Arbitrating the Patent Case Part XII: The hearing schedule

In earlier articles in this series, we addressed 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 the final pre-hearing schedule regarding pre-hearing exchanges of information as well as witness lists, document lists and briefs.  We now turn to the hearing schedule.

Planning for the hearing.  Counsel will be asked for their estimate of how long the hearing will take.  Here are a few guidelines for that.  Things tend go two to three times as fast in arbitration as in most courtrooms.  Breaks tend to be fewer and shorter, and there is generally much less need for preliminaries.  The arbitrator is already quite focused on your case and, having read your briefs and dealt with other aspects of the case, is likely to be familiar with the background.  Generally, the exhibits will go in faster and there is no need for sidebars and complicated evidentiary arguments, although at least some issues in that regard are bound to arise.  There may or may not need to be closings.  But when estimating your time for the case, remember that your opponent is allowed to cross-examine your witnesses and present witnesses.

It often makes sense to build in a “spillover day” into the schedule, so that everyone has their schedule clear if it some extra time is needed to complete the hearing.  Trying to resynchronize schedules of counsel, witnesses and an arbitrator or panel to finish testimony of  a witness or two can delay the conclusion of the arbitration by months.

Transcripts.  You will probably be asked whether or not you want the proceedings transcribed.  On the positive side, having a transcript provides a record that can be used in a complicated case for the arbitrator to study.  If the case requires post-hearing briefing, access to a written record can make those filings more meaningful.  And if you hope to attack the award on appeal a transcript is almost mandatory to give a reviewing court some idea of what occurred.

On the other hand, transcripts are expensive and taking time for their preparation can delay the proceedings.  The standard of review is so high for overturning an arbitration award that a transcript likely won’t assist you in any event.  In fact, you may not want to encourage judicial review of the award by having a transcript.

Most arbitrators I know like to have a transcript, particularly for a longer hearing with complicated facts.  It is likely more accurate than notes taken over many days.  On the other hand, most commercial cases involve documents which contain much of the evidence, so a transcript may not be as useful enough to justify the cost.

You may not need to make the decision regarding the transcript at the first pre-hearing conference.  For example, AAA Commercial Rule 28 requires that you notify the other party three calendar days in advance of the hearing that you will have a court reporter and has provisions for the use and payment of the transcript.  You will likely be in a better position to decide whether or not you want a transcript as you are closer to the hearing.  Just don’t forget to address the issue at the appropriate point if you don’t make a decision at the first pre-hearing conference.

Standard or reasoned award?  You probably will be asked whether you prefer a standard or reasoned award.  A standard award basically says, ” I find for party X in the amount of $X.”  No reasons are given. A reasoned award provides the decision and also the reasons for the decision.  Findings of fact and conclusions of law can also be requested, though I have never seen a party want that much detail.  Most parties prefer a reasoned award.  They like to see why the arbitrator decided what he or she decided.  It also can provide a basis for judicial review, which can be a positive or negative depending on how you did at the arbitration.

Under AAA Commercial Rules, you are not entitled to a reasoned award unless the arbitration clause requires it.  Most arbitrators will, however, provide such an award if both parties ask for it. But not all.

There are possible negatives to a reasoned award.  The first is you have to pay the arbitrator or panel to write it.  The second is it can encourage a party to seek judicial review.  Without it, there is little to review.

You will do well to think through the “details” of the matters addressed above so that the procedures make sense for the specifics of your case.  Knowing what makes sense and being able to explain why will help the arbitrator put procedures in place that will help keep the arbitration efficient and effective.

Next up.  In the next article we begin to address the hearing itself.

Arbitrating the Patent Case Part XI: the Prehearing Schedule

In this series or articles, we first focused on the patent cases most likely to be arbitrated, formulation of arbitration clauses, and some matters to be addressed during the prehearing conference.  We then took a slight diversion to examine federal statutes governing arbitration of patent matters.  After looking at considerations regarding use of experts in arbitration, we are now ready to consider how all these pretrial matters fit into the final schedule.

As earlier noted, arbitrators factor in the amount of discovery and other prehearing matters that must be accomplished before finalizing the schedule.  They then tend to set the final hearing date and work back from there on prehearing deadlines.

Planning for pre-hearing procedures.  This can become complex in a patent arbitration, but if well planned, can provide some real benefits.  Let’s assume, for example that the parties are convinced – and convince the arbitrator – that a separate Markman hearing to construe the patent claims at issue will likely resolve the key issues in the case.  Time will need to be built into the schedule to allow the parties to exchange the information necessary to inform the Markman presentations.  And here is where the flexibility of arbitration can potentially save time and money.  If, in fact, if the claim construction has some possibility of resolving much of the case, it may well be the best course of action to assure discovery is tailored only to those facts that bear on claim construction and discovery of everything else, including sales and related information, be done later.  It may not need to be done at all.  The Commercial Arbitration Rules of the AAA, in fact, encourage consideration of “whether there are any threshold or dispositive issues that can efficiently be decided without considering the entire case,” including “bifurcation of the proceeding.”  Rule 21 and Checklist P-2.

But be careful.  One of the problems with patent litigation in court is the mandatory phases of the case – infringement contentions, invalidity contentions, claim construction contentions, claim construction statements, claim construction hearing, etc. –  under local patent rules, all of which can add to delay and expense.  As earlier noted, some cases need to proceed with attention to all these matters, but many do not.  As earlier noted, the attractive thing about arbitrating patent disputes is fitting the process to the problem and avoiding unnecessary activities.  Thus, if there is only a minimal chance that separate Markman hearings – or any other separate proceeding, including a dispositive motion – will actually save time and money, it isn’t a good idea.

