What is the Baseball Procedure?

If a member wants to take a licence to use a fellow member’s patented invention, this member can start bilateral negotiations with the member that is the patent holder. If no agreement is reached within three months, the case can be submitted to a group of independent experts.

The innovative aspect of the system is the method of decision-making by the experts. It uses a baseball arbitration model, whereby both parties submit their licence fee proposal (incl. supportive arguments) to the independent arbitrators, who then only choose between the two submissions the most reasonable proposal. This encourages both parties to adopt reasonable positions from the outset, because an unreasonable position will be rejected in favour of a more reasonable competing proposal. The member who’s proposal will not be chosen will have to pay the fee for the baseball procedure, which is currently set at € 30.000.

The reference to baseball has to do with the a way of dispute settlement in the US called baseball arbitration. This is a form of dispute settlement in which each party has to make a proposal for the decision to the arbiters and the arbiters may only choose between the proposals made by the parties involved. This form of arbitration is used in baseball to settle disputes between baseball players and their clubs concerning salaries.

At the end of the baseball procedure a Standard License Agreement will be executed between the two members, including the royalty percentage selected by the independent experts.

The two members involved in the baseball procedure may have agreed to include a lump sum in the Standard License Agreement. In that case, each of the members will propose a lump sum to the independent experts and those experts will choose between the two proposals.