After coming to the decision to sue your software vendor, one of the first steps is to determine whether to use arbitration or litigation. Depending on a multitude of factors, there are both practical and strategic reasons to use one or the other.


As a preliminary matter, the software vendor contract will sometimes contain a binding arbitration provision. While there are ways to circumnavigate this, courts and judges are typically unwilling to break a binding arbitration clause contained within a valid contract. Therefore, the decision to proceed with arbitration or litigation may be precluded from the start of the lawsuit.


Assuming there is no binding arbitration clause, however, you may then decide whether to proceed via arbitration or litigation. This article explains the pros and cons of using one or the other in a software lawsuit.


Speed and Timeliness: When compared side-by-side, arbitration is much quicker than litigation. After selecting an arbitrator, the process is moved along much more quickly through the discovery phase and the arbitrator will hear the case sooner. Software litigation before a judge, on the other hand, may suffer long periods of extensions or delays because the court’s docket may be full and a judge may not be able to perform a trial until much later.


Costs and Fees: Arbitration is typically much cheaper than litigation. Since the amount of time litigating issues is expedited in arbitration, as discussed above, attorneys’ fees will not be as high in arbitration when compared to litigation.


Formalities and Evidence: Much of the arbitration proceeding is left to the discretion of the Tribunal, and there are rarely concrete rules from the beginning. Contrast that with litigation, where there are specific rules of procedure that the court is bound by. For example, a federal civil litigation will have to comply with the Federal Rules of Civil Procedure. In arbitration, while the Tribunal may generally follow the Federal Rules of Civil Procedure or the rules of civil procedure of a particular state, the Tribunal will ultimately decide the discovery mechanisms allowed.


Privacy: In litigation, the entire docket will be available to the public. While there are mechanisms in place that will allow the parties to protect confidential information, such as a protective order or redacting information, you will have to demonstrate to the court why the information should be kept confidential. In arbitration, there is no public access to any documents submitted and information.  However, certain steps need to be taken to ensure that documents utilized in the arbitration and testimony transcripts are kept confidential. The non-public nature of arbitration may be an important consideration for your business.


Selection of Tribunal or Judge: The parties in an arbitration proceeding have a much greater say in deciding who the arbitrator and ultimate decision-maker is. Typically, an arbitration clause or the governing arbitration body’s rules will provide procedures for how to select the arbitrator or arbitrators who ultimately makes the decision in the case. In litigation, however, you will have little to no say in deciding the background of the judge, particularly with technical matters.


Appeals: In a binding arbitration, the parties will be bound by the final decision of the Tribunal. Typically, an appeal will not be available in arbitration. Contrast that with litigation, where appeals are a matter of right and as long as you follow the jurisdiction’s rules of procedure, the decision will be appealable as a matter of right.


The above covers some of the main differences between arbitration and litigation. For a software or enterprise resource planning proceeding, the strategic decision to proceed with arbitration or litigation is very important and should not be taken lightly. For more information about the differences of arbitration versus litigation in software cases, please call our office at (312) 263-0570.