That said, I think arbitrators should always be on the lookout, with the parties’ help, for procedures that will help focus the arbitration on threshold issues and otherwise save time and money.  But one also has to remember that, from an advocate’s point of view, it is attractive to focus first on the strengths of their case or the opposing side’s weaknesses, which may or may not actually save time and may just prolong the arbitration.  If a party sincerely thinks that focusing on an issue can genuinely structure the case in a way that could avoid some expense and that is fair to both sides, it should be prepared to explain why.  Better yet, it may be able to convince the opposing party it will save everyone time and money to have key issues determined first.

Information exchange.  Of course, the schedule also has to account for discovery, known in the language of AAA rules as “exchange and production of information.”  It is worth remembering that the arbitrator is charged with managing “any necessary exchange of information among the parties with a view to achieving an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party’s opportunity to fairly present its claims and defenses.”  AAA Commercial Rule 22.

You will need to build in some time for the exchange and also for resolving any disagreements.  Discovery disagreements normally should not need to be the subject of court-style motions.  Instead, a brief letter from each side explaining the need for the information or problems with providing it should suffice. The arbitrator can then ask any questions during a phone conference and quickly get the parties on track with a prompt ruling.  In routine disputes a conference call with counsel and the arbitrator may be all that is necessary.

To avoid expensive disputes over electronic discovery, guidelines should be set in advance to limit where the parties must search for electronic documents and the format in which they are to be produced.  Here the arbitrator is charged with “balancing the need for production of electronically stored documents relevant and material to the outcome of disputed issues against the cost of locating and producing them.”  Rule 22.  Give some thought to this in advance to help the arbitrator help you save costs and avoid frustration.  An earlier article in this series provided some further guidance on that issue.

I recall the time counsel for each side produced electronic documents in the format they preferred, which was different than the other side preferred.   After doing so, each asked me to order the other to use the format they preferred.  Each was sincere in their belief and could give good reasons why their preferred format made sense.  But the result was a complication that cost money.  Discussing the issue before producing documents would have saved a motion, expense, and aggravation.

Subpoenas.  Remember, as noted in an earlier article, if you plan to subpoena witnesses or documents you will need to start analyzing how to do that and allow for possible delays in that process.  If you foresee difficulties, it is best to address them at the prehearing scheduling conference.

Inspections.  It may be that your case involves a process or device that requires a visit by the arbitrator to allow you to explain it and allow the arbitrator to understand it.  It may be that drawings, photos and videos will be sufficient, but often there is no substitute for observing the real thing.  If that is true in your case, you will want to account for that at the scheduling session and address the logistics as is necessary.  If travel is involved, this can be expensive, so think through this carefully.  Field trips are fun, but like anything else in arbitration, you must balance the cost and benefit.

Expert reports.  If the case will involve experts, which as noted in the last article in this series it often will, time needs to be built in for exchange of reports and possible rebuttal reports.  Parties may want to take depositions of experts, but be cautious about that.  If the reports include sufficient information, expert depositions may be unnecessary.  This is particularly likely to be true if the expert reports serve as the direct testimony of the expert.  Foregoing expert depositions in favor of good expert reports can present a real cost savings and not really any disadvantage in being prepared to cross examine the opposing expert.

Prehearing filings.  Once you have accounted for the time necessary to get ready for the arbitration, you will need to set deadlines for providing exhibit lists, witness lists, and prehearing briefing.  You will have to work out whether these will be phased in, with the claimant going first with response by the respondent, or whether the exchange will be simultaneous.  You will also want to think about providing an “escape valve” if one party is genuinely surprised by a document or witness and believes it needs to call another witness or present another document to fully air the issue.  This could be in the form of an additional disclosure of witnesses or documents if necessary.  The point, from the arbitrator’s point of view, is to avoid surprises and provide everyone a fair chance to present a case or defense.

Planning for the hearing.  Counsel will be asked for their estimate of how long the hearing will take.  Here are a few guidelines for that.  Things tend to go twice as fast in arbitration as in most courtrooms.  Breaks tend to be fewer and shorter, and there is generally much less need for preliminaries.  The arbitrator is already quite focused on your case and, having read your briefs and dealt with other aspects of the case, is likely to be familiar with the background.  Generally, the exhibits will go in faster and there is no need for sidebars and complicated evidentiary arguments, although at least some issues in that regard are bound to arise.  There may or may not need to be closings.  But when estimating your time for the case, factor in time for your opponent to cross-examine your witnesses and present witnesses.

It often makes sense to build in a “spillover day” into the schedule, so that everyone has their schedule clear if it becomes some extra time is needed to complete the hearing.  Trying to resynchronize schedules of counsel, witnesses and an arbitrator or panel to finish testimony of a witness or two can delay the conclusion of the arbitration by months.

With the above in mind, as well as the particulars of your case, you should be equipped to do your part to help realize arbitration’s promise of providing a fair opportunity to be heard while minimizing time and expense.

Next up.  The hearing schedule.

 

Arbitrating the Patent Case Part X: Experts

In earlier articles in this series we focused on the patent cases most likely to be arbitrated, formulation of arbitration clauses, and the prehearing conference.  We then took a slight diversion to examine federal statutes governing arbitration of patent matters.

Because the prehearing conference shapes the arbitration process, to participate intelligently you will need to think through your case in terms of needed discovery, other prehearing matters such as claims construction and invalidity contentions, and whether to plan for summary judgment in your arbitration.  All these things will affect the case schedule.

We now will focus on experts in patent arbitration, another matter you will address at the prehearing conference.

There typically are two likely candidates for experts in a patent arbitration: a technical expert and a damages expert.  It is possible that the case could involve technical issues of patent prosecution procedure or the like, in which case a patent prosecution expert may be considered, but in most cases that is unlikely.

