Design Your Dispute Resolution Mechanisms Before the Relationship Turns Sour

“This is a success story where the relationship of the contributors has turned sour.” These are the opening words of a judgment delivered on 7 January 2013 by Judge Woo of the Hong Kong Court of First Instance (Emagist Entertainment Ltd v Nether Games (Hong Kong) Ltd, HCA 1659/2012).

The case arose in Hong Kong, the “Port of Fragrances” (香港), a city that has rapidly established itself as a thriving technology hub thanks to strong governmental support for innovation. Within this dynamic environment, a number of start-ups have achieved remarkable success. Emagist Entertainment Ltd. (“Emagist”) was one of them.

Emagist was a young company driven by a talented team consisting of three directors (A, F and E) and three creators (B, C and D). Together, they conceived, designed and developed the online game Ninja Saga. The game became an outstanding success on Facebook, generating substantial profits for the company.

Success, however, did not prevent conflict.

An internal dispute eventually divided the team. While director A was away, four members of the company (B, C, D and E) incorporated a new company under the name Nether Games (Hong Kong) Ltd. (“Nether”) and allegedly took control of the data necessary to operate Ninja Saga. According to the judgment, Emagist claimed that the defendants had moved the servers, changed passwords and transferred the databases, source code and graphic files. In practical terms, the company suddenly lost control of the very assets required to operate its flagship game.

Emagist and A therefore commenced proceedings against Nether, B, C, D, E and F, alleging, among other things, copyright infringement, breach of employment contracts and breach of confidentiality. Pending the determination of the action, the plaintiffs sought an interlocutory mandatory injunction requiring the defendants to return all the data necessary to operate the game. Their objective was straightforward: to restore the status quo ante bellum.

To support their claim, Emagist relied on section 14(1)(a) of the Hong Kong Copyright Ordinance, which provides that, where a literary, dramatic, musical or artistic work, or a film, is created by an employee in the course of employment, the employer is the first owner of the copyright unless otherwise agreed.

The three creators disputed that position. They argued that they were independent consultants rather than employees, that they owned the copyright in the game, that they had merely licensed those rights to Emagist and that they were entitled to terminate that licence by taking back control of the game’s operational data.

One of the central issues before the Court was therefore the nature of the legal relationship between Emagist and the three creators. Were they employees, independent contractors or shareholders?

On this point, Emagist presented compelling evidence. The documentation before the Court persuaded Judge Woo that genuine employment relationships existed between the company and the three creators. The Court also observed that, even if a licence agreement had existed, it could hardly be terminated in such a unilateral manner. Judge Woo therefore granted the mandatory injunction and ordered the delivery of all the data necessary to operate the game.

The judgment nevertheless suggests that the underlying dispute had less to do with copyright than with expectations surrounding the company’s ownership structure. According to the evidence, A had promised B, C and D that they would receive shares and participate in the profits generated by Ninja Saga. Disagreements of this nature are not uncommon in start-ups. Unfortunately, they can jeopardise highly innovative and profitable ventures unless they are addressed at an early stage.

This case illustrates the importance of thinking about dispute resolution before disagreements arise.

Mediation, in particular, might have offered the parties a constructive way of resolving their differences while preserving both their commercial relationship and the future of the business. Properly conducted, mediation enables parties to explore practical solutions that litigation is often unable to provide.

Hong Kong has firmly embraced mediation as a preferred means of dispute resolution. The Judiciary introduced Practice Direction 31 in early 2010, encouraging parties to consider mediation, while the Mediation Ordinance (Cap. 620), enacted on 22 June 2012, entered into force on 1 January 2013, providing a comprehensive legislative framework for mediation.

For start-ups, mediation offers several significant advantages. It can be initiated at an early stage, before disagreements escalate into full-scale disputes. It is generally faster and less costly than court proceedings. Perhaps most importantly, mediation is confidential. This confidentiality enables innovative businesses to protect commercially sensitive information, preserve trade secrets and minimise reputational risks.

Section 8 of the Hong Kong Mediation Ordinance expressly provides that mediation communications are confidential, while section 2(1) defines a mediation communication as anything said or done, any document prepared, or any information provided for the purpose of or during a mediation, excluding the mediation agreement itself and any settlement agreement reached.

For entrepreneurs, the lesson is clear. Designing an appropriate dispute resolution mechanism should not be treated as a mere contractual formality. It is an integral part of building a successful business relationship. When expectations are clearly defined and an appropriate mechanism is available to address future disagreements, businesses are often better equipped to overcome conflict without jeopardising the very success they have worked so hard to achieve.

Brief Comment on the European Patent Arbitration and Mediation Center

Adopted alongside Regulations (EU) No 1257/2012 and 1260/2012, the Agreement on a Unified Patent Court of 11 January 2013 establishes a Patent Mediation and Arbitration Centre, seated in Ljubljana and Lisbon. This early commentary welcomes the initiative but questions its design. The Agreement forbids arbitrators from revoking or limiting a patent, whereas several jurisdictions — the United States, Switzerland, France — allow arbitral tribunals such powers, with inter partes effect, to the benefit of speedy resolution. Article 79 similarly prevents parties from revising patents through settlement, although such concessions are often the very substance of negotiated outcomes. Procedural questions remain open: which court will hear actions to set aside awards, and how arbitrators may access preliminary rulings from the Court of Justice. The Centre is a welcome innovation, but its restrictions may compromise its effectiveness.

4 March 2013
Initially published on emmanuelgillet.com

DNS Abuse: How Can Domain Names Linked to the Same Actor Be Connected?

On 18 August 2026, ICANN published for public comment the Initial Report of its DNS Abuse Mitigation Policy Development Process (PDP 1). Among its proposals are Associated Domain Checks: when a registrar acts on an abuse report, it should also examine the other domain names held by the same customer. In its comments of 25 September 2026, the WIPO Arbitration and Mediation Center supports the approach but points out its main limitation: the checks stop at the edge of a single registrar's portfolio. Bad actors know this and spread their registrations across several registrars, which hampers consolidated UDRP proceedings. WIPO suggests exploring cross-registrar mechanisms without saying which data could link the names. The article argues that payment data, pseudonymised, could serve as that common denominator, while acknowledging its limits (prepaid cards, fraud, multiple payment methods): an indicator rather than proof. It marks a shift from a one-domain, one-investigation logic to a network approach.

28 September 2026
Initially published on iptwins.com

DNS and Web3: How Can We Avoid Importing Cryptosquatting into the DNS?

The DNS and blockchain-based alternative naming systems are converging, with projects such as .BLOCKCHAIN and the .ROBOT cryptoTLD seeking to operate the same string in both worlds. In August 2026, ICANN's Technical Study Group released an Initial Report on integrating gTLDs with alternative naming systems, built on a "string + controller" principle: the same name must remain under the same control across systems, with its status kept in sync. In September 2026, the SSAC supported this synchronisation but noted that applying the UDRP and the URS becomes difficult when a registrant exists only in an alternative system, without conventional registration data. The WIPO Arbitration and Mediation Center warns that cybersquatting is already widespread in these systems: mapping names automatically into the DNS would import existing infringements. Trademark owners therefore need functionally equivalent protection mechanisms, including a way to prevent infringing names from being activated, as initiatives like Unstoppable Domains joining GlobalBlock have begun to show.

24 September 2026
Initially published on iptwins.com

Article Information

Author

Emmanuel Gillet

Publication Date

24 February 2013

Jurisdiction

Industry

Related Decision(s)

HCA 1659/2012Hong Kong Court of First InstanceEmagist Entertainment Ltd v Nether Games (Hong Kong) Ltd
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