SETTLEMENT OF PATENT LITIGATION AND DISPUTES

Improving Decisions and Agreements to Settle and License

 

Use in ADR Processes

The parties could use this approach in connection with mediation or some other dispute resolution process.

Mediation.  Mediation is used to explore settlement in many patent actions.  Mediation is basically a private negotiation conducted with the help of a neutral person, who attempts to do a variety of things to overcome barriers to an agreement.  Some of these are discussed briefly in a moment.

This approach provides an outline of the information needed to evaluate settlement possibilities.  This should help reduce the cost and time spent gathering information.  More importantly, this approach provides a well-defined way for a neutral person to evaluate the economic interests of each party given each party’s views of the facts and its estimates of the future, including its view of the litigation alternative.  If agreeable to both parties, each party would provide its views of the facts and its estimates in confidence to a neutral person with the understanding that this person would apply this approach to assess settlement prospects.  If a neutral person followed this approach, the parties would know in advance how that person would process the information and views provided and the nature of the results of the analysis.  This knowledge would make it more likely that they would cooperate in providing information and perhaps even make honest estimates of the likelihood future events, most notably the probability the patent owner would win and the accused infringer lose if the action is litigated.

The parties would presumably require that the neutral person not reveal to one party the results of applying the approach using the facts and estimates provided by the other or indeed give any indication of those results.  However, this person could advise the parties in a general way whether settlement would or would be in their mutual economic interest, given their expressed views.  This person could also identify the nature of the factors that appear to make settlement more likely and those tending to make it less likely.  This person could identify the nature and magnitude of the changes in the views of the parties needed for an agreement.

Partial Arbitration.  If agreeable to both parties, each party could provide to an arbitrator its views of the facts relating to the commercial value of some invention with and without licensing, the value and cost of damages and the value and cost of an injunction.  The arbitrator could provide a decision on those issues.  The parties could negotiate about the probability the patent owner would win and accused infringer lose, each party’s attitude toward risk, third party effects, and other factors.  Settlement could be based on a combination of the factors decided by arbitration and the factors negotiated.

Use in Settlement Decisions

The analysis may be used to provide a basis for a business decision to accept or reject a settlement proposal.  There are many legal and practical incentives for business people to understand and sometimes justify their decisions about settling patent actions.  The approach and analysis helps with both.

Use in Managing Litigation

The analysis should help in managing litigation.  The parties to patent disputes must make decisions on what the lawyers and others do during the course of a dispute.  Those activities involve costs.  The approach should help people determine the value provided by additional litigation efforts (and costs).  For example, how valuable to a patent owner is some additional work that increases the owner’s probability of winning or the infringer’s perceived probability of losing by some amount?  Is the added value greater than the costs and if so by how much?  By helping answer such questions, the analysis should help patent owners and infringers identify the point of diminishing returns where additional litigation effort and cost is not justified by the additional value that effort provides.

 

 

JOHN W. SCHLICHER

PATENTS, PATENT LITIGATION, PATENT DISPUTE RESOLUTION AND

SETTLEMENT, LICENSING, ANTITRUST, LAW AND ECONOMICS