The hearing in your patent arbitration is over, the briefs are in, and you receive the award. Let’s assume it is not what you hoped. Not bad, but not great either.
You asserted two patents. The arbitrator found no infringement of the first patent based on a claim construction you think is just plain wrong. You are certain the arbitrator relied on a particular embodiment shown in the specification of the patent to limit a broader claim term. You are disappointed because your arbitrator is quite experienced, having been a patent litigator for twenty years. Still, there it is. While the arbitrator said in her award she was using the specification to interpret the claim, you are convinced she used it to limit the claim. While this is a pretty subtle distinction in some cases, you don’t think it is in yours
You did prevail on the second patent, but you are a little disappointed in the amount of damages. While you would have preferred lost profits on lost sales – who wouldn’t? – you were happy with the royalty rate. But you think the base is simply mistaken. This issue was a little confusing during the hearing as there were a few different products that you claimed infringed the patent, but you are confident she either missed a year of sales or one of the products. There seems to be no other explanation for the amount.
You also question the pre-judgment interest award. Your proposed amount was based on sales under both patents and for all products. The amount awarded is, of course, less than if you won on everything, but after checking with your expert, you think the prejudgment interest calculation appears too low and appears uncompounded even though your opponent didn’t object to compounding.
Overall, you think the award is pretty favorable, but not as favorable as it could be. If this was a trial, you would bring post-trial motion to straighten things out or at least set the stage for an appeal. There is enough at stake to do that.
But, because this is an arbitration you wonder what your options are. Where do you start?
The rules
Your first order of business is to see what set of rules you are under. Let’s assume AAA Commercial Rules apply. The rules specifically address the type of post-award requests you can bring. Rule 50 provides:
Within 20 calendar days after the transmittal of an award, any party, upon notice to the other parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided. (Emphasis added.)
Is that it, you wonder? It is. To understand why, let’s revisit what arbitration is all about in the first place. The idea of arbitration is to have a knowledgeable decision maker consider and decide a private dispute. And the process is to be fairly quick, inexpensive and informal. Thus, by design, there are not to be complex motions, review, and appeal. Decisions are to be fast, fair and final. So it is little wonder that the typical post-trial motions available in court are not available in arbitration.
What can be corrected?
With that background in mind, how do your issues stack up in terms of being eligible for post-hearing consideration?
The infringement issue likely provides little hope. The arbitrator has determined the merits of the dispute and found no infringement for one patent. This was not a matter of a clerical, typing, or computational error. The arbitrator couldn’t revisit the issue even if she wanted to. If she did, she may be operating outside her authority, which is one of the few grounds for vacating an arbitration award in court. Save your time and money. Efficiency and finality will trump you urge to reargue this issue.
What about the mistake you think was made on the royalty base? That shows more promise. If the arbitrator truly made a mistake and overlooked a year or a product, you may well obtain some relief. Hard as they try, decision makers sometimes do make errors, particularly in situations where accounting can become somewhat complex. If the arbitrator concludes she “added it up wrong,” she will fix it.
The same is true for the pre-judgment interest award. If it truly is just a computational error, or maybe even a typo, the arbitrator will likely fix it. If, on the other hand, it is based on a finding that, for example, a lower interest rate should apply based on the evidence presented, it will stand.
Avoiding the issue
This is probably a good time for some advice on presenting computations in a patent arbitration. Your side likely has the benefit of a trained accountant or, in a bigger case, even a forensic accounting expert with access to programs and information allowing fairly sophisticated calculations. The arbitrator probably does not. Thus, you are far more likely to avoid mistakes if you break your damages down into smaller categories, depending on how the underlying substantive decisions could go. If, for example, there is an issue whether or not three products infringe, you would want to separate out your proposed damages by product in the event the arbitrator finds some but not all products infringe. That makes it easy to add up.
The same would be true for prejudgment interest calculations which can become pretty complicated pretty fast, particularly if there are different interest rates for different years and compounding is involved. The arbitrator is more likely to get things right if you provide the tools to allow him or her to do so.
Think of it as having the arbitrator take a multiple choice test on damages rather than an essay test.
Next up
We will next take up confirming the arbitration award.
Dave's ADR: IP, Commercial 