DISPUTE RESOLUTION IN TECHNOLOGY TRANSACTIONS: CURRENT AND FUTURE OUTLOOK

INTRODUCTION

The rapid evolution of the technology sector has given rise to increasingly complex and technically nuanced legal disputes, often spanning multiple jurisdictions and areas of law, reflecting the sector’s complexity and global reach. Traditional litigation, with its procedural rigidity and public nature, is increasingly ill-suited to meet the demands of this dynamic and fast-paced industry. Consequently, there has been a marked shift towards alternative dispute resolution (ADR) mechanisms, particularly arbitration, which offers parties a plethora of benefits considering the features of the industry and disputes arising therefrom.   

This article examines the evolving nature of disputes in the technology sector, the effectiveness of current resolution methods, and explores the future role of emerging technologies such as blockchain and artificial intelligence in reshaping dispute resolution, both globally and within Nigeria’s evolving legal framework.

THE NATURE OF DISPUTES IN THE TECHNOLOGY SECTOR

The tech sector is one which is evolving rapidly and as such new disputes are emerging. These disputes often intersect multiple areas of law shaped by the sector’s unique characteristics. Some of these areas include intellectual property, contract law, data protection and privacy law and consumer protection.

Also, many industries are evolving and embracing the intersection between their business and technology by making technology an integral part of their business operations and adopting core technology fields such as computer hardware and software, artificial intelligence, cloud computing and blockchain. Examples of such intersection can be seen in industries such as Finance (FinTech), Health (HealthTech) and Education (EdTech). A key feature of the technology industry is that its operations are not necessarily constrained by geographic location. It is an industry that is able to service users globally with minimal or no physical presence. This is because digital services are delivered online from different parts of the world and as such cross-border disputes are common and the concept of jurisdiction is easily blurred.

In many cases, a single dispute involving technology may raise overlapping issues thereby complicating resolution and demanding a technical multidisciplinary legal approach. A few examples include:

1.    Intellectual Property Disputes

At the heart of many technology related disputes is an issue concerning Intellectual Property (IP). Given that the value of technology companies often lies in intangible assets like software code and algorithms, IP disputes, ranging from patent infringements to copyright and trademark violations to trade secret misappropriation, are commonplace.

These disputes may involve patent infringement, copyright violations, trademark disputes, or trade secret misappropriation.

A notable example is the long-running patent dispute between Apple Inc. and Samsung Electronics concerning smartphone design and software patents. The dispute, which spanned multiple jurisdictions, and involved billions of dollars in damages highlights how critical intellectual property is to technology companies. Such disputes often require adjudicators to understand complex technical evidence, making specialized arbitration particularly attractive.

2.    Contractual Disputes

Technology-related transactions, much like those in other sectors, are typically governed by contracts. Inevitably, disputes may arise over the interpretation and enforcement of these agreements. Some contracts frequently used in this space include Non-Disclosure Agreement (NDA), End User License Agreement (EULA), and Service Level Agreement (SLA).

Typical areas of contention in contracts of this nature include breach of contract, ambiguity of poorly drafted terms, payment and fee structures, deliverable and termination clauses.

3.    Data Privacy and Cybersecurity Disputes

In an era where data is gold and the technology industry is driven by same, efforts need to be made to protect such data and guarantee the security of users of digital products. Privacy and cybersecurity disputes have become central in the technology industry with disputes arising out of unauthorized access to data, and misuse of consumer data. Such disputes often center around concepts such as consent for data processing, compliance with privacy policy, cybersecurity infrastructure, third-party liability etc.

The litigation and regulatory scrutiny following the data privacy controversy involving Facebook and Cambridge Analytica is a prominent example of how data misuse can trigger cross-border legal and reputational consequences.

In Nigeria, the increasing enforcement of data protection obligations under the Nigeria Data Protection Act 2023 also signals the potential for more privacy-related disputes locally. A significant illustration of this in the Nigerian context is the case of Meta Platforms Inc. – the U.S. parent company behind Facebook, WhatsApp, and Instagram, which was fined $220 million by the Nigerian Data Protection Commission for breaching Nigeria’s data protection and consumer protection laws.

