Arbitrating the Patent Case Part XXII: Attacks on the Award

In earlier articles in this series we followed arbitration involving patent matters from drafting the arbitration clause through the award, motions to “reconsider” the award and, finally a motion to confirm the award.  We now arrive at attacks on the award.

The standard that applies to review of an arbitration award is much more rigorous than appellate review of a trial court judgment.  The whole point of arbitration is to have a quick, relatively inexpensive, final determination of the parties’ dispute.  The Federal Arbitration Act (“FAA”) and most state arbitration acts recognize that.  Because the FAA typically pre-empts state arbitration acts for transactions in interstate commerce – which will almost certainly include your patent arbitration – we will focus on the FAA.

Before we do, however, note that under the rules of most arbitral bodies, you can build in an arbitration appeal.  The newer AAA commercial rules, for example, allow the parties to agree to review of an award by a panel of arbitrators, acting much like an appellate court. But, as a practical matter, you must build that into your arbitration clause if you want an appeal. Nobody is ever going to agree to an appeal after they have won.  We’ll take a look at arbitration appeals in a later article.

Timing

Let’s begin with a timing issue.  You will recall from the last article that a party has one year to seek confirmation of an award.  9 U.S.C. § 9.  A motion to vacate, modify or correct an award must be brought within three months after the award is filed or delivered.  § 12.  So what happens if a party moves to immediately confirm the award?  Does the party wanting to vacate or change the award still get three months, so a confirmed award can later be undone and a judgment on it vacated?

I haven’t seen this be much of a problem as a practical matter. The party seeking to vacate the award usually does so in response to an application to confirm it, so the issue doesn’t arise.  I did once have a state court, applying rules almost identical to the FAA, postpone the hearing on a motion to confirm the award until over 90 days after the award to make sure the other party had a chance to move to vacate the award before it was confirmed.

Grounds for vacating awards

The FAA has only a few specific grounds for vacating the award.  They are:

(1)   where the award was procured by corruption, fraud, or undue means;

(2)   where there was evident partiality or corruption in the arbitrators, or either of them;

(3)   where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4)   where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S. C. § 10. Note first that none of these grounds are that the arbitrator improperly applied the law or that the findings of fact have no support.  To quote the Eighth Circuit, so long as “the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,” the award must be confirmed.  Gas Aggregation Svcs., Inc. v. Howard Avista Energy, LLC, 319 F.3d 1060 (8th Cir. 2003).

Evident partiality

“Evident partiality” can be a ground for attacking an award in the right case.   For example, in a Second Circuit case, an award was vacated under the evident partiality standard where an arbitrator had reason to believe a conflict of interest might exist, but chose to ignore it and instead erected a “Chinese wall” in his company.  If he had investigated, he would have learned that his company had a significant contract in place with one of the parties.  But he disclosed neither that he had decided not to investigate further nor that he had erected the wall.  The award was vacated.  Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132 (2d Cir. 2007).

The cases tend to be quite fact specific, so a party considering this ground will need to review all applicable cases in the jurisdiction and the specific facts of the case.

Of course, there is always the danger that a party will learn of a failure to disclose a relationship and keep it under wraps until they see whether or not they won.  Courts don’t like that type of gamesmanship.  The Fifth Circuit held that a party seeking to vacate an arbitration award based on an arbitrator’s evident partiality must object during the arbitration proceedings. Failure to do so results in waiver of its right to object.  Dealer Computer Services, Inc. v. Michael Motor Co., Inc., 11-20053, 2012 WL 3317809 (5th Cir. Aug. 14, 2012).

The district court found that rule that an objection must be made during the proceedings “paradoxical [because] if the arbitrator completely failed to disclose a potential conflict, the objecting party could not know about it in order to object.” But the Fifth Circuit noted that the arbitrator had at least generally disclosed that she had been in an earlier arbitration involving one of the parties.  That was found to be sufficient to provide notice to the objecting party. The Fifth Circuit upheld the award.

Because many courts are willing to define “evident partiality” to include unrevealed relationships with a party, this is one of the more promising grounds for vacating an award.  That law – and the ethical rules – keep diligent arbitrators making disclosures of just about anything that could cause their neutrality to be questioned.

Refusal to hear evidence

This ground seems to be at the heart of some arbitrators’ apparently limitless patience in hearing evidence of dubious value.  Arbitrators often simply take evidence “for whatever relevance it may have, if any,” to be determined later so as not to be accused of refusing to hear evidence.  Still, this ground is not as promising for getting an award overturned as one might suppose.

First, a party would have to show the evidence is “pertinent or material” not just that the arbitrator refused to consider all the evidence proffered.   Second, in AAA Commercial arbitrations, for example, the parties have agreed to the AAA rules which specifically give the arbitrator the power to “determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.”  Rule 34(b).  Given that the parties typically will have agreed to these rules, the arbitrator would have to have fairly blatantly abused this authority for it to become a real issue.

But his ground has recently been applied in a fairly high profile case to vacate an award.  In National Football League Management Council v. National Football League Players Association, No. 15 Civ. 5916 (S.D.N.Y. Sept. 3, 2015), the district court vacated the arbitration award of the NFL Commissioner suspending quarterback Tom Brady for four games over the “inflategate” controversy.  In so doing, he noted that Brady’s counsel had sought to call for examination Jeff Pash, an announced co-lead investigator of the allegations against Brady.  Instead, the Commissioner, serving as arbitrator, refused to compel his examination, finding it would be cumulative of other evidence already submitted.

The court found denial of an opportunity the examine Mr. Pash was fundamentally unfair and violated the FAA.  While recognizing an arbitrator has authority to exclude cumulative evidence, the court found he could not simply do so ipse dixit without indicating “in what respects it would be cumulative.”  The decision is on appeal.

Exceeding authority

Another ground that could be promising in the right case would be an arbitrator exceeding authority.  The arbitrator derives all power from the parties’ contract, so only issues the parties have given the arbitrator power to arbitrate may be decided.  Of course, the parties may expand this authority by actually arbitrating issues before the arbitrator beyond these agreed.  And note that, if the parties’ contract incorporates AAA or other rules, the arbitrator’s power will include those given in the rules unless the parties contract otherwise.

As pointed out earlier in this series, parties will not want to get too elaborate about what is or is not to be arbitrated so that the arbitrator’s authority is unclear.  Otherwise the award will be subject to attack on this ground.

This ground may also be raised to attack a late award.  Many rules or arbitration clauses require that an award be made within a certain amount of time, often 90 days.  Some late awards have been vacated because the arbitrator was without power after the time for issuing the award had run.