Technical experts.  I would suggest that different considerations often come into play in an arbitration than in a jury trial when it comes to technical experts.  In many cases, the real experts in the technology are the inventor or engineers with one of the involved companies.  In jury cases, you may prefer to use a seasoned technical expert who is accomplished at testifying – perhaps a college professor who has the appearance of impartiality and impressive credentials.  This may not be as important in an arbitration where your arbitrator is likely to be an experienced patent lawyer or patent litigator who is most interested in the substance of the testimony and the familiarity of the expert with the particulars of the involved art.

Of course, the most important thing remains that the expert is knowledgeable in the art and has enough understanding of patent principles so that his or her testimony stands up on the merits.  Thus, you may find the most knowledgeable expert is the inventor or another engineer employed by your client. There is still the appearance of bias or interest to worry about, but the testimony is most likely to be judged based more on its substance in an arbitration.  This is good news if you are trying to avoid the expense of experts in an arbitration that is important, but doesn’t have millions of dollars at stake.

But remember, in the end, arbitrators tend to be more technically savvy and will credit the expert who is truthful, knowledgeable and can communicate his or her position well.  If your in-house experts do not fill that bill, you will need to look elsewhere.

Damages experts.  Damages experts are on a little different footing.  It may well be possible to use your client’s CFO or other accounting professional in a relatively straightforward case where the only issue is which sales are subject to the royalty.  But in a case that may involve issues of lost profits or the like, an accountant or economist with significant experience in determining damages can be important.  Questions of lost profits on lost sales, incremental damages and the like require application of legal and accounting principals that accountants not versed in patent damage law may not have mastered.  Your arbitrator will likely know quite a bit about all those issues, so your expert will want to be conversant with them, too.  Thus, you will want to consider the background and experience of any accountant you may choose.  It may well be that you can save expense and time by using a client’s employee, but you will want to approach that choice carefully.

Expert reports.  I can’t imagine a case where you would not want a fairly detailed expert report before the hearing.  You should know, however, that you will need to address at the prehearing conference just what that report should contain.  Typical arbitration scheduling forms provide for expert disclosures, but do not require them to be as detailed as reports under the Federal Rules of Civil Procedure.  You will want to consider asking the arbitrator(s) to require detailed expert reports for your arbitration. First, it will avoid surprises at the hearing and allow you to be prepared to meet the report. Second, if detailed enough, you will likely be able to forego a deposition of the expert and simply rely on the report itself.

You can use Fed. R. Civ. P. 26(a)(2)(B) as a checklist for the detail the report should have.  You may not need everything in the rule, but you will probably not need any more.  AAA commercial procedures caution us, appropriately, that “care must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive and more expeditious.”  Still, this is one area where we can get some guidance from court procedures that can help make arbitration more efficient, fair, and effective.

In some arbitrations, the expert’s report serves as the expert’s direct testimony. This eliminates questions as to whether the report sufficiently revealed the all areas of expert testimony and saves time. The arbitrator can study the report before the expert is called to testify, so will likely be well-informed of the issues involved rather than coming to them cold on the day the expert testifies.  The issues are then dealt with on cross and short redirect.

Consider whether this procedure would make sense in your next arbitration.  It may be, however, that you would prefer to have the expert build some rapport by having a brief direct examination.  You can be fairly sure the arbitrator will have read the report ahead of time if it is provided to him or her, so the expert need not testify in full detail, but can hit the most important points.

Next up.  The prehearing and hearing schedule.

Arbitrating the Patent Case Part IX: Statutory provisions

In earlier articles in this series we looked at patent disputes most suitable for arbitration, choice of arbitrator, arbitration clauses to use and avoid, the prehearing conference, discovery, and prehearing matters such as claim construction and summary judgment.  Before we continue on, let’s stop to explore the statutes that specifically provide for arbitration of patent disputes:  35 U.S.C. §§135 and 294.  I’ve received a question on patent statutes and arbitration, so there is no time like the present to address the matter.

Derivation proceedings.  Section 135 is straightforward.  It allows parties to a derivation proceeding to submit their contest to an arbitrator.  A derivation proceeding is used to determined whether the first-to-file inventor was the true inventor or whether he or she derived the invention from another.

If the parties determine to arbitrate the matter instead of submit it to the Patent Office, they are to give the Director of the Patent Office notice of the arbitration award – which is the arbitration term for a decision or order. The award is then binding on the parties.  The arbitration award is not enforceable until notice is given to the Director.  The award is noted as part of the patent’s prosecution record.  The Director may still determine the patentability of the invention claimed in the patent.

This makes sense. The arbitration will bind the parties.  But the patentability of the invention goes to the public interest in having only valid patents in existence.  That is not something the parties should be able determine for others in a private arbitration.  It remains the Director’s responsibility.

Contracts involving patent rights.  Section 294 allows arbitration of any contractual dispute relating to patent validity or infringement. This would most typically relate to patent license agreements, although it is not limited to that.  The parties can provide for arbitration either in the contract itself or later agree to it in writing. Section 294(a) says such a provision is “valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for revocation of a contract.”   Those grounds are very narrow.

According to House Report 97-542 (1982), this provision was enacted, in part, in response to cases such as Beckman Instruments, Inc. v. Technical Developments Corp., 433 F.2d 55 (7th Cir. 1965).  The Beckman court found that patent issues were “inappropriate for arbitration proceedings and should be decided by a court of law, given the great public interest in challenging invalid patents.”  Congress decided allowing arbitration was in the public interest to save time, money and burden on the courts.

The arbitration is governed by the Federal Arbitration Act.  The arbitrator must consider defenses under 35 U.S.C. § 282.  These include  (1) non-infringement, (2) invalidity, (2) unenforceability,  (3) failure to comply with 35 U.S.C. §112 – including, for example, failure to meet the written description, definiteness, enablement, and other requirements of section 112, and (4) failure to comply with any requirement of 35 U.S.C. § 251, which among other things prohibits broadening the scope of re-issued patents.

