Litigating patent disputes is expensive and time-consuming. Data from the U.S. Patent & Trademark Office and the American Intellectual Property Law Association’s 2005 Economic Survey indicate that the number of patent disputes filed and the costs of litigating these disputes continue to rise. The endpoint of patent litigation occurs when these cases are dismissed (e.g., voluntarily or for lack of jurisdiction), decided via motion practice (e.g., declaratory or summary judgment), litigated to a trial verdict, or resolved through the appeal process.
Mediation is increasingly being considered and used as a cost-effective and time-efficient alternative dispute resolution (ADR) method for resolving patent disputes. However, disputing parties and even some practitioners of mediation may view this process as unsuccessful and a waste of time and money if no settlement is achieved. This view may be myopic. Mediation, unlike litigation, is a flexible and creative process that can result in numerous substantial benefits to disputing parties that may or may not ultimately result in a complete and final settlement.
Mediation is a voluntary, non-binding process that essentially grants control to the disputing parties. A third-party neutral (the mediator) works to ensure that the process is fair and equitable to all parties and serves as a communications focal point for these parties who are often incapable of having direct settlement negotiations for whatever reason (e.g., emotions, litigation posturing, etc.). However, unlike adjudicative processes, such as arbitration or litigation, in which the adjudicator (an arbitrator or a judge) wields considerable influence and decision-making power, a mediator is virtually powerless and has no decision-making authority of any kind. Apart from the mediator’s potential contribution of ideas or "mediator’s proposals", the ultimate success of any mediation resides largely in the hands of the disputing parties.
Another key attribute of the mediation process is its confidentiality. Mediation provides a "safe harbor" from the ongoing litigation process. Parties are typically required to sign confidentiality statements prior to commencing mediation certifying that any information disclosed or developed during the mediation process won’t be disclosed in any subsequent proceedings for any reason. Thus, mediation allows the parties a unique opportunity to freely and openly communicate with one another in exploring litigation positions, and non-litigation settlement options with minimal risk and with all litigation rights preserved.
The open, flexible and confidential dynamics of mediation make this ADR process uniquely suited for a wide variety of uses in patent dispute resolution. Some examples of how the mediation process can be used to a successful endpoint short of achieving a complete and final settlement are discussed in the following paragraphs.
Partial or interim settlements. Complete and final settlements of patent disputes via ADR processes such as mediation may not be possible because the disputing parties may simply be too entrenched in their litigation positions concerning issues relating to liability or damages. However, it may be possible for the parties to reach a partial or contingent resolution on one or more of the issues that are in dispute. For example, while the parties may wish to have the court decide on issues involving liability, they may not want the court to determine the basis for damages. The parties could use mediation to reach an agreement on the method(s) for calculating past damages and/or future royalties. The parties might also agree to table certain issues pending the resolution of larger or more contentious issues, or they might even agree to truncate certain issues during trial.
Eliminating claims and counterclaims from further litigation. Because of the high-stakes nature of patent disputes, it is not uncommon to find the pleadings incorporating multiple claims and counterclaims, many with questionable legal relevance or viability. To take these claims and counterclaims through the litigation process is costly and time-consuming for all of the parties. Mediation can be useful in identifying and eliminating those claims that lack sufficient merit to pursue, or narrowing or focusing the remaining claims to make them more manageable. The maximum benefit of using mediation for this purpose, in terms of minimizing costs and time, would likely be achieved following the filing of the pleadings but before substantive motion practice or discovery began. However, mediation can also be successful in eliminating claims late in the litigation process, for example, after the discovery phase and the Markman hearing but before the filing of summary judgment papers.
Clarifying issues. Patent disputes are technically and legally complex. The technical complexity depends on numerous factors including: the area of dispute (e.g., complex biotechnology versus simple mechanical patents), the number of patents and claims in dispute, and the number of defenses or recovery theories proffered (e.g., infringement, invalidity, inventorship and ownership, the basis for damages). The legal complexity derives from the voluminous and constantly changing and evolving body of patent regulations, procedures and case law governing prosecution and litigation. Accordingly, there are countless opportunities for confusion or misunderstanding of the issues in dispute. The mediation process and a good mediator provide an opportunity for the disputing parties to come face to face for frank and open discussion of the issues which, if it doesn’t facilitate an immediate settlement, can result in more time-efficient and cost-effective discovery or motion practice following this clarifying exercise.