There is room for gamesmanship here, with parties complaining about a late award only after it is issued and they lost.  Some state arbitration statutes specifically require that an attack on a late award be made before it is issued.  The FAA does not, but that doesn’t mean the award will be vacated automatically if it is late.  Still, it is best to avoid all this by getting the award issued on time.

Other statutory grounds

The FAA’s other grounds for vacation are fairly esoteric and will not come up very often.  Hopefully, you have vetted your arbitrator or arbitrators during the selection process so they are unlikely to engage in misconduct or write incomprehensible awards.

There are other grounds for attacking awards that have been raised and considered over the years, which we will take up in the next article.

 

Arbitrating the Patent Case Part XXI: Confirming the Award

We have now arrived at a point in our discussion of patent arbitration where a party has won an award and wants to enforce it.  Now what?

It depends.  You may not need to do anything but speak to the other side.  In many cases, once there is a final award of money, the other side pays it.  Given the limited nature of review or arbitral awards, unless the parties have agreed to an appeal procedure, there is often very little reason to spend time and money on further disputes.  Presumably, the parties chose arbitration to save time and money.  They may simply agree it’s time to settle up and move on.

But what if your opponent doesn’t see it that way or if the award involves some sort of injunction you may need to enforce one day?  How do you collect and enforce?  The arbitrator can’t issue a judgment that can be enforced by a sheriff or marshal.  For that you need a court.

Finding the right statute

You will first want to consider what statute governs.  There are two possibilities: the Federal Arbitration Act (“FAA”) or a state arbitration act, which most states have.  The FAA generally pre-empts state law in cases involving interstate commerce, which your patent case almost certainly will.  Easier yet, Congress said the FAA governs patent arbitrations. Recall from an earlier article in this series that 35 U.S.C. § 294 specifically allows arbitration of any dispute relating to patent validity or infringement and that the arbitration is governed by the FAA. (You can find that article at http://daveadr.com/2015/05/21/arbitrating-the-patent-case-part-ix-statutory-provisions/.) So you will almost certainly look to the FAA.

Finding the right court

Next, you will want to consider which court to go to.  Federalism can be confusing, so spend some time figuring out the particulars of your case.  I’ll skip ahead and say the answer is almost always the federal court in which you held the arbitration or in which the losing party resides, but getting to the answer takes some doing.

While the FAA pre-empts state law, it doesn’t automatically confer jurisdiction in a federal court.  For that you need to find an independent source of federal jurisdiction. Often that will be diversity jurisdiction, requiring citizens of different states and over $75,000 at issue.   28 U.S.C. § 1332.

Another obvious source of jurisdiction is 28 U.S.C. 1338 that confers original jurisdiction in federal district court “of any civil action arising under and Act of Congress relating to patents . . .” But be careful. Fairly recently, the Federal Circuit, albeit in a non-precedential opinion, refused to hear an appeal from a district court’s confirmation of an arbitration award, noting that “[c]auses of action based on contractual rights in a patent assignment or license agreement as a general rule do not arise under the patent laws.” DeRosa v. J.P. Walsh & J.L. Marmo Enterprise, No. 2012-1401(Fed. Cir. 2013)( citing Luckett v. Delpark, Inc., 270 U.S. 496, 502-03 (1926)). The case was in federal court, so there was federal jurisdiction, but diversity was pled as the basis – not federal patent jurisdiction.

On the other hand, if a party can “establish[h] either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law,” then federal jurisdiction will lie. DeRosa (quoting Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826, 830 (2002)). Presumably, a counterclaim for invalidity and other patent-related issues would establish patent jurisdiction in federal court

There are no reported cases I can find that authoritatively address all this, so do yourself a favor. You didn’t get into arbitration to get into the vagaries of federal jurisdiction under the patent laws. In many cases, there will be diversity, so rely primarily on that. If not, and the case involves issues of infringement or validity – which it usually will – rely on 28 U.S.C. § 1338 and 35 U .S.C. § 294. If not, consider state court.

Don’t forget the Director

Recall that Section 294(d) requires that notice of an arbitration award be given to the Director of the Patent Office for each patent involved. Until the Director receives the notice, the Award is unenforceable. The same goes for Section 135 if you have agreed to arbitrate a derivation proceeding. Of course, if the real issue is payment, and the respondent just pays up, this filing may be unnecessary. It could be that failure of a patentee to file an award might have some inequitable conduct implications if the decision involves validity issues, so I commend consideration of that to you if you are thinking of skipping this step.

Applying to the court

Once you have figured out the right court, you will need to file an application – often styled a “petition” – to confirm the award. As noted, despite the complexity of federal jurisdiction over patent matters mentioned above, that court will usually be the federal district court in the jurisdiction where the arbitration hearing was held or where the loser resides. The FAA provides the basic procedure for confirming the award at 9 U.S.C. § 9. Basically, you have to apply to the court within a year to confirm the award. The court must confirm it, unless the award is vacated, modified, or corrected, pursuant to sections 10 or 11 of the FAA.

Because the statute is fairly general, naming and crafting the pleading you file isn’t a standard thing. Generally, you will want to file an application or petition to confirm that states the basis for the Court’s jurisdiction, summarizes the Award, and seeks that the award be confirmed and judgment be entered. The name probably doesn’t matter, but the statute says you “apply” for confirmation, so I’d call it the pleading an “Application for Confirmation of an Arbitration Award.”

Normally, you will attach the arbitration demand, any answer and counterclaim, and the Award itself. But check local practice and local rules for the particulars. And, of course, you will need to obtain a summons and serve it and the application on your opponent. If your arbitration agreement requires the proceedings to be kept confidential, you will need to determine what exactly is confidential and how to file confidential information, which may include the award itself, under seal.

You will next need to bring a motion to confirm the award. Again, check local rules and procedures on how to do that. If the motion is not contested, you will have your award confirmed and a judgment entered that can be enforced like any other judgment.

But it is not uncommon for your opponent to seek to vacate the award and avoid its confirmation. We’ll take that up in the next article.

Arbitrating the Patent Case Part XX: Post Hearing Motions

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.

Arbitrating the Patent Case Part XIX: Closing

In earlier articles in this series, we have gone from considering what types of patent cases are most amenable to arbitration to many specifics of the hearing itself.  We have now arrived at the final article, the closing. I suppose this is fitting as we also close this series with this article.  So, let’s consider final arguments and post-hearing briefing as well as related considerations.

Closing.  In less complex arbitrations, it is common to simply have closing arguments right after the end of the testimony.  This is the most efficient way to approach the matter.  After the arguments, the arbitrator will announce the record is closed and the decision (which in “arbitration-speak” is the “Award”) will be issued, typically, within 30 days.  This saves time and money, but may not be the most effective way to proceed in a patent arbitration.

