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.

Warranties Remedies and Related Peccadilloes

Steps to Successful Contract Negotiation

What do you promise when you sell something? What rights might you give up when you buy? And who pays when things go wrong? 

By Steven Kelley and David Allgeyer

Purchases move fast in an electronically connected world, often without contracts or any other negotiated agreements. That’s fine when the buyer is happy, but can cause confusion and arguments when the buyer finds its purchase less than satisfactory. In that case, does the seller have to offer a refund? Is it also responsible for lost sales, personal injury or claims of infringement?

As is common in the legal world, the answers vary with the particulars of the case. Outcomes often depend on the agreements that the parties . . .

To read the entire article from the ACC Docket, click here or paste into your browser:

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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.