Last month, the Unified Patent Court (UPC) announced that former judge, government minister and president of the European Centre for Dispute resolution (ECDR) Mr. Aleš Zalar started in his new role as head of the UPC’s Patent Mediation and Arbitration Center (PMAC). ip fray‘s founder had the opportunity to learn a lot from this experienced and even award-winning designer of alternative dispute resolution (ADR) systems. Like ip fray ‘s interviews with UPC judges, a significant part of the focus is on the background and views of key players.
ip fray: Mr. Zalar, you were a judge and the president of a court in Slovenia. Before, during and at the end of trials, I have often seen judges in other countries urge parties to strike a settlement. Have you done so during your judicial career as well?
Mr. Zalar: That was quite some time ago. I finished serving as a judge in 2007. In my capacity as a civil judge, it was my duty to assist parties in reaching an amicable settlement. But it was more than just an obligation: I know that some lawyers who appeared in my courtroom said I liked to facilitate settlement. I always had this inclination.
ip fray: German judges also have that duty, though many of them have given up when it comes to certain types of patent disputes. In what fields of civil law did you hear cases?
Mr. Zalar: The whole range of civil law cases from divorces to IP. It was only after my time that the court developed internal specialization.
ip fray: Did you find some fields of civil law more amenable to ADR than others?
Mr. Zalar: There were no general statistics that would show such correlation. Much depends on the parties. Apart from a few exceptions, like the revocation of a patent with erga omnes effect in principle, all disputes are eligible for amicable settlements. But not all disputants are receptive to that idea.
ip fray: Within certain parameters that have already been determined, you now have the opportunity to shape the PMAC from the very beginning. When did you do something like that for the first time?
Mr. Zalar: Back in 2002 when I was president of the Ljubljana District Court, the biggest court of first instance in my native country, I authored that court’s ADR program.
ip fray: That initiative was acclaimed beyond the borders of Slovenia, correct?
Mr. Zalar: Yes, the Council of Europe [an international body, not an EU institution; its members also include some non-EU member states] recognized it by means of an award.
ip fray: That must have been a great start for you in ADR system design. Then you became your country’s minister of justice. In other words, a high-level policy maker.
Mr. Zalar: That was another opportunity to promote ADR and to integrate it into the court system. I authored a Slovenian ADR code that required each Slovenian court to design at least one ADR program. If there’s only one, it’s typically mediation. Those ADR options had to be connected with the regulator litigation process.
ip fray: Have others sought your advice on this subject?
Mr. Zalar: Yes, in a consultancy function I helped many countries put mediation and arbitration processes in place. From Switzerland to Georgia, Ukraine and several countries in the Western Balkans.
ip fray: Did you personally work as a mediator or arbitrator during your many years at the helm of the European Center for Dispute Resolution (ECDR)?
Mr. Zalar: I was the founding father of that center, and my function as president was rather representative. We had a list of experts who conducted the proceedings. But outside of the ECDR I was engaged as a neutral at the request of parties to certain ADR efforts. For example, until recently I was a member of dispute resolution board in several construction projects between Georgian and Turkish companies. But I always separated that work from the ECDR.
ip fray: When was your first contact with the UPC?
Mr. Zalar: This has actually been a longstanding matter. During my time as Slovenia’s Minister of Justice from 2008 to 2012, the Unified Patent Court (UPC) was already on the agenda for EU member states, and I took a keen interest in it. Justice has always been close to my heart, while mediation has been a passion of mine. I worked diligently to secure a seat for the Patent Mediation and Arbitration Centre (PMAC) in Ljubljana [the capital of Slovenia], which is now a reality.
ip fray: The other seat is in Lisbon [the capital of Portugal]. How can our readers imagine those two PMAC venues? Empty offices waiting for staff to move in?
Mr. Zalar: First, it is probably unprecedented for one institutional ADR provider to have two equal seats. In Ljubljana we are in the process of getting premises, and I have been assured that they are already available in Lisbon, which I plan to visit soon. At the moment, I am alone at PMAC. Recruitments will follow soon, and each location will have a case administrator and a secretary.
ip fray: So from where are you doing your work at this point?
Mr. Zalar: It’s a true startup. I’m currently operating in a home office as the premises in Ljubljana aren’t available yet. But none of that came as a surprise to me. What makes this a lot easier is the fact that there is an excellent collaboration in place with the UPC’s leadership, particularly the presidents of the Court of Appeal and the Court of First Instance, with the Registry, and I get support from other UPC staff. More than that, I am happy to see that several key players proposed their support (EPO, EPLAW, EPI).
ip fray: What are the PMAC’s plans regarding its own case management system?
Mr. Zalar: For the PMAC we need a whole new CMS. That’s why it’s a fortuitous circumstance that the UPC itself decided to create a new CMS tailored to the Court’s purposes. There will be interactions between the UPC and the PMAC: referrals from the UPC to the PMAC, and reports from the PMAC to the UPC on whether cases were settled. We also need to define the PMAC’s procedural rules first so the CMS will be suitable for tasks.
ip fray: How much communication will there be between the judges and the PMAC?
