On 26 February 2024, the District Court for the Southern District of New York issued a judgement in favour of Italian fashion designer Valentino S.p.A. against U.S. designer and manufacturer Mrinalini Inc., recognizing and enforcing a final arbitral award issued by the Chamber of Arbitration of Milan (CAM). This followed a previous decision by the same court, which dismissed Mrinalini’s complaint against Valentino based on the arbitration clause in the purchasing agreement that compelled arbitration.
There seems to be an emerging trend in IP law, as increasingly more copyright and entertainment contracts incorporate arbitration clauses. But why is this the case? Why are creators, studios, and suppliers increasingly often choosing arbitration over traditional litigation? The main drivers seem to be the “classic” advantages arbitration offers, i.e., confidentiality, speed, expertise, and quasi-global enforceability, especially when considering that they “fit” the needs of IP and Entertainment disputes very effectively. This trend is confirmed by statistics. In a 2024 report, the World Intellectual Property Organisation (WIPO) disclosed that during that year its Arbitration and Mediation Centre (WIPO AMC) handled 858 IP disputes, compared to 179 in 2019 and only 82 in 2014, which effectively constitutes a ~379% increase over the past 5 years and a ~946% increase over the past decade.
Figure 1 – Information Retrieved from wipo.int
Furthermore, the trend is observed in large productions in both TV and Hollywood, such as the “House of Cards” arbitration between Kevin Spacey and MRC, administered by JAMS (Judicial Arbitration and Mediation Services) and the “Black Widow” arbitration between Scarlett Johansson and Disney. It can be thus concluded, based on the above data, that arbitration is gradually becoming a preferred forum for copyright and entertainment disputes, particularly when cross-border elements are involved. But what are those key advantages which arbitration offers that are driving this trend?
- Confidentiality and privacy: In sensitive IP and Entertainment related disputes, involving scripts, designs, or trade secrets, confidentiality is a very important consideration for parties. Further, in high-profile copyright or entertainment cases, where public image equals currency, discretion in legal proceedings and keeping disputes from reaching headlines is critical. When a dispute arises between parties, arbitration offers a high degree of confidentiality, especially if the award is not later challenged in court (although even in such cases, there is arguably much less publicity than when a dispute is initially brought in litigation).
- Speed: The swiftness of arbitration compared to traditional litigation, which can often span multiple years, is another key consideration. This can particularly be the case in the fashion industry, where fashion cycles change at a rapid pace, or in entertainment, where strict schedules and deadlines create high pressure, making speedy resolution of emerging disputes invaluable.
- Expertise of decision-makers: Arbitration allows parties to largely appoint the arbitrator(s) who will decide their dispute. Thus, it is quite common for parties to select individuals with specific knowledge of the field relevant to the dispute at hand. This can be particularly important in large industries, such as the fashion and entertainment industry or in complex matters such as trade secrets, where parties can select arbitrators that specialise in IP law and/or have industry-specific knowledge, effectively tailoring the decision-maker to the dispute.
- Cross-Border Enforceability: Arguably, arbitration’s biggest advantage over litigation is its quasi-global enforceability. Due to the almost global ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, arbitral awards issued in one country can swiftly be recognised almost anywhere in the world, without de novo review of the merits of the case. This stands in stark contrast with the recognition of court decisions in foreign countries, which can often prove to be quite a troublesome endeavour. The world, and by extension legal disputes, are becoming increasingly global; yet, “IP” and “Entertainment” are industries that could be considered particularly international due to factors such as territorial rights, licenses that extend across multiple jurisdictions, content distributed on global platforms, creative collaborations involving parties and assets from across the globe, etc. Thus, the ability to resolve cross-border conflicts effectively is a large advantage and arbitration does just that.
Arbitration’s advantages are well-illustrated in the aforementioned cases. In Valentino v. Mrinalini, the Chamber of Arbitration of Milan (CAM) swiftly issued a final award, and 2 years after initiating arbitration, the award was enforced by the SDNY. This case is indicative of the speed and cross-border enforceability arbitration provides, qualities that would have been difficult to replicate in traditional litigation (in Italy or the U.S.), especially in such cases whose cross-border nature would have likely caused further delays.
The “House of Cards” case shows the effectiveness of arbitration when it comes to confidentiality, which can shield both studios and actors from severe reputational damage. In contrast to Spacey’s parallel litigation and criminal proceedings, which became one of Hollywood’s most publicised controversies, the arbitration against MRC was mostly unknown to the public, as the JAMS proceedings did not attract much publicity, even when the $30.9 million award was confirmed by the Los Angeles Superior Court. Furthermore, the case illustrates the advantage of appointing arbitrators with industry-specific expertise, as the case was presided over by Bruce Friedman, Esq., a seasoned entertainment arbitrator.
Nevertheless, arbitration still presents some drawbacks. Specifically regarding IP, many jurisdictions do not allow patent disputes to be arbitrated as a matter of public policy. Also, crucially, arbitrators do not wield the same coercive power that courts do, and although in most jurisdictions courts facilitate injunctions issued by arbitral tribunals, still interim measures may face certain delays, which can be crucial in high-paced industries where immediate relief is required. Finally, arbitration can be quite pricey and offers less certainty and foreseeability compared to the regular court system given the absence of case law to be relied upon.
In light of all the above, it can be concluded that arbitration is no longer a niche choice, but rather an emerging standard in copyright and entertainment disputes. It offers confidentiality, speed, expertise, and cross-border enforceability, which respond excellently to the needs of modern, global creative industries. As transactions, collaborations, and legal relationships across borders only keep increasing and becoming more and more complex, arbitration is sure to play an important role in shaping the future of IP dispute resolution.