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.