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As a small software company, clients for whom I develop license agreements insist on including an arbitration clause. Are there risks?
Arbitration clauses provide potential benefits including expeditious dispute resolution. However, Arbitration may not be the best dispute resolution method because initial litigation over its enforcement can result. The process can turn costly and lengthy, even if the clause states otherwise. Other risks include the arbitrator(s) unfamiliarity with issues underlying technological disputes. Furthermore, the arbitrator's decision is generally not subject to appeal. Avoid risk by carving out from the arbitration provision disputes regarding intellectual property and specifically the right to obtain injunctive relief.
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