Mediation of Patent Disputes—Part 3 of 3

In the first two parts of this series (Part 1, Part 2), we examined what mediation is and considered reasons why a party might desire to engage in mediation. In our final segment, we discuss how parties may come to mediate a patent dispute and provide an overview of the mediation process.

Getting to Mediation

Parties can arrive at mediation in various ways.

1. Some courts order parties to a patent litigation to participate in compulsory mediation. The old adage “you can lead a horse to water but you can’t make it drink” is applicable to court ordered mediations. While parties may be ordered to participate in mediation, they cannot be ordered to agree to terms of settlement. If the parties are not motivated to resolve the matter, they will only go through the motions. For this reason, court ordered mediations are less likely to be productive of a settlement than those to which parties voluntarily submit. 
2. Courts may inquire whether the parties desire to mediate. Some courts will refer the matter to federal magistrates or a private mediator if the parties are so inclined.
3. Some contracts include a provision that requires a party to engage in mediation prior to the filing of a lawsuit. 
4. Parties to a dispute can privately agree to engage in mediation before or after the initiation of a lawsuit in an effort to find an acceptable resolution of the matter. 

Preparation for Mediation

Frequently, mediators will request that each party submit a written mediation statement that sets forth the party’s view of the case and the relief sought. The purpose of the written statement is to inform the mediator of the subject of the dispute and the posture of the matter.

In preparation for mediation, parties should consider a number of questions that are virtually certain to be front and center during the discussions. Some of these questions are summarized below.

1. What are the objectives you seek to accomplish through mediation and what are the underlying interests that would be furthered if these objectives were achieved?
2. What is understood with respect to the objectives of the other party and what are the underlying interests of the other party that would be furthered if their objectives are achieved?
3. What options exist for resolution of the dispute? This question should be considered with the recognition that it is unlikely that the matter will resolve if all of one party’s interests are met and none of the other party’s interests are met. Accordingly, consider options that would be acceptable to you and may be acceptable to the other party. Such options are not limited to the remedies that would be available through litigation—in mediation they are limited only by the creativity and desires of the parties.
4. What is the best alternative available if the matter does not resolve through mediation, and what are the implications if that alternative is pursued in lieu of a negotiated agreement?
5. What are the implications in terms of cost, time to resolution, market disruption, productivity, sales, etc., if the parties do not resolve the matter through mediation?

Preparation for the mediation increases the likelihood of a satisfactory outcome. A satisfactory outcome may involve a settlement on negotiated terms or the recognition that some alternative course of action would be preferable to a settlement on terms available through the mediation. Having considered the above questions in advance of the mediation, the parties will be well positioned to have a constructive dialogue around possible bases for resolving the dispute through mediation.

The Mediation Process

At the outset of the mediation hearing, mediators typically explain the mediation process to both parties. A representative of each party with authority to settle the matter should be present for mediation to be effective. The mediator will confirm that the persons in attendance have such authority if such has not been confirmed in advance of the hearing. In addition to a representative of each party with decisional authority, counsel for each party may attend to provide advice to their client during the course of the mediation. 

Following an explanation of the mediation process, a mediator may elect to engage in a joint session in which each party explains their position and their objectives. Not all mediators commence the mediation with a joint session. Some mediators are of the view that starting the mediation with a joint session only heightens tensions in an already stressful situation. Mediators of the view that an initial joint session may not be beneficial will proceed to private sessions in which they explore the interests of the respective parties and options for resolution of the matter proposed by the parties. The mediator typically engages in shuttle diplomacy between the parties, sharing information that each party has authorized the mediator to disclose to the other party. In private sessions, the parties typically are more willing to confide in the mediator with respect to underlying motivations for positions they may have and possible solutions, while understanding that the mediator will keep in confidence information that is not to be disclosed to the other party.

If the parties arrive at a resolution in mediation, a memorandum summarizing the terms of their agreement is typically drafted. The memorandum may be reduced to a formal settlement agreement by counsel for the parties.

Mediation is not the answer for every party involved in a patent dispute. Nevertheless, given the advantages afforded by an early settlement, it should always be considered.

Mediation of Patent Disputes—Part 2 of 3

Part 1 of this series discussed the general nature of mediation as a dispute resolution process. There are a number of reasons why parties may find it advantageous to attempt to resolve a patent dispute through mediation rather than litigation. Some of those reasons are considered below.

1. Uncertainty of litigation outcome – After more than 35 years in practice, I have come to understand that the only thing certain about the outcome of litigation is the uncertainty of the outcome. This is particularly true in the arena of patent litigation, which involves complex issues of law and fact. In the United States, most patent cases are tried to juries. The jurors, selected out of the general public, are rarely technically trained and, as a rule, are often ill-equipped to understand the highly technical subject matter involved in many of the cases. Even if a jury or judge understands the technology, it is often difficult to predict in any given case whether infringement will be found or the validity of asserted claims will be upheld, as the outcome frequently involves subjective determinations.
   
2. Years until final judgment – It takes years to resolve a patent dispute in the courts. After a judgment from a federal district court, the losing party may file an appeal, which is likely to take another year or more. By the time a final judgment is rendered, the exigent circumstances that initially motivated the filing of the lawsuit may no longer exist. An accused party may modify their product following the filing of suit so as to avoid infringement and limit the possible damage recovery. An injunction precluding the ongoing sale of an accused product may be of less importance due to changes in the marketplace. For these reasons, a favorable judgment after years of costly litigation may represent only a pyrrhic victory.
   