Significantly, section 294(c) provides that the arbitration award binds the parties, but no one else.  This may have some benefit for the patent holder, but that is not clear.  Consider a case where the licensee successfully defends by proving the licensed patent is invalid   Recall that in  Lear v. Atkins, 295 U.S. 653 (1969), the Supreme Court held that, in light of “the strong federal policy favoring the full and free use of ideas in the public domain,” licensees are not required not to pay patent royalties if they establish the licensed patent is invalid.

But does an invalidity finding bind the patent holder when it later sues someone else on the patent or seeks royalty payments from a different licensee of the patent?  The issue is unclear.  In fact, section 294(c) says the arbitration binds parties, and the patent holder is a party.  So one might think that a later accused infringer could make use of the arbitration decision to invalidate the patent.  After all, in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, (1971), the Supreme Court held that, where a patent has been declared invalid in a proceeding in which the patent holder “ has had a full and fair chance to litigate the validity of his patent,” the patent holder is collaterally estopped from re-litigating the patent’s validity.

But one might suppose there must be some reason Congress made it clear that the arbitration decision only binds parties to the arbitration. An arbitrator’s finding the patent is valid wouldn’t bind a third part in later proceedings anyway, so why does the statute specifically say third parties aren’t bound?  Maybe the idea was just to make it clear that the drafters understood that.

Or perhaps the idea was to meet the concern that validity issues implicate the public interest so much, as recognized by Lear and later cases, that an arbitration is not the way to determine them except as between the parties who agreed to arbitrate.  Just as the issue of validity was specifically carved out from derivation arbitrations under section 135, noted above, perhaps Congress meant to carve it out so that only within the arbitration itself would the validity decision be of any effect.

But that isn’t what the literal language of the statute says. After all, if a patent holder is satisfied to submit the issue of validity of a patent to arbitration and loses, the only interest at stake is the holder’s interest in having a patent monopoly.  The public’s interest in eliminating invalid patents is not disserved.

And if the arbitration decision is to have no effect on the patent’s validity in other proceedings, why does section 294(d) of the statute require that one of the parties inform the Director of the arbitration award on pain of the award otherwise being unenforceable?  In fact, the award is also entered publicly in the patent’s prosecution record.  One might assume that making the award of record is necessary to give the award preclusive effect.  But perhaps the idea is only to give a later licensee notice that a validity challenge has been successful even though it isn’t binding in subsequent proceedings.

Unfortunately, there appear to be no decided cases on the matter, so we are left to wonder.

Practical considerations.  A few observations can be made about all this as a practical matter. First, whether or not the arbitration has a collateral estoppel effect or not provides no real disincentive to a licensor to include an arbitration clause.  Collateral estoppel would surely apply if the licensor chose to litigate instead of arbitrate, unless it could show it did not have a full and fair opportunity to present its case.  Thus, arbitration provides no disadvantage over court in this regard.

Second, a licensor worried about the matter could suggest a provision in the arbitration clause that the award would simply say what if anything was owed in royalties without specifying the reasons.   Thus, no specific finding of validity would be required.  To be sure, the arbitrator is required to consider an invalidity defense, as noted above.  But that probably doesn’t mean the arbitrator has to include a specific finding on it in the award. Without a specific finding, no collateral estoppel effect is likely.

Third, the licensor still has an argument that section 294(c) should be read to eliminate the effect of an invalidity finding concerning a third party, as noted above.  This is no sure thing, but the issue could be decided in the licensor’s favor.

Finally, it seems unlikely the licensee will be concerned about whether a third party could or could not raise invalidity as a defense against its former licensor.  So long as the licensee is found not to have to pay royalties because the patent is invalid, whether or not its competitors have to pay is of little concern to the licensee. In fact, if its competitors have to pay and the licensee doesn’t, it will enjoy a competitive advantage.

Similar questions could arise concerning infringement findings in an arbitration.  Section 294 requires that the award be provided to the Director, which would include an infringement determination.  Again, a finding that the products at issue infringe the licensed patent would not be binding on a party in a later proceeding that was not a party to the arbitration.  A finding of non-infringement is much less likely to bind the licensor in subsequent disputes than a finding of invalidity.  The requirements of collateral estoppel may well not be met under the facts of the second case because different issues are being presented, depending on the products involved and the like.  And section 294(c) may foreclose use of a non-infringement finding in a later dispute involving a different licensee.  But it may not, as discussed above in the context of an invalidity finding.

Thus, arbitration remains a viable way to settle contractual disputes involving patents.  While it would be better if the statute was clearer on the precise effect arbitration determinations have in later proceedings, it is a benefit that there is a statute with the express purpose of allowing arbitration of patent disputes.

Next up. In the next article, we will proceed through the next stages in the process of arbitrating patent disputes, focusing on the use of experts.

Arbitrating the Patent Case Part VIII: More on the prehearing conference

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 have now taken up the prehearing conference, the event that shapes the course of the arbitration and determines how effective and efficient the arbitration will be. These usually are conducted by phone conference.

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 we should 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. .

We first considered the types of discovery available and suggested that, particularly in a smaller case, the focus should be on the basics of the case: the patent, prosecution history, the specifics of the accused product, and the basic financials that go into damages or royalty computation.  While some cases might justify more probing discovery, we noted that in many cases, limiting discovery to the main custodians of relevant documents and limiting depositions to those needed to obtain information not available from documents is the way to go.  Indeed, one good approach to deciding whether to do a particular deposition should be to determine what expect to learn, what it will cost — including preparation, travel, taking the deposition, court reporter fees and the like — and whether there is an alternative, less expensive way to obtain that information.