THE CURRENT POSITION OF DISPUTE RESOLUTION – EMBRACING ARBITRATION

As the landscape of the technology sector is rapidly emerging, it is inevitable that disputes in this area are becoming increasingly common. There has been a noticeable shift from conventional courtroom litigation to ADR mechanisms[1]. Arbitration has become a popular choice for technology disputes. A reason for this popularity is the speed arbitration can offer in resolving the dispute. Traditional courtroom litigation may be riddled with increasing caseloads and procedural formalities that may cause delay in reaching decisions. In an industry where delays can lead to missed market opportunities, arbitration provides an opportunity for prompt dispute resolution to reduce disruption and preserve a competitive edge. Additionally, arbitration is more attractive as it gives the parties the flexibility to select an arbitrator who may be an industry expert with specialized knowledge that can understand the complexities and technical nuances of the particular dispute.

Ultimately, this may result in a better-informed resolution of the dispute and parties would feel more confident in the process. Another notable benefit of arbitration in the resolution of technology disputes is the confidentiality it offers. Most court proceedings are generally held in public whereas arbitration proceedings are held in private. Many companies and investors operating in this industry value privacy and would like to reduce reputational risk and avoid public scrutiny. In most cases, they prefer to safeguard sensitive proprietary information, trade secrets and business practices that could be exposed in litigation.

A growing trend in the resolution of technology disputes on the international landscape is the emergence of specialized technology arbitration forums. These are dedicated forums or bodies designed to handle technology related disputes by combining their technical and legal expertise. Examples of these include the Adjudication Scheme set up by the Society of Computers and Law based in the United Kingdom. Similarly, the World Intellectual Property Organization (WIPO) Arbitration & Mediation Centre has administered several notable tech related disputes, including the resolution of domain name disputes under its Uniform Domain-Name Dispute-Resolution Policy (UDRP). One such case was Microsoft v. Microsof.com (2000), where the Administrative Panel ordered the transfer of a cybersquatted domain name to Microsoft, thereby resolving the dispute without resort to litigation.

A similar growing trend is the adoption of and referral of technology-related disputes to arbitration by multinational corporations. For example, in LG Display Co., Ltd v. Sharp Corporation (2022), the dispute over a cross-licensing agreement covering display technology patents was referred to and resolved by the Singapore International Arbitration Centre (SIAC) with the tribunal awarding the sum of US$95 Million in favour of LG Display.

Presently, Nigeria does not have a dedicated specialized technology dispute resolution forum, however, the Nigerian Copyright Commission (NCC), in 2020, signed a Memorandum of Understanding between itself and the WIPO Arbitration and Mediation Centre to collaborate to raise awareness of alternative dispute resolution (ADR) options to resolve copyright disputes[2]. This may be helpful for resolving intellectual property violations within the technology sector. It is possible that as Nigeria continues to embrace technology, it may follow in the footsteps of other jurisdictions to establish a designated technology focused dispute resolution centre.   

KEY CONSIDERATIONS IN DRAFTING ARBITRATION CLAUSE IN TECH-RELATED CONTRACTS

Given the likelihood of disputes in the tech sector and the growing resort to arbitration by players in this sector, careful drafting of arbitration clauses in technology contracts is critical. Key considerations in drafting a tech-related arbitration clause include:

• Scope of Disputes Covered: The clause should clearly define the types of disputes subject to arbitration, whether limited to matters such as IP rights, licensing disagreements, or all disputes arising under the contract. This prevents uncertainty and ensures that parties know exactly what issues will be resolved through arbitration.
• Choice of Forum and Rules: Selecting an arbitral institution with specialized expertise and understanding of legal issues around technology transactions is also important. Parties may also stipulate the number and qualifications of arbitrator(s), ensuring that the tribunal has both legal and technical competence.
• Seat of Arbitration: It is important that parties determine at the outset, the legal seat of arbitration, particularly for multinational transactions. The seat dictates the procedural law governing arbitration and can affect enforceability of awards across jurisdictions.
•  Language of Arbitration: In cross-border technology contracts, specifying the language of proceedings avoids ambiguity and ensures clarity.
• Other Considerations: Other clauses that would typically be found in an arbitration clause contained in a tech-related contract include Confidentiality provisions, Expert determination, Enforceability and Governing Law.