3. Litigation costs – Over 90% of patent lawsuits are settled before trial. Litigation costs for a patent case through a district court trial routinely exceed $1 million. For those companies that can afford the fight, litigation often presents a major distraction for the business. Many companies are unable to afford the costs associated with a prolonged and vigorously contested patent litigation. In contrast, mediation is a comparatively inexpensive process that typically lasts a day or involves a few sessions spaced over weeks or months. A mediation that results in a settlement of a patent dispute will avoid substantial litigation costs, including costs associated with discovery, motion practice, trial preparation, trial, and any ensuing appeals.
   
4. Flexibility of settlement terms – The parties to a patent infringement action will usually either view the outcome as a win or a loss. A final judgment by a court offers no opportunity for the parties to fashion a creative resolution that may serve the interests of both parties. By contrast, in mediation, the parties determine the terms of settlement and any options may be considered—e.g., phase outs, cross-licenses, other license arrangements, manufacturing agreements, etc.
   
5. Selection of Mediator(s) – Unlike litigation, in which an assigned judge presides over the case, parties to mediation may select the mediator. Judges often have little familiarity with technical matters and some judges have little experience with patent cases. On the other hand, selection of a mediator by the parties allows the parties to obtain the services of someone familiar with patent law or the specific technology. The selection of a mediator with specific knowledge related to the involved subject matter reduces time and effort educating the mediator with the legal and/or technical issues involved.
   Additionally, while many mediations involving patent disputes proceed before a single mediator, the parties may elect to engage two or more mediators should there be a good reason to do so—e.g., one mediator may have particular expertise in the facilitative mediation process, while another may be a technical or patent expert. While the mediator’s role is not to render a decision, should the parties desire that the mediator engage in an evaluation of the case, a mediator with expertise in the relevant field may be desired by the parties.
   
6. Continuing Relationships – The filing of a lawsuit often does little to improve the relationship between the parties to the suit. There may be an ongoing relationship between two parties and/or a desire that the parties continue to work together once their differences are resolved. Mediation provides a process for parties to resolve their differences without the lingering animosity and distrust that often accompanies “civil” litigation. There is no loser in a settlement that is fashioned by and agreeable to both parties.
   
7. Confidentiality of mediation – Although information disclosed to the other party in a patent litigation can be prevented from disclosure to the general public via a protective order, court proceedings are public proceedings. Mediations are not public proceedings. With only a few exceptions, mediators have an obligation to maintain in confidence information obtained from the parties. In most circumstances, mediators cannot be subpoenaed to testify or produce documentation or notes in a subsequent judicial or administrative proceeding. Additionally, parties to mediation can contractually agree that the parties will not disclose or use any information obtained during mediation for any purpose apart from the mediation.
   
8. Prior efforts at settlement have been unsuccessful – If parties to a dispute would prefer to resolve a matter by settlement but have been unsuccessful in their unaided efforts, facilitative mediation may be of assistance to overcome obstacles the parties were unable to address on their own. 

It is often said that mediation provides an opportunity for parties to trade hope for certainty. It is this opportunity for certainty that can make mediation of a patent dispute particularly appealing. A settlement achieved through mediation may be viewed as a victory in its own right due to the avoidance of future costs, business distractions, and the uncertainly associated with a prolonged patent litigation.

In our final segment (Part 3), we will conclude with some discussion on how parties arrive at mediation and discuss the mediation process.

Mediation of Patent Disputes—Part 1 of 3

In recent years, mediation has been used with increasing frequency by parties to patent disputes for good reason. Mediation has the potential to achieve a rapid resolution of the matter upon terms mutually agreeable to the parties.

Mediation is an extra-judicial process that has been described as an assisted negotiation. It is a voluntary process in which parties to a dispute seek to resolve their differences with the aid of a neutral, disinterested third party (a mediator), who facilitates discussions by attempting to focus discussions on the underlying interests of the parties. In the course of the mediation, the parties are encouraged to explore options of their own creation that address their respective interests. The mediator neither advocates on behalf of either party nor seeks to impose a resolution. Moreover, the mediator has no power to render a decision with respect to the matter. The parties are solely responsible for the terms of any settlement reached through mediation. Mediation and arbitration are sometimes confused; however, they are different forms of dispute resolution. In arbitration, a disinterested party (arbitrator) functions like a judge, and the arbitrator, not the parties, determines how the matter is to be resolved.

Mediation is attractive because, if a resolution is reached, the parties avoid prolonged uncertainty of outcome. In a circumstance in which a party is willing to consider mediation of the dispute, a question arises as to when mediation should be pursued. If pursued shortly after the filing of a patent lawsuit, a party may be of the view that there has been insufficient discovery to evaluate the merits of the case. If delayed well into discovery, the parties will have incurred substantial litigation costs. When successful, mediation can produce a resolution in days or months, and at far less cost than a resolution through the courts.

Although mediation has proven to be an effective process for resolving patent disputes, as mediation is a voluntary process, a settlement will be obtained only if the parties find common ground. If a patent owner initially demands that an accused infringer cease the manufacture and sale of an accused product, and the accused infringer refuses to accede to this demand, it would seem that resolution of the matter through mediation would be difficult to achieve. In practice, however, the initial demands are simply viewed as the starting positions, and efforts are made to determine if there is a basis for the parties to bridge what may initially appear as irreconcilable differences.

In this series, we will seek to demystify the mediation process, while addressing some of the unique considerations involved in patent disputes. The next segment will consider reasons why parties to a patent dispute may prefer mediation as a dispute resolution alternative to litigation. In the final segment, we will consider how parties may arrive at mediation and generally discuss the mediation process.