“Effective Practices” for Resolution of Intellectual Property Disputes

There is a perceived reluctance to use private dispute resolution (either mediation or arbitration) to resolve intellectual property (IP) disputes.

One reason is that IP rights (patents, trademarks and copyright) are statutory monopolies, granted on a national basis. Therefore, rights holders must look to government authorities and national courts to establish and enforce these rights.

However, the most valuable IP rights are commercialized internationally, so national enforcement and dispute resolution is very costly, time-consuming and inefficient. IP litigation is also public and potentially fatal to confidential information and trade secrets. That’s why there is a compelling case for both owners and users of IP to look to private dispute resolution.

The International Institute for Conflict Prevention and Resolution (CPR) has been a pioneer in seeking improvements to private resolution of IP disputes. In 2010, CPR formed a Patent Mediation Task Force to examine the benefits of mediation in resolving patent disputes in particular, and to identify and overcome barriers to the effective use of mediation.

The Task Force has published an “Effective Practices Protocol” to dispel some of the common business myths about mediation and to promote the strengths of mediation as a means for resolving patent disputes and saving companies from ruinous litigation.

The CPR has also promoted mediation through its Corporate Policy Statement on Alternatives to Litigation^©, which has been signed by over 4,000 companies. The Policy Statement does not commit companies to do anything more than “explore … resolution of the dispute through negotiation or ADR techniques before pursuing full-scale litigation.” If either party believes the dispute is not suitable for ADR, or if ADR does not produce satisfactory results, either party may proceed with litigation.

In-house counsel who are considering mediation, can refer to the CPR website to see if the other party to a dispute is a signatory. The list, available here, includes many major multinational companies, but leading Canadian corporations are surprisingly conspicuous by their absence.

Other IP groups have recognized the value of specialized private dispute resolution. The World Intellectual Property Organization (WIPO) Arbitration and Mediation Center provides a host of dispute resolution services, including domain name arbitration. WIPO has recommended contract clauses, rules that parties can adopt in international agreements and rosters of mediators and arbitrators. The International Trademark Association (INTA) has established a Trademark Mediators Network and cites recent surveys that show mediation settlement rates for IP disputes as high as 70%. In Canada, a group of IP professionals launched IP Neutrals of Canada a few years ago to provide a roster of trained neutrals and to educate the Canadian business and legal community about the benefits of mediation of IP disputes. [Full disclosure: I am a member of the WIPO, INTA and IP Neutrals of Canada mediator and arbitrator panels.]

It’s surprising how confused many business people (and their advisors) still are about the differences between mediation and arbitration/litigation. The CPR Task Force notes that reluctance to consider mediation is often due to a fear of the unknown. Clients need to understand that mediation is not a sign of weakness, that it is voluntary and provides a means for them to retain full control over the resolution of their dispute.

The Task Force Protocol recommends:

• Including mediation clauses in license agreements. This is an effective way to avoid the perception that seeking mediation is a sign of weakness; if it’s in the contract, the parties have to do it.
• Proposing mediation as early as possible. Although parties need enough information about the dispute to evaluate the strengths and weaknesses of their positions, there is a real advantage to mediation before the parties have incurred significant litigation expenses or become entrenched.
• Avoiding full discovery, especially electronic discovery, prior to mediation. The mediator can often facilitate the voluntary disclosure of documents and information needed for the purposes of mediation. Counsel should execute a “bullet-proof” confidentiality agreement to limit the use of the information exchanged solely to the mediation. Confidential financial information may be disclosed in confidence to the mediator. Technical information may be disclosed to a neutral third party for a confidential evaluation (for example, on the validity or infringement of a patent) without having to disclose it to the other party or the mediator.
• Use of Early Case Assessment and Decision Trees to facilitate informed and expedited decision-making at the early stages of a dispute. Early Case Assessment calls for a small team to work quickly to: (a) gather the facts and law relating to the dispute; (b) identify the key business issues; (c) assess risks and costs; and (d) make an informed choice or recommendation on how to handle the dispute. Decision Trees demonstrate the economic impact of litigation and are particularly useful in IP cases as a tool for counsel to communicate effectively with clients about the costs associated with the various steps in the litigation and the likely outcome of their strategic decisions. Focus groups agreed that both tools improved the chances of success at mediation by enabling parties to be better prepared and focus on the critical business issues driving the dispute.
• Focusing on mediation skills and experience, when selecting a mediator. Mediation skills (including experience mediating IP cases, and a thorough understanding of IP law and litigation) trump specific experience with the technology in issue or general technical expertise, according to the Task Force. It is always possible to get outside, neutral technical advice if necessary.
• Viewing the mediator as “the adult in the room.” The mediator’s integrity and “people skills”, as well as his or her ability to obtain the trust of the parties, is critical to the success of mediation. The key qualities identified by the task force participants include: unwavering neutrality, respect for confidential communications, willingness to work with the parties to create and maintain an effective mediation environment, and sensitivity to cultural issues. The mediator must have strong empathy and communication skills to deal with difficult people and problems.
• Ensuring that retired judges have suitable mediation training and experience. Often chosen for their instant credibility or subject matter expertise, they may be great judges, but lousy facilitators. The parties may also expect them to provide an opinion on who will win or lose, if the dispute is not settled. This may be counterproductive to the mediation process.

Many of these observations and recommendations apply to mediation of any kind of dispute. But the Task Force has taken pains to directly address many of the frequently-heard objections to mediation of technology and intellectual property disputes.

The bottom line is there is no special magic to IP disputes. The keys to successful dispute resolution are early intervention, preparation, understanding the essential elements of the dispute, choosing the right neutral and crafting the dispute resolution process to meet the specific needs of the parties. That is something that litigation cannot do.