Subpoenas.  Another consideration is whether or not non-parties have critical information that will have to be subpoenaed.  If so, you will need to factor in time for doing that and also research what you can and can’t subpoena in the jurisdiction you find yourself in.  Many courts allow you to subpoena documents, but do not allow pre-hearing depositions. You will have to check the law in your jurisdiction.  Your arbitrator won’t do that for you.   You may want to negotiate with your opponent and the third party to obtain a deposition that can be used at the hearing rather than subpoenaing the witness for the hearing.  Of course, not all witnesses will be within the arbitrator’s subpoena power, so you may need to rely on documents.

And remember that arbitrators cannot themselves enforce subpoenas.  Only courts can do that.  So you may need to build in time for that process if the third party is unlikely to cooperate.

Infringement and Invalidity Contentions.  There are other activities in a typical patent case to consider.  Among the most important is the exchange of infringement and invalidity contentions.  The AAA Supplementary Patent Rules address these and other matters, by mandating their consideration but not necessarily requiring them in every case. (You can find these supplementary rules in the rules section at adr.org.)  It may be that your case does not require a full exchange of this information depending on the nature of the dispute, but most cases will benefit from this type of exchange.  Thus, you will want to set some time aside to have an exchange of this information.

Claim Construction.  You may also want to provide for a relatively early claim construction hearing, as usually happens in a federal court patent case.  But think this through.  Typically, claim construction hearings are expensive and require the decision maker to consider things in a relative vacuum.  In some cases, this may be unnecessary.  I have arbitrated patent cases where “claim construction” was simply another issue to be determined after the evidentiary hearing on all issues.  The technology was quite complex, but the disputes about the claims were relatively straightforward.  Claim construction was much better presented and ultimately decided in the context of all the evidence presented at the hearing.  Because there is no jury to instruct on claim construction, the decision could be made along with all the other issues in the case.

On the other hand, there are cases where claim construction is the real issue driving the entire case.  I recently had just such a case.  The parties agreed that the key to the dispute was the construction of two or three claim terms.  If that is so, focusing the early part of the proceeding to what is needed for claim construction may well save time and money.

The point is to think about whether a separate claim construction hearing would genuinely make the proceeding more efficient, or it would just add unnecessary expense. That’s the advantage of arbitration.  The process can be molded to the requirements of the dispute.

Invalidity.  A separate, early hearing on invalidity is another thing to consider.  Again, there may be cases where the real dispute focuses on validity of the patent or patents.  It may be that there is a serious question whether the patent involves patentable subject matter, particularly in light of the recent decision by the Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank Internat’l.  It may be that one party thinks it has uncovered some prior art that renders the patent invalid, or the on-sale bar applies.  Determining validity early on may determine the whole case and, again, avoid other expensive discovery.  But many cases won’t be amenable to that approach.   You will want to determine the expense of a separate proceeding versus the likelihood it will actually resolve the case without need for a full hearing on all issues.

Summary judgment.  Parties often want to bring summary judgment motions.  Think that through carefully.  Many arbitrators are reluctant to decide a case on summary judgment given the lack of an appeal on the merits in most cases.  In many cases, it would be less expensive to simply present the facts at the hearing rather than take the time to present all the evidence in briefs and affidavits, only to discover that there is an important factual dispute that needs to be presented and determined.

The AAA rules now expressly provide for dispositive motions.  But they condition their use upon the arbitrator first determining that “the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case.”  AAA Commercial Rule 33.    Thus, if there is a discrete legal issue that will dispose of the whole dispute or part of it, providing for summary judgment may be in order.  But if there are likely to be disputed facts or if the issue isn’t clear cut as a legal matter until it is informed by delving into the background facts, summary judgment motions are likely to be a waste of time and money.

To be sure, there are cases where it makes good sense to focus on the legal effect of clear cut facts and foreclose the need for an expensive hearing.  But you will want to be prepared to explain how that is likely to be true in your case if you want to include a summary judgment motion in the schedule for your case.

Up next.  In the next article, we will take a look at the role of experts and other witnesses in the patent arbitration.

Arbitrating the Patent Case Part VII: The prehearing conference

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.

Written Discovery

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.

Depositions

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.

 

Arbitrating the Patent Case Part VI: Arbitration clauses to watch out for

In the last couple of articles in this series, we looked at arbitration clauses to use in patent cases.   These clauses will most likely be involved in license agreements, employee agreements, or product development agreements.  We noted that a good place to start is not simply the last arbitration clause someone in your office did, but rather the AAA Commercial Rules form clause.  You will then want to add the Supplementary Patent Rules, and then state the number of arbitrators and the location of the arbitration.  This should avoid most litigation over whether to arbitrate and what to arbitrate.  We explored a number of other possible additions, to fine-tune the clause such as keying the number of arbitrators to the amount in dispute, stating the qualifications for an arbitrator, limiting or ensuring certain discovery and the like.  We also explored some more usual possible provisions such as “baseball” provisions, where the arbitrator(s) must pick one of the Award amounts suggested by each side.

How much detail you want to put in the clause will depend primarily on whether you think it best to leave the exact process to a skilled arbitrator after you know more about the nature of the dispute, or whether you think it best to control everything you can about the process in the clause while you have a chance to do so.   Reasonable minds can differ on that.  I tend to be a little more in the trust-the-arbitrator camp, but it depends on the nature of the contract and the type of dispute you foresee.

There are some provisions that might seem at first like good ideas, but upon further analysis, may not be.  Let’s look at a few of those.