Waiving a closing.  Occasionally, parties may consider waiving final arguments.  Be careful.  It is the rare case where counsel should forego the opportunity to explain and clarify some factual, technical or legal issue.  And it is almost always helpful to have counsel put the evidence in context.  Closing argument also gives the arbitrator or panel a chance to ask questions and ask for clarification of issues, which in turn gives counsel a chance to determine what particular issues the arbitrator is wrestling with and deal with them.  None of this can happen without final arguments.

Timing.  One of the advantages of arbitration is that the final arguments need not be held immediately after the completion of testimony.  There isn’t a jury waiting impatiently to have the case over and be excused.

A typical patent arbitration hearing is quite fast paced, with evidence coming in quite a bit faster that it would during a trial, often with longer days and fewer breaks.  Counsel is typically working pretty hard getting the testimony in order, so the need to prepare – or at least revise and refine — a closing argument during the hearing is an added burden counsel may prefer to avoid.  Thus, counsel may well agree that a separate session for closing is a sensible way to proceed. Also, the quality of the closings will usually improve with a little more time to prepare.

It is important, however, not to delay the conclusion of the hearing unduly by postponing the closings, particularly when coordinating schedules for the final session may be a problem.  In many patent arbitrations, this does not present a practical problem because the parties will want to prepare post-hearing briefs in any event.  If that is to take place, then it makes sense to have the closing shortly after the final briefs are in.

Alternatives.  Depending on how the hearing went, it may or may not be necessary to have formal arguments during which everyone gathers together again.  Some cases are more efficiently handled by having the briefs filed and then simply having a phone call or video-conference during which counsel can make the summary remarks they think necessary and during which the arbitrator or panel can ask questions.  Larger, more complex matters may justify a fuller presentation.  The exact nature of the presentation that will be the most efficient and effective can be determined at the close of the evidence in conference with counsel and the arbitrator or panel.

Post hearing briefing.  Most patent arbitrations will benefit from some sort of post hearing briefing. This is not always a given, though.  You will always want to consider whether there actually is a need for more briefing.  Typically, the parties have addressed the applicable law in pre-hearing briefs and it may be that none of that has changed. It may be that the issues have developed clearly enough at the hearing that there is no need to rehash them in yet another brief.

But that is often not the case.  In many case the issues evolve and the focus may even shift from what was anticipated by the pre-hearing briefs as the result of the testimony and evidence at the hearing.

If post-hearing briefs are deemed useful, the nature of those briefs will, of course, depend on how the issues have developed.  Generally, the brief provides a good chance to direct the arbitrator to the exhibits and testimony you think most important.  While the arbitrator or panel has heard the evidence and read the exhibits, this is counsel’s chance to put final emphasis on those most important to them and put them in context.  Similarly, counsel will want to provide and explain the law the arbitrator needs to know in light of the evidence that has been presented at the hearing.

Many arbitrators will give you a list of points, often legal or application of law to your facts, they would like you to address in your briefing.  You may even want to ask the arbitrator or panel if there are any points they particularly would like to see covered if they don’t volunteer a list.  You may not be thrilled with the implication of all the question, but you should welcome the insight.  It is a great advantage to understand any areas of concern so you can address them.

Order of briefs.  It is common to have parties provide simultaneous post-hearing briefs.  I no longer routinely embrace this practice.  Too often, it seems as though these briefs are like ships passing in the night.  Since it will typically be the claimant’s burden to prove its case, it often will make more sense for the claimant to go first.  The claimant may have decided to pursue fewer issues in light of what happened at the hearing than you would have supposed from the pre-hearing briefing.  This will help focus and narrow the case and those issues that need to be addressed in the response.  Generally, the claimant should have a chance to file a brief reply to respond to any new matters raised in the response.

If invalidity or another affirmative defense on which the respondent bears the burden of proof is prominent in the case, you may want to have simultaneous briefing, but have the party with burden of proof file the first brief on the issues on which it bears that burden.  The best approach will often be apparent by the time the evidence closes.

Page limits. Short page limits seem to be all the rage these days.  The idea is, I suppose, the less said the less there is to decide and the more efficient things will be.  But it doesn’t always work out that way.

Some legal issues or factual matters don’t lend themselves to summary, superficial treatment.  If the page limits don’t allow full treatment of important issues, the briefs don’t really help very much.  The arbitrator may then find him or herself having to dig through the law to discover the actual nuances and specifics of the law as necessary to decide the issues presented.  It is far better that counsel have a fair chance to explain all that needs explaining.

Generally, I find it adequate to suggest to counsel that they take the pages they need to make their point.  I have yet to have a situation where counsel doesn’t recognize that putting in a brief that is more a filibuster than an explanation is more harmful than helpful.  Counsel voluntarily limit themselves accordingly.  Having said that, if counsels are adamant that they want page limits, I am happy to hear their suggestions and put something reasonable in place – together with margin requirements and typeface and size requirements – if it makes everyone feel more at ease.

Planning ahead.  With the above in mind, you will want to start thinking about how closings and briefing will proceed in your next patent arbitration before you get to the hearing.  If you are going to be expected to do a closing right after the testimony finishes, you will want to know that so you can prepare.  As noted, issues as to briefing will be usually be ironed out before the close of the hearing.  But you will want to have thought through what will be most efficient and effective so you provide your views to the arbitrator.

Next up.

            We will next turn to post-award motions to the arbitrator.

Arbitrating the Patent Case Part XVIII: Presenting Testimony at the Hearing

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise, opening statements, and case organization.  We went on to presenting documents on the hearing, including the positives — and pitfalls — of electronic document presentation as well as some observations on how most arbitrators actually use documents during the hearing and decision-making process.

We will now take a look at presenting testimony at the hearing.

Transcripts.  First, an observation on having a transcript of testimony.  Most arbitrators I know would prefer to have a transcript if possible.  Most arbitrators, like most lawyers, are quite gifted note takers, having had decades of practice.  But notes often are not a perfect substitute for a verbatim transcript on closely contested issues.  The transcript gives everyone a way to be very precise about what the testimony was.

But most arbitrators are also committed to trying to keep costs down if at all possible, so it is unlikely that an arbitrator will ever insist or even suggest it is necessary that the parties bear the additional costs of a transcript.

So when is a transcript worth the cost?  Here is one way to think about it.

Many patent arbitrations are very document heavy so that the real evidence is in the documents.  In most patent cases, much of the key evidence is found in the patents, prosecution history, technical information about the involved products, financial documents, and the like.  While explanations and discussion of these documents and the issues raised by them in testimony is important and may even be critical, a verbatim transcript of what was said may not be necessary or worth the price.  The details are in the documents.  A transcript could  be overkill.

