Parties Should Think Twice Before Saying “I do” to Copyright Arbitration

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PARTIESSHOULDTHINKTWICEBEFORESAYING“IDO”TOCOPYRIGHT
ARBITRATION

LaurentCarrièreandLorraineLaquerre*
LEGERROBICRICHARD
,L.L.P.
Lawyers,PatentandTrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
info@robic.com-www.robic.ca

PRECIS:AnOntariocourthasruledthatjudicialreviewofanarbitralawardin
acopyrightdisputewaslimitedtochallengingthejurisdictionofthepanel,
maintainingtheprinciplethatpartieswhoagreetoarbitrationshouldbeheld
tothatbargain.Thissetsthebarforthereviewofanawardofinternational
commercialarbitrationveryhigh.
InXeroxCanadaLtdvMPITechnologiesInctheSuperiorCourtofOntariohas
rejectedaclaimtosetasideanarbitralawardgrantedunderthe
InternationalCommercialArbitrationActandtheModelLawonInternational
CommercialArbitrationinacopyrightinfringementaction.Thecourtheld
thatthepanelhadnotexceededitsjurisdictioninawardingdamagesfor
breachofcopyrightandunpaidroyalties.
In1994XeroxCanadaLtdandMPITechnologiesIncenteredintoasoftware
andhardwaredevelopmentandlicensingagreement.Underthetermsof
theagreement,Xeroxwaslicensedtousethesoftwareasacomponentof
Xeroxprintingsystemsinreturnforaroyaltyfeeof$5,000foreachunitsold.A
disputearosewhenMPIclaimedthatroyaltieswerenotlimitedtoone
paymentperXeroxcustomer,butshouldalsoincludeupgradeinstallations.
MPIalsoclaimedthatXeroxbreacheditscopyrightinthesoftwareby
developingandsellingapieceofsoftwarethat,accordingtoMPI,wasonly
anupgradedversionofMPI’ssoftware.



















































©CIPS,2007.*Lawyerandtrade-markagent,LaurentCarrière,isaseniorpartnerwithLEGERROBIC
RICHARD
,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentandtrademarkagents.Lorraine
Laquerreisanarticlingstudentwiththefirm.PublishedinWorldCopyrightLawReport.
Publication328.030.

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FollowingMPI’scomplaint,thepartiesformalizedtheproceedingsinawritten
arbitrationagreement.Thethree-personarbitrationpanelacceptedMPI’s
claimandorderedXeroxto:

·payMPI$50,448,100forunpaidroyalties;
·delivertheVersion7.4softwareandanyearlierversionstoMPI;
·payMPI$38.828millionindamagesfortheunauthorizeduseofits
confidentialinformationtocreateVersion8or,alternatively,forbreach
ofcopyright;and
·reimburseMPIforthecostofanaudit.
Xeroxsoughttoquashorsetasidetheawardmadeagainstit,allegingthat
thepanelhadexceededitsjurisdictionbyfundamentallymisconstruingits
powersanddutiesundertheModelLaw,improperlyconductingthehearing
andallowingthemisuseofknowledgegainedbyonepanelmemberwithout
properdisclosuretotheparties.
TheSuperiorCourtacknowledgedXerox’scomplaintthatthepanelhad
exceededitsjurisdictionbyaddingMPITechSA,theFrenchparent
corporationofMPIUS(MPIFrance)asapartytotheaction,eventhoughMPI
Francewasnotasignatorytothe1994licenceagreement.However,while
thecourtconcededthatthepaneldidnotgivesufficientweighttothe1994
agreement,itrefusedtointerprettheadditionofMPIFranceasanexcessof
jurisdiction,remindingpartiesthatanarbitrationagreementshouldgiveas
muchweightaspossibletotheparties’intent.ThefactthatXeroxhaddealt
withMPIandMPIFrancewithoutmakinganydistinctionbetweenthemwas
consideredimpliedconsenttoaddMPIFranceasapartytothe
proceedings,eventhoughXeroxhadenteredintoawrittenagreementwith
MPIalone.
ThecourtalsorejectedtheallegationbyXeroxthatthepanelactedoutside
ofitsjurisdictionbyadoptingnon-judicialconduct.Onememberofthe
panel,whohadtechnicalexpertise,investigatedtheexpert’sfindings
relatingtocodeproductivity.Hecreatedtwodrafttables,basedonhis
reviewofthecode,listingthepeoplewhohadworkedonbothversions.
Xeroxclaimedthisamountedtotheintroductionofnewevidenceinfavour
ofMPIafterthecompletionofitscase.Thecourtfoundthatthepanelshould
begivenamplediscretioninassessingtherelevantfactstoadisputeand
thatfactgatheringbyanindependentarbitratorcouldonlybehelpful,as
longashedidnotcrosstheboundarytoofferexpertevidence.Thecourt
foundhewasnotactingasanexpertbutratherasanindividualwhose

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backgroundcouldhelpthepaneltounderstandtechnicaldifficulties.
Further,whenthechartswerepresentedbythepanelmember,thepanel
clearlydisclosedwhatwasbeingconsideredasevidenceandgaveXerox
everyopportunitytocommentandobjecttoitsprocess.
Xeroxalsoallegedthatthesourcecodehadlostitsconfidentialaspectonce
theentirecodewasfiledbyMPIwiththeUSCopyrightOffice.Thecourt
agreedwiththepanelthatXeroxhadnotmetitsevidentiaryburdenof
establishingthattheconfidentialityinthesourcecodewaslostasaresult.
AstotheallegationoftheimproperawardofdamagesagainstXerox,the
courtalsoagreedwiththepanel’sdecisionthattherewasevidenceto
supporttheawardofdamagestoMPIonitsroyaltyclaim.Thiswasadecision
basedsolelyonfactspresentedtothepanelandthefollowingdecision
remainedwellwithinthescopeofthepanel’spowers.
Thecourtfinallyreiteratedthat:
underArticle34oftheModelLawforinternationalarbitration,
theresimplyisnopoweratallforacourttosetasideanarbitral
awardforanerroroffactorevenanerroroflaw.
Thechallengeislimitedtoajurisdictionalclaimwhichsetsthebarveryhigh
forapartytoaninternationalcommercialarbitrationagreementlookingto
quashanawardmadeagainstit.Thewilloftheparties,evenifitlater
becomesonlythewillofthewinner,shouldprevail.

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