One type of provision you may see is one that limits the arbitrator’s power to “interpreting the contract,” and not deciding any issues under any statutes, common law or other matters.  This is a perhaps laudable attempt to narrow the issues, but it could have some real problems.  By limiting the power of the arbitrator in that way, you may be simply setting up part of the case for arbitration and the rest for litigation.  The last thing you want in terms of expense is a two-front war, so to speak.

Another provision to think long and hard about is a mandatory award of attorneys’ fees and costs.  While this may seem like a good idea at the time, it can skew the arbitration.  Sometimes parties have legitimate disputes that simply need to be decided by an objective third party.  If the price of doing that can be, however, paying the other side’s fees, the dispute about fees can sometime overwhelm the real issues in the case.  It also creates an opportunity for the side that is sure of impending victory – whether there is reason to be sure or not – to put more resources and expense in the case since they will be sure that will be on the other parties’ dime.  An alternative may be to give the arbitrator the ability – but not the mandate – to award fees to the prevailing party, trusting the arbitrator to be able to make the judgment whether the position taken by a party warrants an award of fees or not.

Another provision I have seen that raises some confusion is one that forbids the arbitrator from awarding “consequential damages.”  Without a better definition, you are creating significant ambiguities.  Drawing the line between direct and consequential damages is not always easy.  Do consequential damages include incidental damages – which are separately defined in the U.C.C. — for example?  How indirect do damages have to be to be consequential?  At very least, some more definition is needed.  And is it really a good idea to foreclose recovery for your client of what might be an expensive breach that causes real, albeit consequential, damages?

It is not uncommon for arbitration clauses to forbid an award of punitive or exemplary damages.  Again, be careful.  While the instinct to avoid a possible punitive damages award may be justified, what if you find yourself in a situation where your client would be justified in seeking such damages?  Do you want to foreclose that?  The normal reason people include such clauses is to make sure the arbitrator(s) do go off-track and make a large award of punitive damages that isn’t justified.  But consider that you have quite a bit of control in who is chosen as arbitrator. You can strike arbitrators you don’t have faith in, for example.  In the end you may decide this type of provision is alright, but think through it.

Another clause that I have seen allows discovery as if under the Federal Rules of Civil Procedure.  I suppose whoever suggested thought they may have won their last case if only they had more discovery or were worried they wouldn’t get enough discovery.  I find, however, that most people’s complaint about arbitration is that there is still too much discovery if the process is not well managed.  Thus, expanding discovery to the scope of the Federal Rules strikes me as abandoning the flexibility, efficiency and cost savings of arbitration.  If you are really concerned about not getting sufficient discovery, you would be better off saying the parties shall each be allowed X hours of depositions and that there will be an exchange of key relevant documents or the like.  Remember, however, that the rules already give the arbitrator the power to order exchange of necessary information.  You are probably best off spending your efforts picking an arbitrator you trust to properly control the discovery process than trying to micromanage discovery in a future dispute, the contours of which you can only make guesses about.

Finally, some arbitration clauses say that the Federal Rules of Evidence will apply at the hearing.  I can’t imagine that is ever a good idea.  Relaxation of strict evidentiary rules is an advantage of arbitration.  And there isn’t any harm in it. After all, the rules of evidence are designed primarily to keep irrelevant or unreliable evidence from a lay jury.  Here your fact determination is being made by a skilled arbitrator, who is generally a lawyer and quite familiar with what kind of evidence is relevant and reliable.  Indeed I, like many arbitrators, often remind counsel that the rules of evidence don’t apply, but that doesn’t mean that unreliable hearsay will suddenly be useful in deciding the case.  Unreliable evidence will be disregarded as, well, unreliable.  Thus, the parties will want to bear in mind that the point of the rules of evidence is to assure that only reliable evidence will be used to decide the case and present evidence that conforms to the rules to make their case more persuasive. But there is little danger a skilled arbitrator will base a decision on unreliable evidence.

Arbitrating the Patent Case Part V: Crafting the arbitration clause

In earlier articles in this series we examined the types of patent-related cases most suited for arbitration, whether to use administered arbitration, and the considerations for determining who to choose as an arbitrator.  In the last article, we began looking at drafting the arbitration clause itself.  I suggested it was not a good idea to simply copy the last arbitration clause someone in your office used.  Instead, I suggested that you look to the standard AAA clause (or other arbitration administrator), then incorporate the supplemental patent rules, decide on the number of arbitrators, and the location of the proceedings.  This should avoid having to go to court to interpret the arbitration provision and also avoids disputes about what issues will be arbitrated.

Because arbitration is a creature of contract, the parties can contract for virtually any other procedural or other matters concerning the arbitration they can agree to. There are basically two schools of thought on how elaborate your arbitration clause should be.  One is to basically rely on picking a good arbitrator or arbitrators who will be able to work with counsel to fashion a process that will fit the dispute and be as efficient yet fair as possible.  After all, at the time you are drafting the clause, you won’t really know exactly what disputes will arise or how much money will be involved.   A good arbitrator can take this all into account when formulating the plan for how the arbitration will proceed.

The other school of thought is that you have a chance to create an arbitration provision that will make sure the process is the way you would like, so why not use it?  I suspect this school of thought is particularly prevalent among those who didn’t feel their last arbitration lived up to the promise of being efficient, fair and effective for whatever reason.

So what are the kind of additional things you can do with your clause to control the process?  These range from pretty good ideas to what may be unfortunate micro-management.

One thing that is a good idea to cover, particularly if the contract documents don’t otherwise cover it, is choice of law.  Determining what law applies can be expensive and legally complicated – something you want to avoid in arbitration if you can.  Thus, to the extent you can reach agreement, you will want to say that the substantive law of X state applies to the arbitration, but not conflict of law principles.  Now everyone knows what law to look at without having to brief it and have the arbitrator decide. This can be fairly important in license and employee agreements because state law can vary on controlling legal principles in these areas.