Occasionally, however, a case can turn on the testimony itself, particularly where the documentary evidence is lacking and personal accounts are critical.  If your case is likely to turn on that kind of information, then a transcript is likely worth the price.  This is particularly so if there is a great deal at stake that helps justify the added expense.

Presenting the testimony.  Let’s turn now to presenting witness testimony at the hearing.  Of course, as in any hearing the testimony will be under oath and subject to cross examination.  Because of the relative informality of the proceedings, it will be tempting to lead the witness to save time.  Avoid the temptation.  It simply is not as persuasive to ask the witness to agree to what the lawyer states as it is to elicit real testimony.  The arbitrator already has a pretty good idea what the lawyer would like the witness to say.  The real question is what the witness actually knows, not what he or she will agree to.

Because the rules of evidence in arbitration are relaxed, it may be tempting to take advantage of that and elicit hearsay and other testimony that would never be allowed during a court proceeding.  But be careful. Don’t confuse the ability to get evidence “into the record” with the persuasiveness of the evidence.  While most arbitrators will allow hearsay and the like because the arbitration rules allow it, the evidence is always taken subject to later reflection and study of the persuasive effect of the evidence.  Rank, unreliable hearsay is rarely persuasive and likely won’t advance your cause. Indeed, that a party may be willing to stake its case, at least in part, on such evidence may be detrimental to the integrity of the case as a whole.

Expert reports as direct testimony.  One technique that has gained some sponsorship over the years is the use of the expert’s report as the direct testimony of the expert. This has some advantages.  There is, for example, no question whether the expert’s testimony is straying from the opinions stated in the report because the report is the testimony.  Presumably it also saves time to use the report as testimony, because the arbitrators will have read the report in advance.

While originally enthusiastic about this approach, I am no longer a fan of it.  Part of what we are doing with testimony – and why we don’t just decide everything on written submissions – is gauging the expertise and trustworthiness of the expert.  Only observing testimony allows one to do that.  Perhaps most importantly, having the expert summarize what in the opinion is most important helps the focus the inquiry and pinpoints the most important aspects of the opinion and ultimately the issues in dispute.  Testimony that is given with the understanding that the arbitrators will have the report, but also with emphasis given to the most important points, is the best way to proceed, in my judgment.

Written witness statements.  I have a similar view on  presenting direct testimony of lay witnesses in written witness statements that are then subject to cross examination.  One simply cannot gauge the knowledge or veracity of a witness without listening to the witness’s testimony.  Indeed, we all know the statements are typically written by the lawyers, so it is as though we are simply asked to reread the facts section of the brief again.  In fact, it strikes me as a little unfair to meet the witnesses only on paper when they are telling their side of things, and first meeting them as speaking human beings only on cross examination.  Cross examination tends not to bring out the best in most people.

Next up:  Post hearing briefing and closing arguments.

Arbitrating the Patent Case Part XVII: Presenting Documents at the Hearing

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise, opening statements, and case organization.  We will now continue on to presenting documents at the hearing.  This may seem a little mundane, but it is not.  It can have a significant effect on the efficiency and effectiveness of the hearing.

Patent arbitration tends to be document heavy, and the current technology available to present documents leads to many possibilities.  Here are a few thoughts on that from one arbitrator’s point of view.  Not all arbitrators will necessarily agree with me on all this, but this reflects what I have found over the years.

Presenting written documents

With the advent of Trial Director and other systems to present documents electronically, it can be tempting to default to that system for everything.  I’m not sure it is worth the expense in many cases.  I am sure that, if done improperly, use of these systems can be a detriment rather than a benefit.

But first let’s consider the benefits of trial presentation systems. These systems allow you to focus the witnesses’ and arbitrator’s attention to specific documents and passages in the way you choose.  You can project the page of the document, blow up or highlight a particular passage of interest, and otherwise direct everyone’s attention to the particular part of the document you are working on.  If done correctly, there is no need to fumble around through a book of exhibits and then call out page numbers and paragraphs so everyone can get to the right place.  Nor is the witness or arbitrator as likely to get distracted by other document content you aren’t dealing with at the time.  You may be able to avoid dragging pounds of paper copies around the country if everything is on your computer.

On the other hand, this way of presenting documents doesn’t take into consideration the way many people process and use information from documents in an arbitration.  I, and most arbitrators I have worked with, tend to take notes on exhibits, and underline or highlight key parts of the documents. This is very useful when it comes to analyzing the case and writing an award.  No one I know can memorize all the pertinent language in a document for later recall.  Thus, for matters where the information in the document is critical, you will often see arbitrators reaching for their copy of the document if it is available or asking for a copy if it is not. Be aware that a transitory projection doesn’t usually get the job done.  You need a way to put important evidence you want the arbitrator to rely on into the arbitrator’s hands.

Use of a document projection system can sometimes be annoying.  Have you ever been at a hearing where a vendor was hired to do the document retrieval and the presentation went something like this?

Lawyer:  [To vendor running system].  Put up bates number 14578. [Pause and wait for projection].   Oh, wait sorry, go to 14587.

Arbitrator:  Can I have the Exhibit number please?

Lawyer:  Just a minute.  [Pause.]  I’ll have to get that to you at the break.  OK, please blow up paragraph 2 – or I mean 3.  [Long pause.]  Can you highlight the second sentence?  Okay, blow it up, please.  Oh, before we do that, can we go to bates number 14586 for a little context?  [Pause]. Now, Ms. Witness, see that date?  Ok.  Now back to 14587.  [Pause.] I’ve blown up paragraph 2 . . . See where it says . . .

Witness:  Excuse me. It is hard for me to get the context of this without reviewing the whole document. May I see it instead of just the parts you are projecting?

You get the idea.  The whole process of explaining how to project the right part of the document can get lengthy and tedious.  And it may well appear unfair to the witness to pick out a sentence or two from a document he or she hasn’t seen in three years and start asking about it.

The answer, of course, is to have things better organized.  But in some cases, it is just easier and less time consuming to have a notebook with the exhibit tabbed and refer to it.  This goes more like:

Lawyer:  Let me direct you to Exhibit 27.  You will find it tabbed in the notebook you have in front of you.  Is this an email you sent to Joe Dokes on March 12, 2013?

 

Witness:  It appears so.

 

Lawyer:  Please turn to page two, the second paragraph.  Here you say, “I agree that we should be paying license fees on this product . . .” [Etc.]

If the arbitrator is going to turn to the tabbed exhibit to highlight it or make notes on the document anyway, it might be better to just get everyone to that document.

