generally generates intellectual property. What's more, the ASP is a good example of a new business model for the use of software in the virtual environment. WIPO has a speciality in providing dispute resolution services for new business models on the Internet.

What are likely causes of dispute?

There is service failure on the part of the ASP, breach of contract and third party liability arising as a result of the ASP causing its client to offend third party rights.

Does the nature of the ASP raise specific legal problems not to be found elsewhere?

The major difference arises from a technological activity in a global space governed by legal concepts that are territorially limited. The problem consists of knowing what the applicable law is in any given situation and not being able to specify it in advance. This, of course, is not specific to ASPs, but to the Internet as a whole.

The fact that ASPs are working with a lot of partners and a lot of customers, does that introduce additional problems?

Absolutely. It is a multipartite relationship and the ramifications of a bilateral relationship within the multipartite framework have implications for everyone else. This is another specificity, and the two together (determining applicable law and the number of parties involved) mean that one of the things people might need in order to take the leap of faith into the ASP model is some certainty about how those questions are going to be resolved. That is where a dispute resolution system becomes useful.

What are the traditional procedures for dispute resolution?

The normal procedure would be going to court. There are several reasons why such a procedure may not be the most desirable. One would be the difficulty of trying to identify which would be the most appropriate court and the possibility of having more than one court. The second reason is that court procedures tend to be more expensive than alternative dispute resolution procedures. In the ASP context, the dispute may not concern a huge amount of value. Of course, it may also concern a lot of value. If the ASP model is operating on a cross-jurisdictional basis, for one party to go to court in the other party's country is going to involve at least the impression of a prejudicial environment for one of the parties.

Presumably the openness of the court hearings could be prejudicial?

Indeed! One of the reasons for preferring alternative dispute resolution procedures is the possibility of confidentiality with respect to the existence of the dispute and the means adopted to resolve it as well as the solution.

So what are the alternative solutions?

There is an escalating scale beginning with unmediated negotiation or discussions directly between the parties to the dispute. Anyone is free to do so at any stage of the dispute and those negotiations can continue even after the adoption of a more formal procedure. Such discussions would be the normal way of commencing to deal with a dispute. Not attempting some form of consultation or negotiation might be considered a very hostile act in the context of a business relationship. Let us suppose that you fail to resolve your dispute through unmediated negotiation. The next stage is to escalate one degree by introducing a third party neutral - the mediator - who does not have any power to impose a decision, nor even to require the parties to stay together at the table to negotiate, but who endeavours to mediate between them and to assist them in finding a negotiated solution. Suppose that the mediator fails to assist the parties to achieve a solution, then the third stage is the court model of an adjudication in which there is a decision maker (an arbitrator) who has the power to impose on the parties a binding decision that can be enforced in law internationally by virtue of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Let's come back to WIPO. WIPO has developed expertise in dispute resolution and mediation and is now applying that expertise quite successfully. Is that a correct assessment of the situation?

We like to think so. [Laughter] What does it mean to provide such a service? Several things. First of all, one of our areas of expertise is to be able to identify expert neutrals with the appropriate skills for a particular dispute. Appropriate skills include the personal linguistic and cultural baggage with respect to a dispute as well as their professional experience and qualifications. In other words, someone who can resolve a dispute in the ASP context, who knows something about the ASP model and about the software industry and the Internet more generally. These neutrals have gone through a training system that is not as formalised as the university system for law degrees. Providing that training system is another of the things we can do, in addition to ensuring that people measure up to the appropriate qualifications.

A second feature of our service is to administer a dispute. That means, in addition to nominating and appointing a neutral, we are the conduits for all official communication between the parties, we hold the archive and we look after the financial management of the procedure. In addition, we determine the level of fees of the neutral which avoids the potentially embarrassing situation of a party having to negotiate with his or her "judge" about how much he or she will be paid.

Does that not make your situation difficult in terms of liability?

Not so much liability. Responsibility, yes. We are responsible for the payment of the neutral, but we deal with that by having the parties contribute a deposit in advance. As far as the fees to be paid to neutrals are concerned, we fix those only after consultation with the parties and after knowing the parties will accept that level of fees. We don't see any interest in paying neutrals low fees. You obviously want to attract the highest quality neutrals.

There is no liability on the part of WIPO on the outcome of the procedure?

No. In mediation, we hold the belief that any good faith endeavour by both parties to mediate a solution, will result in a benefit to them, even if that benefit consists solely of understanding their own position in relation to the dispute better and the other side's position. They are better able to identify the issues that need to be resolved through adjudication. We feel there are few, if any, failed mediations even though there may not be a settlement.

In this activity, WIPO is leveraging its position as an international organisation in a new context that requires new international collaboration.

Absolutely. One of the things needed in the "new context" is trusted intermediaries. That is one of the bases of the formation of international organisations. We rely on that foundation to apply it in a new context where we think it is very much needed. It is needed because people are looking for neutral territory and they are also looking for international expertise with multilingual and multicultural capacities.

The fact that people are seeking a neutral person does that give you an advantage over potential commercial solutions?

We think so. Many potential commercial solutions are somehow rooted in one particular legal system. Very often their participants come from the same culture, whereas we can offer something a bit different. The other thing is that we'd like to think that there is a certain legitimacy associated with the solutions that can be found through an international organisation. In many ways, some of these disputes are likely to represent disputes before law. That is to say, there is currently no law that has been developed to govern the dispute because the business activity has occurred long before any regulatory framework has been put in place. In that context, it is very important to have a solution that parties can recognise as legitimate.

Given the slowness of traditional litigation, is this not a model that could be extended more widely?

We think so ... but gradually. People have to have confidence in it. If we come with a proposal for its application on too widespread a basis, it will frighten everyone. We think we have established some credibility in the domain name area. We like to think we have established some credibility with the enterprises that have participated in the development of this scheme for ASPs. We now need to establish credibility in its implementation and application before we look at another area. The business model needs to obtain gradual confirmation and affirmation as we move forward.

Francis Gurry, Assistant Director General, World Intellectual Property Organisation
Interview by Alan McCluskey, Geneva.

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Created: April 10th, 2001 - Last up-dated: April 10th, 2001