Another possible addition was mentioned in an earlier article.  If you think the dispute could be large enough to justify a panel of three arbitrators, but can’t be sure, you could provide that disputes involving a claim or counterclaim of, say, under $2 million will be decided by a single arbitrator and disputes over $2 million will be decided by a panel of three.  This isn’t a perfect solution.  The exact amount in dispute may be not be known at the beginning of an arbitration so one party or the other might manipulate the demand to either invoke or avoid use of a panel, depending on what advantage they think that might hold for them.  But it still is the best way to balance the cost versus the benefits of a full panel.

Other possible provisions are a little more daring.  One is to require a “baseball” style of arbitration.  In this type of arbitration, each party proposes a dollar amount for the Award.  (In arbitration, what lawyers would normally call the damages awarded – or not – is called an Award).  The arbitrator is then required to hear the evidence and choose one or the other.  The theory of this style of arbitration is that the parties will try to put forth the most reasonable claim justified by the evidence, foreclosing overreaching and the like.  It also appeals to those who think arbitrators tend to “split the baby.”  I have not observed that arbitrators do this any more than courts or juries.  But requiring the arbitrator to choose one or the other makes sure he or she will not simply split the award.  He has to pick one side or the other.  Those who are wary of this arrangement suspect it injects too much gamesmanship into the arbitration.  Most arbitrators don’t like baseball style arbitration. They want to reach a fair award, not choose what may merely be the least unfair.

There is another whole series of things that may be added to the arbitration clause to ensure the process is the way the parties want it – or at least thought they did at the time they drafted the arbitration clause.  A common example is to require that the matter be heard and an award issued within some short time period, often 90 days or so.  You will want to be careful with this one, particularly if the case might require an even modestly complex exchange of documents and information.  That takes time, and 90 days or less might be pushing it.

It is not at all uncommon for parties to seek to either allow or limit discovery.  Generally, arbitration rules foresee the arbitrator overseeing an exchange of documents to provide information.  Depositions are not uniformly allowed by arbitrators and are usually restricted.   Some parties, therefore, write into their arbitration clause that a certain number of depositions will be allowed.  Others – probably those who have seen their arbitration become as deposition laden as a federal civil case – go the other direction and restrict them to one or two per side or the like.  Others are more convinced that a good arbitrator or panel will be in a better position to judge just how much discovery is necessary given the size of the dispute and issues involved after there is a live dispute than someone drafting a clause when one can only guess what issues may arise.

In the next article in the series, we will explore other possible additions to the clause. Some at first seem like a good idea, but often are not.

Arbitrating the Patent Case Part IV: Crafting the basic arbitration clause

 In earlier articles in this series we examined the types of patent-related cases most suited for arbitration, whether to use administered arbitration, and the considerations for determining who to choose as an arbitrator. In the next few articles we will consider drafting the arbitration clause for a possible patent arbitration.  As noted, that arbitration is most likely to arise from a patent license, employment agreement or development agreement.

Let’s begin with what not to do.  The easiest approach to an arbitration clause is to simply borrow the one out of the last agreement with an arbitration clause someone in your office did and copy it.  I have seen some pretty strange and even contradictory arbitration clauses.   I am convinced fairly mindless copying explains how they came into being.  Let me give you an example, only slightly changed from one I was once called on to deal with:

Any disputes between these parties about this contract shall be subject to binding arbitration under the Federal Arbitration Act and the Minnesota Revised Uniform Arbitration Act.  Before arbitrating, the parties agree that they will try to settle the case through mediation.  If they cannot so settle this matter, they will each pick an arbitrator and the arbitrators they pick will pick a third arbitrator.  The prevailing party will be awarded its attorneys’ fees and costs.

Right away, you are set up to possibly have to litigate over this clause. First of all, the federal act is actually different than the state act, so you don’t have consistent requirements.  Second, you don’t really have a set of rules to follow, just statutes.  The Federal Arbitration Act is quite brief and does not address procedural nuts and bolts like AAA or other rule making bodies’ rules do.  Third, you don’t have anyone to administer the arbitration.  Fourth, how long do the parties have to mediate? What if one party refuses to mediate?  Fifth, what if one party refuses to pick an arbitrator?  Do you really want to have arbitrators appointed by the parties?  What if one of them is your opponent’s brother?  Who will decide whether arbitrators have to be impartial or are impartial enough?  And so on.

There is a better way.  Let’s begin with the basics and then go from there.  To have an arbitration clause that will avoid litigation over the clause itself, begin with the standard form AAA clause.  (Go to adr.org to get it.)  Recognizing that a patent dispute may be involved,  you will include a reference to AAA’s supplementary patent rules as well.   Then decide where the arbitration will be (your city, your opponent’s city or a neutral city) and list it. Finally,  decide whether you will have a single arbitrator or a panel of three.   You will end up with this:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and the AAA Supplementary Rules for the Resolution of Patent Disputes for any patent issues submitted.  Judgment on the award rendered by the arbitrator[s] may be entered in any court having jurisdiction thereof.  The arbitration shall be before a [single arbitrator] [panel of three arbitrators] in [insert city].

This works because it incorporates the AAA’s commercial and patent rules, which fill in the gaps and provide a framework of rules and procedures for the entire arbitration.  It also takes advantage of cases over the years that have found this type of clause is sufficient to put all controversies related to the contract into arbitration, including most contract formation issues.  Make sure that you are committed to having everything resolved in arbitration if you go this route.  By incorporating AAA rules, even the question of arbitrability is for the arbitrator.  But avoiding court is what you were hoping to do, and this should do that for you.