You may want to do a combination of the two, projecting the document to lead the witness through it, but giving the arbitrator a chance to pull it up in the exhibit book.  But if you want to forego some expense, use tabbed exhibits in three-ringed notebooks − one for you, one for the witness and one for the arbitrator − and skip the presentation system for written documents.  Or, if the technology is too challenging for you, but there is an advantage to having a particular document projected, just use a document camera to project it.

You can be sure of this: You won’t lose your arbitration because you didn’t project exhibits.   But tabbed exhibits are almost always necessary and generally are effective enough in the context of your patent arbitration.

Two more thoughts on notebooks.  First, giant notebooks with 5 inch spines are heavy and awkward, particularly if there is more than one of them everyone has to retrieve and you are moving between them.  Use more, smaller notebooks, clearly labeled so it is easy to find the one that has the right exhibit in it.

Second, it may seem like a good idea to simply have a book for each witness with the exhibits you will use for that witness.  This works well during testimony.  But it can get confusing in a long arbitration.  The arbitrator ends up with a jumble of notebooks, many with the same exhibits, so it is difficult to locate an exhibit and may be nearly impossible to locate the copy with the arbitrator’s notes.  Exhibit books with exhibits tabbed in order are usually best.  Make a list of exhibits organized by date, too, to allow easier retrieval and review.

Visual information

For drawings, photos, or other highly visual documents critical to patent cases, projection will often be the way to go, so everyone can follow along.  Thus, if you are trying to show where each element of a claim is in an accused product, or that an element is missing, a large visual you or the witness can point to is a must.  But remember to have a smaller version available in permanent form so that arbitrator can easily locate and study it as part of the decision or award writing process.

Sometimes you are better off with a large chart or two so you can easily write on it, draw arrows, or the like.  It depends on your case and what you are presenting with a given witness.  But the arbitrator won’t be hauling charts around, so remember to provide a small version of it for later reference.  A smaller version of the drawing and a document camera may be all you  need.

Computer animation

You can spend a small fortune on computer animations and the like, but this is rarely necessary.  Most patent arbitrators can visualize what is necessary from drawings or photos without the expense of animations that may or may not be completely accurate.

Of course, you can simply bring smaller devices to the hearing or take a field trip to observe large devices or systems in operation.

Helpful technology

It has become more and more common for counsel to provide arbitrators with documents electronically, either on a USB drive or by emailing pdfs.  Patent arbitrations tend to involve traveling to the hearing, so this is a good way to allow everyone having a computer or tablet to easily retrieve exhibits at the hearing and for review afterwards.  One typically can’t take notes on the documents (absent some extra software and practice using it), but having them easily accessible anywhere is a real plus.  Talk this over with the arbitrator early on to see whether he or she uses a computer or tablet and in what format to provide the documents.

Unused exhibits

Parties usually provide exhibits in books or electronically that they don’t end up using and that never make it into the record.  You may be worried that the arbitrator will go off on his or her own quest and review unused exhibits and use them to come to conclusions.  The arbitrators I know are very unlikely to do that.  There is always plenty to consider without looking for more outside the record, and it is thought to be unfair to consider documents that are not part of the record.  In fact, many arbitrators tell the parties that if an exhibit is in the record, but hasn’t been discussed with a witness, you shouldn’t expect them to consider it.

But if you are worried about having exhibits available to the arbitrator that aren’t in the record, the arbitrator will certainly let you remove them from the notebooks.  You will have to keep track of what exhibits are in the record and agree with opposing counsel on that.  If you provided pdfs of exhibits, you’ll have to ask the arbitrator to delete the old set and substitute a new set you’ll provide with only the exhibits of record.

Next up.  Presenting testimony.

Arbitrating the Patent Case Part XVI: Presenting the Evidence

We have previously had a look at many aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise and, finally opening statements.  We have now arrived at the beginning of evidence and how most effectively to begin.

There is no one way to start, of course.  But the standard for admissibility for evidence in an arbitration presents some possibilities for efficiently presenting each party’s case that are worth exploring.  Let me give you a couple of examples I have seen that have worked well.

A first approach, and one that is very common, is having the most involved or responsible representative of a party narrate most of the facts involved, often in chronological order.  This is more likely to be effective in an arbitration than in court because of the standard for admissibility.  The standard set forth in AAA Commercial rules is, for example:

(a) The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary.  .  .

Because the real key to admissibility is relevance and materiality, it is possible for one witness to “tell the story” of a party by both relating personal experience and relying on business documents that help to tell the story. This is particularly useful because many arbitration issues turn on contracts and written documents.  Thus, a knowledgeable witness can introduce the key documents and much of the evidence in the case in a logical order.  This may be more difficult to do in a court where there are strict standards for laying foundation, hearsay problems with documents and related technical evidentiary matters to address. Many of those are obviated in an arbitration where, in the words of AAA Rule 34 “[c]onformity to legal rules of evidence shall not be necessary.”

A note of caution is in order here.  Just because the rules of evidence don’t apply, doesn’t mean that anything goes.  First, again in the words of Rule 34, “[t]he arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.”  So taking things too far and having a witness introduce a document that he or she knows nothing about and isn’t part of what one would expect to be in a company’s normal business records, may not be seen by the arbitrator as useful or relevant.  Have in mind that it should be clear that the witness, the testimony and documents introduced have enough in common that it makes sense the witness would be offering the testimony and evidence to provide a genuine understanding of the issues.  After all, getting a document or testimony into “the record” only means it is in there.  It doesn’t mean anybody will be persuaded by it or believe it.

Still, you likely can get into evidence documents and evidence that may not have gone in under technical legal rules with your first witness, but that are helpful to understanding the important events in the case in a logical order.   But for contested matters at the heart of the dispute, keep in mind you should be prepared to present evidence from the witness who wrote the document or observed the events described in it to provide first- hand information necessary for the arbitrator to determine the truth of the matter.

Another effective way I have seen of presenting evidence at the outset to outline the case was use of a technical expert.  The key to the case was the expert’s opinion, which was based on most of the evidence in the case, including all the key documents.  Thus, as the first witness, the expert basically gave each of his opinions on liability and backed it up with the key evidence on which he relied.  This was not a patent case, but was a fairly complex dispute over whether a software system met the specifications and representations about its functionality.  But one can imagine a similar approach to whether, for example, license fees are owed for certain products under the terms of a license agreement and underlying patent or the like.

When representing a respondent, a similar approach is available, using an involved and responsible witness or perhaps a technical expert.  While a fair amount of groundwork for the respondent’s position will likely already have been presented on cross examination, a coherent overview of the most important defense points can be made through a single witness.  And, of course, the respondent will have the benefit of knowing what points the claimant has emphasized in their case and be able to outline the key evidence in response to each point.  Again, contested matters will need to be addressed by other witnesses more directly involved, but providing a well-organized overview of the defense through a first witness can be quite effective.