THE FUTURE OF DISPUTE RESOLUTION IN THE TECHNOLOGY INDUSTRY – ONLINE DISPUTE RESOLUTION (ODR)

As technology continues to evolve and become more accessible, it can be expected that dispute resolution would also take a more digital form. This is particularly relevant in an increasingly globalized economy, where parties routinely enter into cross-border agreements with minimal physical interaction and inadvertently more cross-border disputes are likely to emerge. Considering this, there is need for dispute resolution processes that are not constrained by physical presence and proximity, hence why the world is leaning towards Online Dispute Resolution (ODR) in many different forms.

ODR refers to the use of information and communication technology (ICT) in the resolution of dispute. It encompasses both traditional dispute resolution mechanisms like mediation and arbitration and entirely new online procedures[3]. The following are some areas of technology which are being integrated with ODR to revolutionize dispute resolution:

BLOCKCHAIN TECHNOLOGY

The application of blockchain in dispute resolution in the technology industry has the potential to be transformative for the industry as well as many others. Potential applications of blockchain technology in dispute resolution could include:

a.    Smart contracts and automated dispute resolution

It has been forecasted that smart contracts will become more commonplace in the future[4]. Smart contracts are self-executing contracts that are programmed on a blockchain to automatically enforce the terms of an agreement when certain predetermined conditions are met without the need for intermediaries[5]. With the use of these contracts, it is possible that developers may also develop code integrated into the contract on the blockchain which would contain and automate the dispute handling procedure to be applied to any dispute that may arise from the smart contract. Simply put, the agreement is written in code on a blockchain, and the code also contains the dispute resolution procedure. Additionally, it is possible that smart contracts could be used to automatically enforce the resulting award or its equivalent that may come from the dispute resolution.

b.    Decentralized Arbitration Platforms

Kleros, a company based in France, is an example of a decentralized arbitration platform. It is an ODR platform based on the Ethereum blockchain that functions as a decentralized ‘court’ by randomly selecting vetted jurors to review evidence and vote on disputes. These jurors are selected based on qualifications in the field the dispute relates to and the cryptocurrency which they have staked for the opportunity to be chosen as a juror[6]. It has been reported that in 2020, Kleros resolved about 500 disputes with over 400 user jurors[7]. It is possible to see a surge in the use of such applications as parties may even choose to include them in arbitration clauses drafted in their agreement. However, some concerns exist around this method of dispute resolution, such as ensuring that all jurors are at all times competent to vote and building user trust in the application.

c.    Immutable Evidence Storage

A key characteristic of blockchain is that it is a decentralized ledger system which cannot be altered and therefore makes the data contained within it immutable[8]. This is helpful in creating a secure and transparent record of evidence which can be used in resolving disputes. This may particularly be of value for big companies in the technology industry who wish to keep documents that may be used as evidence secure and away from the public eye. At any time, parties are able to access records stored on the blockchain and refer to the evidence with confidence that it has not been tampered with.   

ARTIFICIAL INTELLIGENCE (AI)

As technology continues to evolve, It is likely that in the future AI will play a more expansive role in the resolution of technology related disputes. This could either be in an assistive capacity or by even completely automating the dispute resolution process. AI powered tools and software can be of assistance by analyzing evidence or even predicting case outcomes. AI may even be useful by creating virtual legal assistants that may represent parties or virtual mediators/arbitrators that may assist in dispute resolution forums. These legal assistants/ mediators/ arbitrators may take the form of avatars that would analyze evidence, make arguments and even reach a reach a decision concerning the dispute[9].

CONCLUSION

As the technology industry continues to evolve at an unprecedented pace, so too must the mechanisms for resolving the disputes it generates. Traditional litigation, while still relevant, is often ill-suited to the fast-moving, cross-border, and highly technical nature of modern tech conflicts. In response, a range of innovative solutions, such as specialized arbitration forums and ODR, are emerging to meet the industry’s unique needs.

Artificial intelligence and blockchain technologies are also beginning to play a transformative role, offering opportunities for faster, more transparent, and more efficient dispute resolution. Ultimately, building a reliable, efficient, tech-savvy dispute resolution ecosystem will be essential to protecting innovation and sustaining healthy collaboration within the technology sector.