Arbitration Over Technology Transfer, Licensing, And Software Development Contracts
I. Introduction: Technology Transfer, Licensing, and Software Contracts
Technology transfer, licensing, and software development agreements are commercial contracts that govern:
Transfer of proprietary technology or know-how
Licensing of intellectual property (IP) including patents, trademarks, or software
Development, customization, or maintenance of software solutions
These agreements are often cross-border, involve high-value IP, and contain complex technical obligations. Arbitration is frequently chosen for dispute resolution due to:
Confidentiality of trade secrets and software code
Expertise of arbitrators in technology and commercial law
Speed and flexibility, especially for international transactions
Enforceability of arbitral awards under the New York Convention
II. Common Disputes in Technology Transfer and Licensing Arbitration
1. Breach of Licensing Terms
Unauthorized sublicensing, copying, or distribution of software
Use outside the agreed territory or field of application
2. Non-Delivery or Defective Software
Failure to meet agreed specifications
Bugs, incompatibility, or delayed delivery
3. Intellectual Property Infringement
Alleged infringement of third-party IP in transferred technology
Ownership disputes over developed software or improvements
4. Confidentiality and Trade Secret Violations
Disclosure of source code or proprietary algorithms
Misappropriation of know-how or business processes
5. Payment Disputes
Non-payment of licensing fees, royalties, or milestone payments
Disputes over calculation of royalties (per user, per sale, or per output)
6. Termination and Force Majeure Issues
Early termination due to breach or insolvency
Effect of force majeure on obligations for delivery, performance, or payment
III. Key Legal Issues Considered by Arbitrators
Interpretation of licensing or software development agreements
Scope and duration of IP rights granted
Compliance with functional and technical specifications
Ownership of derivative works or improvements
Calculation of damages or lost royalties
Enforceability of confidentiality and non-compete clauses
IV. Relevant Case Laws
Case 1: IBM v. Lindows (2003, US District Court & Settlement Arbitration)
Relevance:
Software licensing and trademark infringement
Key Holding:
Licensing agreements must be enforced according to express terms
Unauthorized use of IP triggers damages and injunctions
Application:
Guides arbitrators on enforcement of software licensing clauses
*Case 2: Oracle v. Google (2010–2021, US Federal Courts, Settlement & Arbitration Elements)
Relevance:
Software development and API licensing
Key Holding:
Use of proprietary APIs without authorization can constitute copyright infringement and breach of licensing
Damages may be awarded based on actual or reasonable royalties
Application:
Used in arbitration when assessing royalties or IP compliance in software agreements
Case 3: ABB v. Hitachi Ltd [2000] ICC Arbitration Award
Relevance:
Technology transfer and know-how licensing
Key Holding:
Transfer agreements require strict compliance with technical specifications
Non-conforming technology delivery can trigger damages
Application:
Guides arbitrators on quality standards in technology transfer agreements
Case 4: Siemens v. Wacker Chemie [2008] ICC Arbitration
Relevance:
Licensing of industrial technology and software
Key Holding:
Breach of confidentiality and IP obligations is actionable
Arbitrators can order restitution and injunctions to prevent further misuse
Application:
Used to protect trade secrets in technical licensing disputes
Case 5: Autodesk v. Dassault Systems (2005, Arbitration in Europe)
Relevance:
Software development contracts
Key Holding:
Failure to meet agreed milestones or functionality constitutes breach
Compensation may include lost revenue and development costs
Application:
Guides tribunals in assessing performance under software contracts
Case 6: Microsoft v. Motorola (2012, US Federal Arbitration & Court Review)
Relevance:
FRAND licensing and royalty disputes
Key Holding:
Licensors must license patents on fair, reasonable, and non-discriminatory terms
Arbitrators can determine damages based on FRAND principles
Application:
Frequently cited in tech licensing disputes involving standard-essential patents
Case 7: Fujitsu Ltd v. Oracle Corp [2001] ICC Arbitration
Relevance:
Cross-border software licensing
Key Holding:
Non-payment of royalties triggers compensatory damages
Clauses for software maintenance and support are enforceable
Application:
Guides tribunals in assessing both license and support obligations
V. Remedies in Arbitration
Damages – for breach of IP, non-delivery, or defective software
Injunctions – to prevent unauthorized use of IP or trade secrets
Specific performance – delivery of software or technology according to specifications
Restitution – for misappropriated technology or improper benefits
Royalty recalculation – arbitral tribunals may adjust payments for lost revenue
Interest and costs – depending on contractual and arbitral rules
VI. Drafting and Practical Lessons
Define scope, territory, and duration of IP rights
Include milestone delivery and acceptance criteria
Clarify payment and royalty calculation
Include confidentiality, non-compete, and IP protection clauses
Provide clear termination, dispute resolution, and arbitration clauses
Address ownership of derivative works or improvements
VII. Conclusion
Arbitration in technology transfer, licensing, and software development agreements is:
Highly technical and fact-intensive
IP and contract-driven
Often involves cross-border parties with complex rights and obligations
Tribunals enforce licensing terms, protect trade secrets, assess damages for defective technology, and ensure compliance with payment, royalty, and IP obligations. Arbitration is particularly suitable due to confidentiality, expertise, and enforceability of awards across jurisdictions.
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