Mr. Zalar: The principle of confidentiality will govern those interactions. Confidentiality is going to be a key feature of the PMAC. For example, all that will be reported to the judges is that the parties attended mediation or arbitration, and whether the case was settled.
ip fray: In the United States, Magistrate Judges often preside over court-ordered mediation. You don’t have an equivalent at the UPC, but could judges contribute in some ways?
Mr. Zalar: This has yet to be decided and we haven’t discussed the pros and cons of this yet. Some patent examiners from the EPO, quite a number of whom have been trained as mediators, might also express an interest. That is a possibility to consider. The ultimately goal is to have the most qualified persons on board.
ip fray: What will be the requirements for potential mediators and arbitrators, given that you are hoping to find the most qualified neutrals?
Mr. Zalar: Experience, knowledge and previous training are among the factors to be considered. We need to combine technical expertise, legal expertise, expertise in conducting mediation and expertise in conducting arbitration. Some may act exclusively as mediators, some only as arbitrators, and some in both capacities. We must strike the right balance. The requirements must be objective and transparent and will be published.
ip fray: How soon do you think the PMAC will be operational?
Mr. Zalar: My dream — which is pretty ambitious — would be to launch on June 1, 2025. That will be the second anniversary of the UPC. However, starting later would not be a significant issue as it is essential to allow sufficient time to properly finalize all details and ensure a successful launch of PMAC activity.
ip fray: But presumably there’s still a lot of work to be done before the PMAC can open its doors, given that you started only on September 9.
Mr. Zalar: There are several decisions to be made, yes. For example, it will be key to finalize and adopt the Mediation and Arbitration Rules. We also need to establish a code of conduct. The European code of conduct for mediators focuses also on procedural rules and is somewhat outdated, so it would be beneficial for the PMAC to create its own code. Additionally, we need to develop a clear fee structure for the services provided by the neutrals.
ip fray: How can stakeholders contribute to this process?
Mr. Zalar: We already have a recently established Expert Committee that will be consulted on the forthcoming framework. Many Member States’ experts will be involved there. There will be the second round of consultation with external stakeholders concerning revised draft mediation and arbitration rules. We strive to make the process transparent and inclusive. That also means we must give everyone enough time to provide well-considered input. We have already heard from EPLAW and EPI.
ip fray: Is there a possibility that one type of ADR will become available prior to the other?
Mr. Zalar: It’s not my preference, but I wouldn’t rule it out categorically. Mediation is more flexible procedure: parties can design it as they see fit. That makes it generally easier to design than arbitration, which needs specific rules. We will have to come up also with rules for expedited arbitration. And besides mediation and arbitration, we also hope to offer, even if not all of that from the beginning, such options as early neutral evaluations and expert determination. Non-binding arbitration is another possibility to consider, and maybe last-offer arbitration. We can cover the whole range from merely facilitative services to advisory and adjudicative proceedings.
ip fray: Who will decide whether a particular proceeding is assigned to the Ljubljana or Lisbon division of the PMAC?
Mr. Zalar: One basic feature of ADR is that the parties are in charge. We will flexibly try to accommodate their preferences. The parties to these proceedings will be from all over the world, not just EU-based. In principle, mediation and arbitration could take place anywhere in the world, provided that the parties pay for it. Most of it, however, will presumably be conducted online. PMAC will of course take advantage of digital technology and be able to conduct proceedings online.
ip fray: At what procedural junctures do you think the Court will refer most cases to the PMAC?
Mr. Zalar: It’s difficult to predict because it depends on the parties and the specific circumstances of a given case. The Court may wish to define certain categories of cases that are particularly eligible for referral to the PMAC. I would like to see both, a presumptive policy approach where the Court would send out ADR information in certain predefined cases, along with a consent form, and a screening approach in the hands of judges. For instance, if the parties to a case are aiming for an important precedent, ADR is not an option. At the interim conference, judges are already required to check on the possibility of a settlement. If the parties are not receptive to ADR during the written procedure, they should be invited again at a later stage. In general, the earlier the parties opt for ADR, the more likely it is to work. The more they invest in litigation, the more entrenched they become in their positions and the more difficult it is to bridge the gap. But even at the appellate stage, when parties may realize that neither is likely to obtain its preferred outcome, there is potential for ADR. There may also be situations in which parties pursue ADR for a particular purpose such as FRAND.
ip fray: FRAND is an important keyword. Just last week, two companies settled multi-year litigation over standard-essential patents (SEPs) by means of an agreement to arbitrate FRAND licensing terms. Would it also be an option in the future to ask the PMAC for help with a FRAND determination?
Mr. Zalar: I am well aware of how important a topic FRAND is. We must keep this in mind when drafting the PMAC’s procedural rules and be clear about the PMAC’s competence in this respect. We will, in fact, discuss this rather soon. For instance, if a party raises a FRAND defense in infringement proceedings, the judge might invite the parties to refer the FRAND part to the PMAC. Even if there is no litigation pending, the parties may seek a determination of FRAND terms and conditions. We will have to reach a conclusion on whether the PMAC could set royalty rates for global portfolios notwithstanding Article 3 UPCA. That is one of the questions for us to investigate. I definitely see certain possibilities for the PMAC to play an important role in SEP disputes.
ip fray: Thank you for all these insights, Mr. Zalar.
Mr. Zalar: Thank you for a nice conversation.