Of course, the above approach won’t necessarily work for every case.  There may not be one witness who was really involved enough with the key facts and circumstances to provide a useful overview.  It may be that one event or issue is so important to the case that you would want to lead with your best witness on the point.  Or it may be that the subject matter of the case best lends itself to a few witnesses that have knowledge in one or two of each of the key matters in the case.

But however you end up doing things, you will want to pay attention to the most effective and efficient way to provide an understanding of the key issues and evidence at the outset.  In the end, the arbitrator will likely be able to piece together the case from evidence you present during the course of the proceeding.  Yet, finding ways to get the key information and issues out at the outset is worth the effort.

Put another way, it is difficult to rule for you if your position is difficult to understand.  So anything you can do to clarify your position at the outset should be considered.

Up next:  Practical considerations regarding evidence.

Arbitrating the Patent Case Part XV: Opening Statements

Earlier articles in this series explored various aspects of arbitrating patent cases, beginning with the type of cases likely to be arbitrated, arbitration clauses, and the arbitration process up to the hearing.  We then began looking at the hearing itself, beginning with sequestration issues that can arise and suggested an approach to avoid problems with sequestration.

We now arrive at the beginning of the substance of the hearing:  opening statements.  Should you make an opening statement?  If so, of what sort?

Should you open?  

It is not unusual to waive openings at the arbitration hearing.  After all, you are trying to be efficient and make good use of time.   In a patent arbitration, the parties have almost certainly filed detailed pre-hearing briefs.   You may have already done a Markman hearing and gotten a claim construction decision.  So why would you spend the time and energy preparing and presenting an opening?  Why not just get on with the evidence?

Skipping the opening may be appropriate in some arbitrations, but I would suggest that you be very careful in foregoing this chance in a patent arbitration.  Like anyone else, arbitrators appreciate someone who can clarify the dispute and define exactly what issues they are being asked to decide.  An opening gives the advocate a chance to do that.  First impressions count with everyone, and this is time that can be used to make a good one.

Because arbitrators are professional decision makers, trained and skilled in carefully analyzing facts and law and reaching the right decision, first impressions may not be as important.  But why waste an opportunity to make it clear that you have mastered the facts and law and can efficiently outline what you will be proving?

And, of course, there is no better way to prepare for the hearing than figuring out just how you will explain your case in a succinct way.  It forces you to deal with all the key issues and facts in the case.

What kind of opening?   In constructing your opening, you will want to keep in mind your audience and purpose.  In a patent case, your arbitrator will normally be a lawyer very familiar with patent law and patent issues.  This means you can explain the case with a fair amount of sophistication.  You don’t need to explain what a patent is, how it is like a legal description that provides the boundaries of the intellectual property much like the boundaries of real property and all the things you would normally tell a jury or judge new to patent matters.

Instead, think like an arbitrator. What would you want to know about the case that you are being asked to decide?  Thinking that way will likely lead you to (1) explain what exactly needs to be decided, (2) identify the key evidence you will present so that those decisions should be in your client’s favor, and (3) explain why those decision are fair.  Let me elaborate on this a little.

Issues to be decided

Although the briefs will certainly lay them out, how you describe the real issues for decision is critical.  The emphasis that you can give the key issues in person is different than you can do in your brief.  That’s why we have hearings instead of just deciding everything based on written submissions.  When you are done with your opening, the arbitrator or panel should have a very good idea of what issues you are expecting will be decided.  They probably will have them numbered in their notes.

The key evidence

You will also want to emphasize the key evidence that will support a decision in your favor.  All evidence at the hearing tends to come in as if it is all equally important, one question and answer at a time.  But, of course, some evidence is the key to a decision once the preliminaries are established while the rest is just background.  You want to allow the decision maker to easily fit what is being presented at the hearing into the framework you have presented.  Thus, you want arbitrators to be able to say to themselves, “Yes, I remember, this is the evidence that I was told at the beginning would be one of the keys to deciding the case.”

If there is key evidence you know your opponent will raise, you will likely want to begin to deal with it.  If they are going to say your client’s patent is obvious over two prior art references, you’ll want to explain what is missing or that your expert will explain why no one skilled in the art would combine them except with the benefit of hindsight, or whatever your position will be.  You will want to make it clear you have not only identified the evidence that will allow you to win, but have thoughtfully considered the opposing points of view and will deal with them.

A fair result

You don’t want to ignore the justice of the result you are asking for. Arbitrators are not robots applying some sort of legal algorithm to reach a mandated result.  To be sure, the law must be carefully considered and fact-finding must be carefully done.  But arbitrators, like anyone else, want to arrive at a fair result.  To be sure, that result is informed — and often dictated in large part — by the law and careful analysis of facts.  In the end, however, every decision maker is hoping to arrive at a just result.  Give them the information and perspective that will help them do that.

Keep it brief

This is not to suggest that your opening will do all these things in great detail and last for hours.   In most cases, you would like to open in about half an hour or less if you can.  Shorter and memorable is better.

Thus, a framework should be just that: something to give the arbitrators a place to “hang” the evidence you are presenting.  You will not describe in detail each important document and each important piece of evidence.  You don’t have time. But you can emphasize, for example, that Exhibit 27 is the letter sent on May 13, 2013 by respondent’s chief engineer to claimant admits that the respondent’s device does in fact include the element of claim 2 of the patent now under consideration, despite what they say today.  Or whatever it may be.

Generally, infringement disputes get down to one or two elements that likely cut across a number of claims.  Organize your explanation in a way that makes it easy to follow.  If you are defending, you will want to, for example, explain the “dataflow”  (mentioned in a hypothetical in our last article) limitation in independent claims 1, 5 and 13 of the software patent at issue rather than have a listing of claims and an explanation of the various missing elements of each.  Your framework should be efficient.

I can’t tell you here what the fairness and justice attributes of your case will be, but you must have some.  No one brings a case or decides to defend it without some underlying sense that the opponent has done or is asking for is unfair.  It may be as simple as breaking a promise to pay license payments.   Or it may be much more complex, arising out of the parties’ relationship or other matters.  It all will depend on your case.  You don’t need to dwell on fairness, but don’t ignore it.  Decisions on close issues can often turn on simple fairness.

Of course, in a patent matter, fairness is all viewed through the lens of the specific application of patent rights and principles, all of which will be well understood by your decision maker, the arbitrator.

Next up.  The hearing continues.