The AAA supplementary patent rules provide a useful structure for identifying and determining issues that typically arise in a patent dispute.  Thus, the patent rules require consideration of confidentiality agreements, disclosures of claims claimed to be infringed and devices claimed to infringe, provision of patent file histories, an element-by-element claim chart, provision of invalidity contentions, disclosing claim constructions, scheduling a claim construction hearing if appropriate, exchange of expert reports, and the like.  Note that the supplementary rules only mandate consideration of certain issues and procedures.  But they are not as rigid as the local patent rules in many jurisdictions that require detailed disclosures, claim constructions and other proceedings that may or may not make sense in every case.  The arbitrator(s) and parties are still able to create a balance between the expense and the value of a disclosure or procedure in ultimately determining the case.

Thus, in a fairly simple royalty dispute, there may be a question as to whether certain devices actually are covered by the licensed patent claims and therefore subject to royalty payments. But it may or may not be necessary to have a detailed claim construction hearing when, in fact, only one element or two are at issue.  None of the steps often mandatory for a patent case are mandatory in arbitration, so the parties and arbitrators can craft a structure for the case to “fit the process to the problem.”  This will save time and money so the parties can get the dispute decided quickly and get back to business.

In the next article, we will look at some possible “improvements” to the more standard arbitration clause. And we’ll look critically at whether such improvements are a good idea.

Arbitrating the Patent Case Part III: Who should arbitrate?

 In the first two articles in this series we explored the types of patent cases most likely to be amenable to arbitration, whether to opt for administrated or ad hoc arbitration, and whether to provide for a panel or a single arbitrator.   The next decision to make is what the qualifications of the arbitrator or arbitrators should be in a patent case.

Of course, one of the prime advantages of arbitration is the ability to choose a decision-maker who has expertise in the subject matter of the dispute.  In fact, because arbitration is governed by contract, you can provide for a particular background right in the arbitration clause.

So, what kind of expertise are you seeking in an arbitrator in a patent case?  Given the need for subject matter expertise, you will want an arbitrator who is very familiar with all aspects of a patent case.  I still remember years ago when I asked a federal judge at a pretrial in California what kind of Markman/claim construction  procedures he typically used.  He told me he didn’t use any.  That told me we were in for a difficult educational process with someone who probably wasn’t all that interested in mastering the intricacies of patent law in any event.  You can avoid that in arbitration – and should.

Of course, if you have a panel of three arbitrators you could, as suggested in an earlier article in this series, require that one arbitrator have a technical background, another a financial background, and a third experience in the arbitration process itself.   But you may not have the luxury of a full panel, so you may well want to seek an arbitrator with a background in all the important aspects of patent issues.

Subject matter expertise in patent law is, of course, a must.  You don’t want to spend a great deal of time educating an arbitrator about the intricacies of patent validity, enforceability, claim construction, infringement and the like.  You  need an arbitrator who has dealt with those issues for years of his or her professional life.  Thus, your arbitration clause may provide that the arbitrator(s) must have a minimum of ten or even twenty years of patent litigation practice and experience.

But knowledge of patent law alone is not enough.  Given that your case likely will arise from a license, development, or employment agreement, you will also want to see some familiarity with those issues, which will often turn on issues of contract interpretation.

Technical familiarity is also important.  While it may be too much to ask to have and expert in the specific technology in your case, familiarity with the industry and subject matter in general is something you probably can expect.  Your arbitrator may not, for example, actually be a programmer, but he or she ought to be generally familiar with software issues in a case involving a software patent.

The financial aspects of patent cases can also be complex.  Experience with patent royalties and other forms of damages will be a plus in knowing your decision-maker can easily follow the points you are making concerning the financial aspects of the case.

Don’t overlook the need for some familiarity with the discovery process, particularly electronic discovery. Discovery in arbitration is typically more focused.   But that means you want an arbitrator with more experience in that area rather than less. That will allow the arbitrator to make informed judgments about the need for particular types of discovery and balancing the cost against the likely importance of the information to the case.  Because electronic discovery can be extremely expensive, it will need to be carefully managed by an arbitrator who knows the issues and can weigh costs and benefits.

Perhaps the easiest thing to overlook is the need for considerable experience and expertise in managing the arbitration process itself.  Good arbitrators make this look easy. But in a typical arbitration,  procedural, evidentiary, and process issues arise that require careful management by an arbitrator who has “seen it all,” or at least most of the tough issues that can arise. How will the arbitrator deal with a witness that won’t answer the question directly? The lawyer who won’t quit leading the witness?  The lawyer who objects to every piece of evidence the other side seeks to present as “unfair?”  The party that keeps stalling in providing information?  The party that insists on presenting previously undisclosed evidence and witnesses?  Claims of and attacks on alleged attorney-client privileged information?  None of these issues are unusual in an arbitration.  And each must be dealt with by an experienced arbitrator to obtain the necessary information to decide the matter, but in an efficient way that remains fair to all parties.

As noted in an earlier article in this series, one of the advantages of an administrated arbitration is access to panels of experienced arbitrators and provision of detailed resumes for those arbitrators.  In some circumstances, there are even opportunities for providing questionnaires to arbitrators or even a chance for interviews of potential arbitrators – with both counsel present.

Of course, you don’t get to choose your arbitrator yourself.  Your opponent is also involved in the process.  For example, in a typical AAA process, the parties discuss with the case manager the qualifications they think the arbitrator(s) should have. The case manager then provides a list of candidates.  The parties then can strike or rank each arbitrator on the list.  The arbitrator or arbitrators with the best rankings from both parties is appointed.  Thus, each party has plenty of input into the choice of arbitrator, and careful consideration of what qualities you want the arbitrator to have is critical.

In short, subject matter, legal, and procedural expertise are all things you will want in an arbitrator in a patent case. And because you have quite a bit to say about who the arbitrator will be, are all qualities you can expect your arbitrator to have if you are careful about it.