Controlling the discovery process. It is generally acknowledged by IP legal practitioners that the discovery process is the most costly and time consuming phase of patent litigation. Mediation can be used early in litigation to better define or limit the extent of subsequent discovery activities such as the number of depositions and the deponents, and the scope of document production requests. This could be advantageous if a subsequent mediation session is held to see if the results of limited discovery are sufficient to facilitate settlement, particularly in smaller or less complex cases. Mediation can also be an effective tool to resolve any discovery disputes that would otherwise require more costly and time-consuming motions to compel and other legal memoranda.
Testing litigation positions. The intensive nature of complex patent disputes seldom provides a party with a complete picture of their opposition’s litigation position. It is also difficult to test the validity or strength of the party’s own litigation position prior to presenting it to a judge or jury. Trial consultants and mock juries, which can be very costly, may address the latter but not usually the former. Mediation can provide a critical opportunity to bring both sides of the dispute together to hear firsthand the parties’ positions on the issues – something which is almost never available through traditional discovery. The strengths and weaknesses of not only the legal positions but also the credibility of each party’s experts and other witnesses can be assessed. In addition, if the mediator is sufficiently skillful and knowledgeable, the disputing parties may also be able to obtain a reaction to or even an evaluation of the issues in dispute from this neutral third party.
Exploring potential settlement options. Litigation of patent disputes carries significant risks for both plaintiffs and defendants. Available remedies from the courts are limited to monetary damages and injunctive relief. Non-litigation settlements can incorporate creative and flexible remedies unavailable in litigation. However, when attempting to negotiate settlements directly, many disputing parties are reluctant or unwilling to consider alternative remedies because of the tendency of parties to be suspicious of anything offered or suggested by an adversary – a phenomenon known to ADR practitioners as reactive devaluation. The mediation process offers the parties an opportunity to thoroughly explore and analyze a broad range of remedies under the umbrella of this non-binding, confidential forum and with the assistance of a third party neutral to communicate any creative settlement proposals. Furthermore, a knowledgeable and experienced mediator may offer up their own settlement proposals; a "mediator’s proposal" often forms the basis for a mutually acceptable settlement among disputing parties.
Getting the decision-makers engaged in face-to-face communications. Once a patent suit is filed, litigating counsel typically assume control of the dispute resolution process leaving the decision-makers for the disputing parties with little or no opportunity for further direct communication. Furthermore, legal ethics dictate that litigating counsel from one side cannot communicate directly with the clients of the opposing litigation counsel. Inadvertently or not, litigation counsel become the key players in litigation rather than the business representatives. The mediation process provides a unique opportunity to bring together the decision-makers so they can hear first-hand their opponents’ litigation position as well as their own counsel’s presentation of their case. Even in cases where the opposing decision-makers may be heavily invested emotionally in their dispute or otherwise entrenched in their own litigation position, a skillful mediator may be able to defuse some of the emotion or artfully challenge each party’s position. This will not always result in a settlement at that time and place, but it can often result in the decision-makers leaving the session with a clearer understanding of the issues and their own interests underlying the dispute which, given time and opportunity for them to reflect on these things, may lead to settlement later on.
Resolving Issues Relating to Procedures and Schedule. The complexity of patent cases requires the involvement of many legal professionals, technical experts and other witnesses to address all of the issues in dispute. Keeping these individuals focused as they move through the labyrinth of litigation procedures is a major task. A carefully constructed procedural schedule is essential to coordinating the activities of these individuals and meeting the deadlines of any court-mandated case management orders. The mediation process can be an effective tool to develop and maintain this schedule. The interests and multiple commitments of all of the individuals can be considered while the disagreements and counterproductive communications inherent in these matters can be minimized.
Summary. The notion of successful mediations of patent disputes need not be limited to achieving final settlements. The mediation process provides a degree of openness, flexibility, and confidentiality that makes it an extremely powerful and valuable tool, particularly for resolving technically and legally complex patent disputes. While mediation can result in a final and complete settlement, the process is equally well suited as a tool to facilitate a range of interim objectives which may make the litigation process itself more cost-effective and time-efficient and an eventual settlement more likely.
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