Arbitrating the Patent Case Part XIV: Sequestration at the hearing

In past articles, we have been exploring various aspects of arbitrating a patent case.  These included the types of patent cases most likely to be arbitrated, formulation of arbitration clauses, the federal statutes governing arbitration of patent matters, considerations regarding use of experts in arbitration, and exchanges of information as well as witness lists, document lists and briefs.  We then turned to specifics of the hearing schedule including transcripts, the form of award to request, and finally the hearing itself.

One of the issues that may come up at the outset of the hearing is sequestration of witnesses.  I’ll illustrate the issues that can arise with a story.  It’s loosely based on a real dispute or two.

The situation.

You represent a respondent in an arbitration.  At issue is whether your client’s new software product infringes the claimant’s patent.  If it does, your client has to pay rather high royalties under the parties’ license agreement.

The rule

At the outset of the hearing you opponent suggests that the witnesses be sequestered.  You are subject to AAA rules.  You read AAA Commercial Rule 25 to assure yourself that your client will be able to attend.  It says:

The arbitrator and the AAA shall maintain the privacy of the hearings unless the law provides to the contrary. Any person having a direct interest in the arbitration is entitled to attend hearings. The arbitrator shall otherwise have the power to require the exclusion of any witness, other than a party or other essential person, during the testimony of any other witness. It shall be discretionary with the arbitrator to determine the propriety of the attendance of any other person.

Your client, the owner of the respondent, is a party.  So he can attend.  And you conclude it is helpful not to have your opponent’s witnesses listen to each other.  You think they may well contradict one another without first hearing the “party line.”  Thus, you agree to sequestration.  Now you will have to make your witnesses except your client wait in the lobby, but that isn’t too difficult.

The issue

One of the issues at the hearing is whether your client’s new software uses “dataflow” computing.  The claimant’s patent requires use of dataflow computing as an element of every claim.  Generally, dataflow computing is an alternative to standard computing where execution begins as soon as the data needed for computation become available rather than according to specific instructions. This is said to promote faster, parallel computing.   If your client’s software doesn’t use dataflow computing, it doesn’t infringe and no royalties are due.

During the hearing, your opponent introduces an ad for the new software that describes the “data flow” of you client’s program.  It shows the data happily flowing between typical business processes.  Claimant’s owner testifies the ad is proof positive your client’s software infringes.  “It says ‘data flow’ right here.  That’s part of how we knew their refusal to pay royalties on their new software was a breach of our patent license,” he testifies.

You are fairly sure that the ad uses those terms in a general descriptive sense, since data flows one way or another through all software. You doubt this is really an admission your client’s software uses dataflow computing in the technical sense used in the patent.  You client is more a business guy than a software designer.  He suggests that, to be sure “data flow” is used in the ad in the general and not the technical sense, you show the ad to the lead programmer, who will be testifying later.

During a break, while preparing the programmer to testify, you show her the document and ask her about the “data flow” reference.  She says she is familiar with the ad and that it surely uses the term in the general sense.  She says she designed the new software not to use dataflow computing.  She wishes the advertising folks would have stayed away from that term in the ad, but it was only loosely used. Anybody who knows about software, she says, would know the term was not used technically.

Later, you call the programmer testify.  She explains to the arbitrator that the ad uses “data flow” in the general and not infringing sense.  During cross, your opponent asks the programmer when she last saw the ad  She says she saw it earlier that day, when you showed it to her and asked about it.

Opposing counsel then exclaims, “Mr. Arbitrator, there has been a serious breach of the sequestration order in this arbitration.  It is clear that counsel for respondent flagrantly violated the order by showing this document to the witness and clearly was relaying the testimony of another witness to this witness in violation of the sequestration order.  As a sanction, you should conclude that it is now established that the term ‘data flow’ is actually used in the technical sense, establishing infringement.  Only in this way can you keep respondent from profiting by this misconduct!”

You are a little taken aback.  You quickly reread AAA rule 25 to make sure you haven’t missed anything.  You haven’t.  It says “The arbitrator shall . . . have the power to require the exclusion of any witness . . . during the testimony of any other witness.”  You point to the arbitrator that the rule talks only about excluding attendance during testimony.   It says nothing about not being able to prepare witnesses or clarify the meaning of documents during a break.

Your opponent, ready for all that, begins to cite federal cases where courts have forbidden witnesses to talk to each other to get their stories straight during trial.  That is true even though the Federal Rule of Evidence equivalent, Rule 615, only talks about excluding witnesses from the courtroom.  “After all,” he says,” the point of all this is to keep witnesses from getting together to ‘tailor their testimony to that of prior witnesses and to aid in the detection of dishonesty,’ to quote the case of United States v. Vallie, 284 F.3d 917, 921 (8th Cir. 2002).  Putting a lawyer in the middle of it to help them fabricate their story shouldn’t be allowed.”

You deny the idea that anybody fabricated anything and argue this is all just an attempt to invade privilege and interfere with normal witness preparation.

The law in some jurisdictions

Later, you do some research to find that, even having a police officer take notes during a hearing of government witnesses’ testimony and relaying that information to other government witnesses during the hearing did not violate a sequestration order under Federal Rule 615.   See United States v. Smith, 578 F.2d 1227, 1235 (8th Cir. 1978).

But this has been a fairly uncomfortable situation and you opponent has done his best to cast you as something less than completely forthcoming in your approach.  Besides, you handle arbitrations all over the country, and who knows what a criminal court somewhere has said about sequestration that might be used against you?

Of course, arbitrators normally won’t start making decisions based on court decisions, but will simply stick with the AAA rule.  In fact, as a technical matter, the arbitrator’s power under Rule 25 doesn’t extend beyond excluding witnesses from the hearing while others are testifying in any event.  But why not avoid all this?

The solution

Once you are aware of the issue it is fairly simple to anticipate.  When it comes up, just make it clear your understanding is that the rule applies only to presence at the hearing and not ability to prepare witnesses.  You can say you’ve read about problems that can arise in this regard and want to make sure everyone understands.  Everyone is bound to agree.  If not, you will need to do some education of the arbitrator on this esoteric issue.

Next up:  Opening statements.

Arbitrating the Patent Case Part XIII: The hearing

We have addressed the types of patent cases most likely to be arbitrated, formulation of arbitration clauses,  the federal statutes governing arbitration of patent matter, considerations regarding use of experts in arbitration, and the final pre-hearing schedule regarding pre-hearing exchanges of information as well as witness lists, document lists and briefs.  We then turned to specifics of the hearing schedule including transcripts, and the form of award to request.  We have now arrived at the point in the process when we begin to address the beginning of the hearing itself.

