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.