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 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 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.