Thanks to Ms. Tran for citing to the IP ADR Blog's Interview with Jay Taylor: Interview by Victoria Pynchon with Jay Taylor, Partner in IP Practice, Ice Miller LLP (July 13, 2007).
13 HVNLR 313 Student Note by Sarah Tran
Expert IP Mediators Can Give Attorneys the Gift of a Reality Dose
One of the beauties of an expert IP mediator is her ability to give parties the dose of reality they need when litigation is unpredictable and the stakes are high. A mediator well versed in the industry and uncertainties of patent litigation can provide the parties with a neutral assessment of the facts that challenges their unrealistic assumptions. [FN33] In particular, an IP mediator “can give the parties a good idea what the court is thinking: he understands what issues are hot, how the court has decided previous cases.” [FN34] If the mediator's opinion is respected by the parties, which it likely will be if the mediator has experience as a patent law practitioner or judge, [FN35] the opinion will help the parties converge their estimates of the value of the case. [FN36]
The ability of expert IP mediators to neutrally assess a case carries substantial value for even the largest players in the technology market. In a recent case, a jury demanded that Microsoft Corp. pay Alcatel-Lucent $1.52 billion for alleged infringement of Alcatel-Lucent's patents for the MP3 format. [FN37] The jury deadlocked, however, on the question of whether Microsoft willfully infringed on the patents. [FN38] If the jury had found that it did, Microsoft would have had to pay Alcatel-Lucent an additional $3 billion as treble damages. [FN39] Given the high stakes at risk and the ease with which the jury could have come out with a much more drastic verdict against Microsoft, Microsoft's decision to litigate seems ill-informed. By providing a neutral assessment of how the law and the inadequacies of decision makers combine to affect the facts of the case, expert IP mediators could have helped Microsoft realistically assess its litigation risks. Perhaps Microsoft would have still considered litigation to be in its best interests, but at least it would have done so with a better appreciation for the risks involved. [FN40]
*321 B. Expert IP Mediators Cut Costs, Quickly
In addition to assisting parties in gaining a more neutral understanding of the risks of litigation, expert IP mediators can also help parties resolve their disputes more quickly and cheaply. While it is well known that mediation in general produces time and cost savings for parties due to the absence of formalistic procedures, the savings can be even greater when the parties use an expert IP mediator. The learning curve for an IP mediator is simply much flatter than for jurors and district court judges. This can be especially valuable when a high-level understanding of a certain technology is required, such as in cases involving electrical or biotech patents. Unlike in court, where the lawyers must break down intensely complex facts to digestible portions, the expert IP mediator can delve straight into the issues. This translates into less time and fewer lawyer bills needed to resolve a patent dispute before the relevant invention becomes obsolete. [FN41]
C. Clients Get Better Remedies
In addition to receiving benefits on the bottom line, disputants can use expert IP mediators to achieve remedies that address more of their needs. Instead of receiving an arbitrary interpretation of the law from a jury or district court judge who may not understand the technology at issue, parties using an IP mediator can expose and resolve an array of complex legal and non-legal issues. [FN42]
*322 Experienced IP mediators can unearth more issues because they understand the distinct interests of patent disputants. For one, people generally attribute higher values to things they possess. [FN43] Inventors are no different. They invest substantial time and effort creating what they hope will be an innovative and substantially beneficial product: “Accused infringers are, after all, not merely casual observers of the patent system. They are putatively putting the patented invention to some use themselves. They may well have developed [the] product on their own, unaware of the patent they are accused of infringing . . . .” [FN44] Inventors not only have an interest in achieving some kind of recognition for their efforts, but they also fear that they could completely lose their entitlement to use their invented product. An IP mediator further understands that the IP community is small; reputations and relationships matter and even disputing parties may share an interest in developing a business relationship with each other. For instance, after protracted litigation between Microsoft Corp. and Stac Electronics produced first a $13.6 million verdict against Stac and then a $120 million verdict against Microsoft, the two parties signed a broad cross-licensing agreement, which gave Microsoft a 15% share in Stac. [FN45] As Michael Brown, Microsoft's vice president of finance, expressed, “This [collaboration] is a lot more fun than disagreeing.” [FN46]
After recognizing the parties' interests, the IP mediator can assist the parties in satisfying them. Unlike in litigation, where emotional interests are less recognized, a mediator has the insight to understand how these interests affect patent disputants and could ensure that interests are addressed either through the mediation process or in a resolution. If one party needs to stop using an invention for the parties to come to any agreement, the IP mediator could frame settlement as a gain instead of as a loss of entitlement. If parties indicate a desire to work together in the future, the mediator could use his familiarity with the industry to suggest ways for the parties to work together, like entering a cross-licensing agreement. In addition, the expert IP mediator could help the parties craft a creative remedy. [FN47] Take for example, a typical controversy between the *323 brand name manufacturer of drug X (“brand company”), which possesses a patent for X, and the manufacturer of a generic version of drug X (“generic company”). An IP mediator would understand that the parties probably have plans to invest in a new product at some point, motivating them to prefer a sliding payment scheme. After probing this issue, the mediator could help the parties choose a payment scheme that maximizes their money in the bank when they want to make a purchase. Such a remedy could include a lump sum payment, running royalties (periodic payments), and/or payments on a sliding scale.
D. Society Benefits
Trials, especially in the common-law tradition, are in many respects ‘wasteful’: they produce a victor, but at great cost to both sides and to the public . . . . ‘[A] trial is a failure.’ [FN48]
Besides the various benefits patent disputants derive from mediations with IP experts, the IP mediators create positive externalities for society at large. When district court rulings carry little meaning to the parties due to their high reversal rate, taxpayers pay too high a price to keep the court system going. [FN49] Mediation encourages settlement, which in turn reduces this needless litigation. [FN50] Although some critics of mediation and other forms of alternative dispute resolution (ADR) argue that ADR robs society of valuable precedent, [FN51] “the situations where a party should not agree to ADR . . . are not likely to be involved in a patent infringement dispute.” [FN52] Patent disputes usually do not involve important statutory interpretations or constitutional questions. [FN53] In the exceptional case that involves a *324 highly valuable patent, the parties will likely litigate. [FN54] Although some extol the benefits of revoking “bad” patents through increased patent litigation, [FN55] an increase in patent suits will likely not help jurors and district courts gain enough of an appreciation for the technologies involved to start returning verdicts that consistently revoke only “bad” patents. The USPTO, the gatekeeper of patents, has the requisite technical competence to weed out “bad” patents, not the courts. [FN56] Moreover, a strong argument can be made that by freeing a patent from controversy earlier, as occurs in mediation with IP experts, parties can bring more innovative products to the market sooner and can focus their resources on pioneering new products that carry great benefits for society, like new drugs to treat cancer:
Unpredictability or uncertainty in the boundaries of the patent holder's property right and its enforceability will . . . divert resources from innovative efforts (research and development) to enforcement (transaction or litigation costs) . . . . [FN57]