Young ICCA - Young CalArb Event: Arbitrating Technology Disputes: Present Realities, Future Possibilities

Post Event Report

Written by Tuyana Molokhoeva (Co-Chair, Young CalArb & General Counsel, Quandary Peak Research)

On 17 March 2023, Young ICCA, in partnership with Young CalArb, hosted an engaging in-person event titled "Arbitrating Technology Disputes: Present Realities, Future Possibilities." The event, part of the 2023 California International Arbitration Week, took place in Los Angeles and welcomed around 80 participants, including online attendees.

The panel was composed of:

• Lexi Menish, Independent Arbitrator, Oregon
• Dr. George Edwards, President & Principal Computer Scientist, Quandary Peak, Los Angeles
• Han Ah Lee, Senior Associate, Lee & Ko, South Korea
• John Muse-Fisher, Senior Associate, Arnold & Porter, San Francisco
• Giorgio Sassine, Associate, Musick, Peeler & Garrett (moderator)

Young ICCA Events Co-Director Paul Kleist initiated the event by highlighting Young ICCA's role in promoting greater knowledge of international arbitration worldwide. Giorgio Sassine, a Young CalArb Co-Chair, then introduced Young CalArb, a subdivision of California Arbitration (CalArb) dedicated to young practitioners and law students, and encouraged participants to engage with both Young CalArb and CalArb. Additionally, Mauricio Duarte, a Co-Chair of the Young Silicon Valley Arbitration and Mediation Center (SVAMC), provided an overview of SVAMC and its efforts to promote arbitration as a tool for resolving technology-related disputes.

Moderator Giorgio Sassine introduced the panelists and set the stage for the discussion by providing a brief overview of the topic.

The scope of technology disputes

The conversation began by exploring the scope of technology disputes. Dr. George Edwards, President & Principal Computer Scientist at Quandary Peak, Los Angeles, explained that technology disputes encompass cases where the subject matter is technology-related, even if the parties involved are not strictly technology companies. He cited disputes arising from licensing agreements and breach of contract cases over failed software development projects as common examples of disputes which are often resolved by arbitration.

John Muse-Fisher, Senior Associate at Arnold & Porter, San Francisco, discussed the growing trend among technology companies to use arbitration for dispute resolution. He noted that arbitration clauses are increasingly common in technology contracts and emphasized the innovative potential of arbitration which is appealing to technology companies. In particular, he identified licensing disputes as frequently resolved through arbitration.

The pros and cons of arbitrating technology disputes

The panel then examined the advantages of arbitration for technology disputes. Dr. Edwards highlighted the benefits of having an arbitrator with specialized technological knowledge, as they can better understand expert testimony regarding the disputed technology. Lexi Menish, Independent Arbitrator from Oregon, emphasized the procedural flexibility of arbitration, especially concerning expert witnesses. She noted that in the US, state regulations on expert witness testimony vary and often provide for strict requirements, whereas the IBA Rules of Taking of Evidence which are often used in arbitration generally provide a more flexible framework. Additionally, Menish mentioned that parties can choose procedurally robust arbitrators to ensure time-efficient proceedings.

Han Ah Lee, Senior Associate at Lee & Ko, South Korea, pointed out the privacy and confidentiality offered by arbitration as another advantage, particularly in technology disputes where sensitive information is often disclosed. Although arbitration may not be confidential by default, parties and arbitrators can tailor the process for more confidentiality rules.

The panel also addressed the potential concern of limited discovery in arbitration compared to litigation. Han Ah Lee explained that this concern is less relevant in civil law jurisdictions, where evidence gathering is controlled by the court and, as a result, companies from civil law jurisdictions are less inclined to engage in party-controlled production. John Muse-Fisher offered a US perspective, stating that document production through the Redfern Schedule in arbitration can be more efficient than traditional US-style discovery, especially when parties customize the process according to their needs, which arbitration's flexibility allows.

The future of arbitration in the technology sector: investment disputes, space law, AI and NFTs

The panel subsequently delved into the future of arbitration in the technology sector. Lexi Menish began by discussing investment disputes involving technology companies. She noted that while such disputes began to emerge in the early 2000s, their numbers have remained relatively low, however, they are slowly growing. Menish identified two possible reasons for this: first, technology advances quickly while governments move slowly, leading to new legislation on topics like cryptocurrencies and artificial intelligence; and second, technology companies operate differently from traditional investment frameworks provided by investment treaties, for example, some of their assets are intangible (such as intellectual property rights) which may lead to misconceptions that no treaty protection exists. Menish also cited a few recent investment cases in the technology sector, including Tidal v. Norway (a threatened claim under the Poland-Norway BIT in 2019), Uber v. Colombia (a threatened claim over a ban on Uber operations in Colombia), Neustar v. Colombia (a case related to a concession for the operation of the domain name), and ES Holdings v. Mexico (a case involving a concession to develop a mobile taxi application).

John Muse-Fisher brought up the growing field of space law, which is increasingly becoming more private-sector focused rather than state-centric. He emphasized the increasing interest in use of and access to space worldwide. He mentioned that confidentiality in space disputes is crucial due to national security concerns, as well as specialized knowledge of arbitrators and highlighted the PCA Space Disputes Rules (PCA Optional Rules for Arbitration of Disputes Relating to Outer Space Activities). He also provided some examples of space disputes, in particular highlighting the UN Liability Convention, which could have possibly been invoked in the context of a broken satellite in the late 1970s. He mentioned potential insurance disputes arising from failed satellite launches. He also mentioned an example of a space-related investment dispute against India involving a company in the satellite industry.

The panel then explored the challenges posed by artificial intelligence (AI). Lexi Menish started by giving an overview of the current use of AI in various areas. Copyright claims involving generative AI, data privacy issues, and liability when AI provides incorrect results were among the topics discussed. Most AI companies include arbitration clauses in their terms of use, Lexi Menish observed. George Edwards delved into discrimination-related claims arising from AI systems used in healthcare, insurance, loan applications, and bail decisions. He explained that many AI systems unintentionally encode biases and discrimination from their training data, leading to fairness issues. Experts typically analyze the AI model, rather than the code itself, to address these concerns. Lexi Menish also noted that, given the complexities around AI, governments have started to create default rules on AI-related liability (for example, the EU's draft regulation on AI).

Lastly, Han Ah Lee steered the conversation towards the emerging field of non-fungible tokens (NFTs) and their relation to arbitration. NFTs raise intellectual property issues, such as whether they can be protected under the First Amendment and potential trademark disputes. Lee noted that NFTs are more like receipts than assets, and buyers often mistakenly believe they have acquired full copyright instead of limited rights. The panel also discussed the rights of buyers to use digital assets and the implications if such assets are destroyed. Overall, the panel illuminated the current landscape and future possibilities of arbitration in the technology sector, highlighting the importance of adapting to new developments and challenges.

Event Team

• Saemee Kim (Young ICCA Events Co-Director)
• Paul Kleist (Young ICCA Events Co-Director)
• Tuyana Molokhoeva (Young CalArb Co-Chair)
• Giorgio Sassine (Young CalArb Co-Chair)