In earlier articles in this series we looked at the types of patent disputes most amenable to arbitration, what to look for in choosing an arbitrator or arbitrators for the dispute, relatively foolproof clauses to make sure the matter actually goes to arbitration without having to fight about it in court, arbitration clauses that may be useful in your patent dispute, and clauses to avoid or at least skeptically consider before using.
We now turn to the single event that has the most to do with shaping the arbitration process, particular discovery, motions, and the timing of hearing. That is the prehearing conference with the arbitrator. This is typically done in a phone conference, but don’t let the informality fool you. There you will set a schedule for all that needs to be done before the hearing and for the hearing itself. Having a good idea what the possibilities are will allow you to put in place as effective and efficient a process as possible. Let’s look at a few of the items to consider, particularly those to consider in a patent case.
Three of the key questions you need to answer are: how much discovery do you need, what kind of discovery do you need, are there pre-hearing matters that we should take up before the hearing, and how long should we schedule for the hearing? To answer those questions, you will need to plan the basics of your case, from discovery to pre-trial motions, and from experts to other testifying witnesses. Thus, you will need to decide:
- How much document discovery do you need?
- Will you need depositions, or will documents do?
- Who has the information? Will third parties have any?
- Do you need a separate claim construction hearing or invalidity hearing?
- Should there be dispositive motions?
- Should you have an expert witness or witnesses and on what topics?
- Who are your key witnesses likely to be?
- What witnesses will your opponent call?
- Where should the hearing be?
Let’s begin to take a look at some of the specifics of each.
Discovery is often done on the “gold standard” in a typical patent case in federal court. That is, no stone is left unturned lest you miss an important “admission” in an e-mail, obscure entry in a lab notebook, prior art that wasn’t provided to the patent office tucked away (and perhaps forgotten) in a file, or something else that will help turn the case your way. It doesn’t always seem like it should be that way. After all, the substance of a patent case involves matching the elements of claims to the parts of the accused product or process. Even invalidity requires a matching exercise, this time matching what is revealed in the prior art to the claims at issue to see whether they are valid.
To be sure, the case can be a little more complicated with issues of the on-sale bar, inequitable conduct, willful infringement, and the like. These issues involve specific facts you need to prove or disprove. But in many cases there is little reason to believe the full exploration of every possible defense will turn up anything useful.
Nonetheless, many patent cases are extremely complicated and often involve huge sums of money, so counsel feel they must explore every aspect of the case. A great deal may be at stake.
But because patent cases in arbitration typically will arise from a license agreement or the like, you may well not be able to afford to explore all those issues. You probably need something less than the gold standard in discovery in most arbitrations. Getting the prosecution history and getting the technical details through drawings and inspections of the products at issue will provide most of what you need to prove infringement or coverage by the license agreement. If you want to be a little more thorough, you may want to explore first sales and use and some related matters if you have any reason to think that might be fruitful in challenging the validity of the patent at issue. But it will be the rare case where you will have good reason to spend the time and money exploring every possible defense.
Electronic discovery can easily get out of hand. It is true that most important documents now are electronic and that paper copies are just artifacts. But that doesn’t mean it makes any sense to search a company’s entire system – including all emails – to find documents. You should be able to pick out a group of 3 to 5 document custodians who can turn up all the documents likely to be important to real issues in the case.
One good place to start in limiting discovery in a patent case is to consult the E-discovery Model Order Form from the Federal Circuit Advisory Council. (Available at http://www.cafc.uscourts.gov/images/stories/announcements/Ediscovery_Model_Order.pdf. Or just google: “e-discovery model order in patent cases”). While formulated for court instead of arbitration, the goal is still to keep the cost of e-discovery from overwhelming the amount at stake in the dispute.
Damages and royalties are an area where discovery can be almost limitless if you let it. But focusing on existing financial statements, perhaps with some specific detailed and narrow requests for information on sales and costs for the products involved (depending on how royalties are computed, for example) will save time and money and get you the information you need. It is better to start with the general information already in summary form in financial statements and the like and then ask for more as needed to clear up questions or get needed detail. The normal practice of demanding “all documents reflecting or bearing upon sales, costs profits, etc. etc.” is just unnecessarily expensive and usually doesn’t yield what you really want anyway.
This all suggests that document discovery will probably need two passes. A first pass for the general information you know you will need, and a second to pinpoint the details find you are missing. If counsel are at all cooperative, this probably can be accomplished primarily through a few letters and phone calls. If not, the arbitrator can help you with that through a conference call or relatively quick exchange of letters.
Let me offer a few thoughts on depositions in arbitration. Nobody likes surprises. Particularly not lawyers. This leads to a tendency to over depose. The typical deposition in a patent case seems to involve reading statements to a witness from documents and getting him or her to agree he or she wrote it and meant it.
In an arbitration, where the strict evidentiary requirements are relaxed, you can probably forego most of that. (You can probably forego that for a case headed for trial too, but I’m not addressing that right now.) This suggests that depositions should be more about learning what you cannot learn from documents rather than a process of nailing down a series of admissions made in documents. Thought of that way, you can probably agree to just a few depositions of limited length, if you need them at all.
Another possibility is to simply let the parties take as many depositions as they like, but limit them to, say 10 or 15 hours total per side, or whatever the size and complexity of the case justifies.
A final approach is to use mostly Fed. R. Civ. P. 30(b)(6) -type depositions of designated corporate representatives knowledgeable about key topics, again for a limited time. I at first would have thought this would make the process very rule-laden as in a federal court case. But, approached correctly, use of agreed 30(b)(6)-type depositions can produce a great deal of information efficiently by getting the people who have the information at the deposition instead of using the deposition to find out who would have the answer to a given question and then noticing yet another deposition.
Approaching discovery in a limited and focused way will generally allow you to plan for just a few months to get the documents produced and limited depositions taken if needed. But there are other aspects of pre-hearing phases of the case that should also be considered. We will take those up in the next article in this series.