Boston, 10 April 2019

The program was hosted by Charles River Associates at their downtown Boston offices and supported by the Boston International Arbitration Council, a new organization devoted to promoting Boston as a seat for international arbitrations, and the Silicon Valley Arbitration and Mediation Center, which, among other things, maintains an invitation-only list of neutrals with specialized technical knowledge and experience. Boston was an especially appropriate location for this discussion given the strong presence of life sciences companies in the Boston/Cambridge area, including pharmaceutical, device and diagnostics research, development and commercialization organizations and their partners.

Jared Hubbard (Counsel, Fitch Law Partners; President of the Boston International Arbitration Council) welcomed the attendees and highlighted Boston’s preeminent place in the life sciences industry and the wealth of available experts and counsel experienced in international arbitration based in Boston.

Nancy M. Thevenin (General Counsel, USCIB/ICC USA) introduced the program by emphasizing the importance of international arbitration as a dispute resolution mechanism in cross-border partnerships. She explained, by way of example, the global growth of pharmaceutical companies and the numerous partnerships such expansion requires.

Why international arbitration for life sciences disputes?

Conna Weiner (Arbitrator and Mediator; Vice-Chair, Northeast Arbitration Subcommittee, USCIB/ICC USA) moderated and participated in the first panel discussion focusing on why international arbitration should be used for life sciences disputes from the perspectives of outside counsel serving as an advocate in arbitrations, transactional counsel working on contracts and other deals, the ICC Court and a sitting arbitrator. All panel participants emphasized the importance of flexible, customizable processes, the importance of the global enforceability of an award (as a result of the widespread acceptance of the New York Convention), the ability to select one’s decision-maker and confidentiality.

Carl Valenstein (Partner, Morgan Lewis, Boston) explained that disputes arise at all stages of the life science product life cycle, from co-inventorship and licensing issues in early stages to disputes relating to the acquisition of a start-up company by a larger pharmaceutical company, particularly those that involve earn-outs. Later stage disputes can also relate to agreements made by one party to commercialize the products of another. The definition of ‘commercially reasonable efforts’ often arises in connection with both earn-out clauses and promotional standards. Mr Valenstein highlighted the ability of parties to customize the process as a key benefit of international arbitration and stressed the importance of transactional lawyers and litigators working together early on to structure the dispute resolution clauses in transactional agreements in order to take advantage of such flexibility.

Rachael Kent (Vice-Chair of the international arbitration group, Wilmer Hale, Washington D.C.) noted that disputes in the life sciences industry are often hybrids, consisting of both general commercial disputes, such as those arising from contract interpretation or production issues, as well as industry specific ones, such as patent and regulatory disputes. This means life sciences companies can benefit from the ability to select their decision-makers with relevant expertise, as well as from the flexibility of the international arbitration process by, for example, using creative staging and presentation of expert testimony to ensure that the issues are presented in a logical fashion and agree to timelines for speedy resolution of the disputes if timeliness is a priority. A number of panelists gave examples of using the flexibility inherent in the arbitration process to drive quick results and the adoption of expedited procedures by the leading institutions including ICC.

Ms Weiner noted that in connection with patent disputes, this flexibility could lead to ‘one stop shopping’ for the global resolution of multi-jurisdictional patent disputes that would be impossible in a local court, and that the parties can agree to adopt procedures to provide for the early exchange of patent contention information.

Marek Krasula (Counsel, ICC International Court of Arbitration, New York) noted the growth of life sciences disputes among the matters on the ICC docket.

The panel dispelled common misconceptions about international arbitrations, including concerns about time and cost. Although having a three-arbitrator panel could often be more expensive and lead to lengthier proceedings as opposed to having a sole arbitrator, it could be important for the resolution of a complex dispute. Mr Krasula also explained that, in his experience with ICC, the concern that arbitrators ‘split the baby’ in arbitral awards is unfounded, and that the vast majority of arbitral panels decided clearly in favor of one party or another. Even when multiple claims are resolved in favor of different parties, this is often the result of the complicated nature of life sciences disputes.

Mr Krasula noted that issues raised by some practitioners about the ability of parties to challenge international arbitration awards in courts at the seat or where assets are located are generally unwarranted as awards are usually complied with by the losing party voluntarily and rarely challenged in domestic courts. Even when such a challenge occurs, an arbitral award can only be overturned on very narrow grounds implicating the due process rights of the parties.

Ms Kent pointed out that international arbitrators are experienced at handling conflicts of laws issues that come up in international disputes and applying the substantive law of jurisdictions in which they are not qualified. She also noted the availability of legal expert testimony on substantive law issues.

The panel concluded with a quick summary of the issues that often surprised U.S. litigators about international arbitration, such as reliance on written submissions, limited discovery and the treatment of experts, and the need to become familiar with the different international arbitration institutions. The panel also stressed the unique, beneficial aspects of ICC procedures, primarily the helpful organizational and issue definition tool of the terms of reference at the beginning of the process and substantive award scrutiny by the institution issuance of the award.

Complex issues in life sciences arbitration

James P. Duffy IV (Partner, Reed Smith, New York) moderated and participated in the second panel, which took an even deeper dive into the complex issues that can arise in life sciences disputes. The panel included the perspective of an in-house counsel, an expert, an arbitrator, and the experience of Mr Duffy as both counsel and arbitrator.

The panel began by considering jurisdictional issues that may arise in the course of international arbitrations, including when certain national laws prohibit a tribunal from considering patent validity. Further, the panel addressed questions from the audience regarding how to deal with regulatory and criminal liability issues that cannot be arbitrated should they arise in the course of an arbitration and indicated that ‘the pause button’ may need to be pushed with regard to the proceeding so that the issue may be carefully assessed. The panel also addressed best practices in connection with seeking emergency relief from tribunals and interim awards.

Lauren Ann Pond (Commercial Counsel, Biogen, Boston), speaking only in her personal capacity, emphasized the important role of in-house counsel in coordinating all the key players within and outside the company in connection with all aspects of an arbitration and management. Ms Pond also noted the importance of in-house counsels’ role in helping companies manage their expectations and understanding of the process of international arbitrations.

Philip O’Neill (Chair, Northeast Arbitration Subcommittee USCIB/ICC USA; Independent Arbitrator), who with Ms Weiner initiated the development of an evening program devoted to the life sciences, stressed the importance of being mindful of potential arbitral pitfalls during the drafting of arbitration clauses. It is critical not to set very ambitious time limits on arbitral proceedings or specify too detailed qualifications for the potential arbitrators, as both can hinder the resolution of disputes. He also emphasized that arbitrators should craft the issues that they address in such a way to avoid jurisdictional pitfalls and ensure an enforceable award. When dealing with patent licenses in jurisdictions where the tribunal cannot evaluate a patent’s validity, the tribunal may choose to consider whether the license itself would be enforceable under that jurisdiction’s laws.

Managing a life science company’s expectations is particularly important in the context of experts. Dr Greg Bell (Group Vice-President and Life Sciences Practice Leader, Charles River Associates, Boston) proffered the expert witness perspective, and the need to have industry experts and quantum experts work closely together (or to be the same expert) to increase their credibility to the tribunal. Mr Duffy emphasized this as well from his perspective as counsel. Dr Bell also offered his guidance for best practices in expert conferences (sometimes colloquially referred to as ‘hot tubbing’), noting that he believed that the tribunal should take the lead in connection with expert questioning, with parties having the opportunity to cross-examine on particular issues following the tribunal’s questions on that issue.

The panel addressed a wide range of questions from the audience, including issues relating to the handling of cultural perspectives amongst arbitrations, lawyers and parties.