Final pre-hearing.  In many arbitrations, it will be well worth your while to ask for a final pre-hearing conference to iron out the details of the hearing and the arbitrator’s or panel’s approach.  Some arbitrators routinely set such a session, but many don’t.  Most will be happy to hold them if you request them to.

Another approach I have taken lately is to provide the parties with written guidance as to what to expect at the hearing by way of proceedings, approach to evidence and the like.  Below is a generic version of a communication I have used in past arbitrations.  It was developed with input from a couple of panels of experienced arbitrators.  Of course, your arbitrator or panel may look at things differently, so it is worth finding out.  But this will provide you with a checklist of issues to consider.  Here it is:

_________________

Arbitration Guidelines

Dear Counsel:

I am writing to provide some guidance for the upcoming hearing.  Please bear the following in mind:

We will start the first day at 9 am. We will finish by 5 pm. In subsequent days, if it appears we will need to work longer hours to finish on time, we will.

• We are set to finish on Friday, May 25^th. But we have all set aside Saturday as a “spillover day” if necessary to finish. I will check in with you daily as to our progress toward completing the hearing.
• Each party will be allowed to make a brief opening and closing if they would like. Please plan not to exceed twenty minutes or so for each side.   It isn’t necessary that you do an opening, particularly if the pre-hearing briefs lay the issues out well.
• All testimony will be under oath. Witnesses will be asked to “swear or affirm” the testimony they are about to give is the truth, the whole truth and nothing but the truth. If witnesses would rather not take an oath, they can opt to have their testimony taken “under penalty of perjury.” Please let me know if any of your witnesses would rather have the testimony “taken under penalty” rather than swearing an oath.
• We will proceed by question and answer. I normally will allow some brief redirect to clarify matters from cross. Re-cross is appropriate only if necessary to refine or explain critical points. There is no particular advantage in having the last word. I take notes.
• The rules of evidence do not apply. The standard of what is allowed into evidence is set forth in Rule 34 of the Commercial Rules of the American Arbitration Association:

(a) The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary. All evidence shall be taken in the presence of all of the arbitrators and all of the parties, except where any of the parties is absent, in default or has waived the right to be present.

(b) The arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant.

(c) The arbitrator shall take into account applicable principles of legal privilege, such as those involving the confidentiality of communications between a lawyer and client.

• While not controlling, the rules of evidence often provide some guidance as to admissibility and, importantly, to persuasiveness of certain evidence. For example, rank hearsay subject to no exceptions is not likely to be very valuable in sorting out the controversy. A first-hand account is likely to be more useful. If you want to object based on an evidentiary ground to remind the arbitrator of the weakness of the evidence, you may do so.   But such objections cannot be speaking objections. Stick with basic objections, e.g. lack of foundation, hearsay, irrelevant, etc. Admissibility will still be judged under the arbitration standard for admissibility set forth in Rule 34. I may let you know if a path of inquiry is not helpful and ask you to move on.
• Leading questions, except as to preliminary matters and on cross, are disfavored. Arbitrators would like to know what the witness knows himself or herself and not what the lawyer would like the witness to agree to.
• If an exhibit is referred to during an examination without objection, it is considered to be ‘in the record.” If you object to use of an exhibit, please state your objection when the exhibit is first mentioned. This keeps things moving without the “offer/receipt” ritual. Having an exhibit admitted means only that it is part of the record. It will only be given the weight, if any, deemed appropriate even if it is admitted. Please keep track of which exhibits have and have not been used. If the parties want to do so, exhibits not used can be taken out of the exhibit books at the close of proceedings. The lawyers will need to take care of that.
• You should not assume I will look at any exhibit, even if admitted into evidence, if it has not been used in the examination of a witness or counsel has not expressly stated why I should consider it.
• Your exhibits should be in three-ring binders, tabbed with the exhibit number. Please don’t use notebooks for your exhibits of over 3” or so. If you have a large number of exhibits, it is better to have more notebooks of a manageable size than large, unwieldy notebooks. Counsel should work to eliminate duplicates of exhibits. It wastes time if the same exhibit has two different numbers depending on which side is referring to it. If the exhibits are voluminous, it would be most helpful for you to email them to me in .pdf form so I can retrieve them on my iPad, too.
• Please provide me with copies of any particularly important cases or legal authorities you rely on, preferably in alphabetical order by the last name of the first-named party in the caption. I am fine if you just email them to me in .pdf form.
• One of the benefits of arbitration is that it is fairly informal. This leads to a spirit of cooperation that will keep things moving and keep things inexpensive. Also, because we are in a little more informal setting than a courtroom, it is a good idea to “turn down the volume” a little bit in the presentations. You may be reminded of that occasionally. Please don’t take offense. It often takes lawyers who are used to appearing in court some time to get used to the more informal setting.
• On the other hand, we won’t be taking depositions either; you are presenting evidence critical to determining the outcome. There is sometimes a tendency because of the informality to go more into probing deposition mode than evidence presentation. You will do well to stick with presentation mode.
• Another aspect to the informality of the proceedings is there is a tendency to want to chat between breaks. We have to be careful, though. I will not speak with counsel or witnesses about the merits of the case outside the hearing and tend to avoid talking to witnesses and lawyers at all (except for small talk about the weather) when we aren’t all together. Arbitrators would like to be social, but it’s more important that we be impartial, so please don’t take offense if I avoid much conversation. Please advise your witnesses that I’m not being unfriendly, but just trying to be impartial.
• I may ask questions of the witnesses. This is normal. Some witnesses, unfortunately, have a tendency to try to determine what the arbitrator is getting at and answer so as to “agree” with the arbitrator. Please tell witnesses to answer my questions like any other questions. I don’t want agreement; I just want information. If you think I’ve gotten a wrong impression based on questions asked, you can ask to pose a few more clarifying questions to the witness.
• Sometimes people don’t know what to call arbitrators. Please call me “Mr. Allgeyer” or “Mr. Arbitrator.”  There is no need to call an arbitrator “your honor.” Don’t worry too much if you don’t get it right all the time. I’ll use Mr. or Ms. Lawyers’ last names during the proceedings, unless it fits to become more informal.
• It is fine to have beverages during the hearing.
• We will generally take a break every 1 ½ hours or so. If you or a witness need a break, let me know. There will be no breaks while a line of questioning is pending.
• We likely will discuss how to handle closing arguments and post-arbitration briefing, if any, during the course of the proceedings.
• Please refer to AAA Commercial Rule 28 regarding use of stenographer. If either party uses real-time reporting, please arrange to provide that capability to me as well.

I hope these guidelines will help answer some basic questions to make our hearing as comfortable and productive as it can be.   Please feel free to seek any clarification or address any other questions you may have during any final pre-hearing conference or when we are together at the hearing.