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Patent Mediation

The life of patent dispute is often long, expensive and riddled with small victories and small defeats along the way. Mediation can occur at any stage of the proceeding, whether before a lawsuit, at the early stages of a lawsuit, around the Markman debates, before or after Summary Judgement motions are resolved, before or after trial and during appeal. There are benefits and drawbacks to mediating a case at each of these stages.

Patent litigation can be extremely expensive and time consuming. A patent infringement case of even moderate complexity can cost millions of dollars. The 2017 AIPLA Economic Survey reports that even a patent case where less than $1,000,000 is at stake on average will cost a party $500,000. The costs increase significantly if more money is at risk. The reversal rates of patent cases at the Appeal Court remain high, meaning that even if everything goes your way through trial, the victory is at significant risk for reversal on appeal. It has been written that there are over 30 different defenses to a patent infringement claim, making patent lawsuits some of the most complex and challenging cases our federal courts face. On top of this, a lawsuit can be a monumental drain on a company’s business development strategies, personnel time and other distractions from the core business. The risks of litigation could include a large damage award for infringement, an injunction preventing use of the technology or a finding that the patent is invalid.

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The outcome of any patent lawsuit is impossible to predict. Judges do not generally have particular expertise in patents or the background to understand the patent process, much less the complex technologies covered by patents. Juries are your friends, neighbors or anyone else called to jury duty and these are the individuals asked to decide complex, technical matters that judges struggle to understand.

With this uncertainty necessarily a part of the process, mediation is well suited for patent cases. Mediation can eliminate the uncertainty inherent in the process and cap the expenditure not just of costs and attorney’s fees, but of the incredible drain on the resources of a company involved in the patent litigation machine.

Mediation after a party receives a cease and desist letter or threat of suit is the earliest opportunity for the parties to try to resolve the dispute. On the plus side, presuit mediation carries with it the greatest opportunity to avoid the daunting costs and disruption associated with the lawsuit. The difficulty comes with the lack of information available to the parties to make a sound decision to settle. Oftentimes a patent holder will not have information on sales of the accused device or process, making a damage model very difficult to calculate. An accused infringer will often not be in a position to fully explore the defenses that may be available to it. For these reasons, successful mediation presuit requires both parties to be willing to allow some meaningful disclosure of information to the other side.

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Once a lawsuit is filed, the parties are usually required to explain to the opposition preliminary infringement explanations, preliminary invalidity positions and exchange how each side defines the claim terms. Most jurisdictions have local rules requiring the parties to make these disclosures within the first three or four months after the initial case management conference. Mediating after these disclosures allows the parties to have a basic understanding of each other’s legal positions, allowing the parties to explore informed settlement opportunities before incurring substantial legal fees and expert witness costs.

As part of the life of a patent case, the Court is often asked to define disputed claim terms, known as the claim construction rulings or Markman Decision. Once the parties know how the court will interpret the disputed claim terms, they can more reasonably assess the strengths and weaknesses of their infringement and invalidity positions. Ideally, the claims are construed before substantial fact and expert discovery has occurred, but the parties will incur meaningful fees and expert costs prior to the rulings.

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Another opportunity for mediation is to time the mediation before or after summary judgment motions are filed or decided. Summary judgement motions are often prepared after the discovery has occurred, but before trial preparations begin. At this stage of the proceeding, the parties are very familiar with the strengths, weaknesses and exposure a trial will bring, but on the other hand, the parties have devoted much money and time to the process and are oftentimes entrenched in their respective oppositional positions.

Mediation just before or after trial is not common. All parties have invested heavily in the cause and the mindset is often that the sides are ready for and looking forward to the “final” decision a trial brings. The parties should bear in mind, even at this late stage, that a jury’s decision is not the end of the process. The non-prevailing party can seek relief from the jury’s decision from the trial court and then from the Appeals Court. Post-trial motions can be expensive and take months, if not longer, to be resolved. An appeal may take years to resolve and if reversed, the process may start over again. Mediation should remain an option throughout the process.

Patent lawsuits can be all-consuming for the parties and an expensive experience. Patents are complex legal documents, mixed with complex technology. The patent litigation field has a vocabulary all its own and has evolved into a very specialized legal specialty. To help the parties understand the strengths, weakness and the road ahead, the parties should choose a mediator with extensive experience and one who can help them understand what they face. Only with this expertise can a party feel confident the decision to settle or not settle is well-founded and the right decision for that situation.

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