Source: https://arbitratemediatecommercialip.wordpress.com/tag/arbitrate/
Timestamp: 2019-04-19 16:32:13+00:00

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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 will now continue on to presenting documents at the hearing. This may seem a little mundane, but it is not. It can have a significant effect on the efficiency and effectiveness of the hearing.
Patent arbitration tends to be document heavy, and the current technology available to present documents leads to many possibilities. Here are a few thoughts on that from one arbitrator’s point of view. Not all arbitrators will necessarily agree with me on all this, but this reflects what I have found over the years.
With the advent of Trial Director and other systems to present documents electronically, it can be tempting to default to that system for everything. I’m not sure it is worth the expense in many cases. I am sure that, if done improperly, use of these systems can be a detriment rather than a benefit.
But first let’s consider the benefits of trial presentation systems. These systems allow you to focus the witnesses’ and arbitrator’s attention to specific documents and passages in the way you choose. You can project the page of the document, blow up or highlight a particular passage of interest, and otherwise direct everyone’s attention to the particular part of the document you are working on. If done correctly, there is no need to fumble around through a book of exhibits and then call out page numbers and paragraphs so everyone can get to the right place. Nor is the witness or arbitrator as likely to get distracted by other document content you aren’t dealing with at the time. You may be able to avoid dragging pounds of paper copies around the country if everything is on your computer.
On the other hand, this way of presenting documents doesn’t take into consideration the way many people process and use information from documents in an arbitration. I, and most arbitrators I have worked with, tend to take notes on exhibits, and underline or highlight key parts of the documents. This is very useful when it comes to analyzing the case and writing an award. No one I know can memorize all the pertinent language in a document for later recall. Thus, for matters where the information in the document is critical, you will often see arbitrators reaching for their copy of the document if it is available or asking for a copy if it is not. Be aware that a transitory projection doesn’t usually get the job done. You need a way to put important evidence you want the arbitrator to rely on into the arbitrator’s hands.
Use of a document projection system can sometimes be annoying. Have you ever been at a hearing where a vendor was hired to do the document retrieval and the presentation went something like this?
Lawyer: [To vendor running system]. Put up bates number 14578. [Pause and wait for projection]. Oh, wait sorry, go to 14587.
Arbitrator: Can I have the Exhibit number please?
Lawyer: Just a minute. [Pause.] I’ll have to get that to you at the break. OK, please blow up paragraph 2 – or I mean 3. [Long pause.] Can you highlight the second sentence? Okay, blow it up, please. Oh, before we do that, can we go to bates number 14586 for a little context? [Pause]. Now, Ms. Witness, see that date? Ok. Now back to 14587. [Pause.] I’ve blown up paragraph 2 . . . See where it says . . .
Witness: Excuse me. It is hard for me to get the context of this without reviewing the whole document. May I see it instead of just the parts you are projecting?
You get the idea. The whole process of explaining how to project the right part of the document can get lengthy and tedious. And it may well appear unfair to the witness to pick out a sentence or two from a document he or she hasn’t seen in three years and start asking about it.
Lawyer: Let me direct you to Exhibit 27. You will find it tabbed in the notebook you have in front of you. Is this an email you sent to Joe Dokes on March 12, 2013?
If the arbitrator is going to turn to the tabbed exhibit to highlight it or make notes on the document anyway, it might be better to just get everyone to that document.
You may want to do a combination of the two, projecting the document to lead the witness through it, but giving the arbitrator a chance to pull it up in the exhibit book. But if you want to forego some expense, use tabbed exhibits in three-ringed notebooks − one for you, one for the witness and one for the arbitrator − and skip the presentation system for written documents. Or, if the technology is too challenging for you, but there is an advantage to having a particular document projected, just use a document camera to project it.
You can be sure of this: You won’t lose your arbitration because you didn’t project exhibits. But tabbed exhibits are almost always necessary and generally are effective enough in the context of your patent arbitration.
Two more thoughts on notebooks. First, giant notebooks with 5 inch spines are heavy and awkward, particularly if there is more than one of them everyone has to retrieve and you are moving between them. Use more, smaller notebooks, clearly labeled so it is easy to find the one that has the right exhibit in it.
Second, it may seem like a good idea to simply have a book for each witness with the exhibits you will use for that witness. This works well during testimony. But it can get confusing in a long arbitration. The arbitrator ends up with a jumble of notebooks, many with the same exhibits, so it is difficult to locate an exhibit and may be nearly impossible to locate the copy with the arbitrator’s notes. Exhibit books with exhibits tabbed in order are usually best. Make a list of exhibits organized by date, too, to allow easier retrieval and review.
For drawings, photos, or other highly visual documents critical to patent cases, projection will often be the way to go, so everyone can follow along. Thus, if you are trying to show where each element of a claim is in an accused product, or that an element is missing, a large visual you or the witness can point to is a must. But remember to have a smaller version available in permanent form so that arbitrator can easily locate and study it as part of the decision or award writing process.
Sometimes you are better off with a large chart or two so you can easily write on it, draw arrows, or the like. It depends on your case and what you are presenting with a given witness. But the arbitrator won’t be hauling charts around, so remember to provide a small version of it for later reference. A smaller version of the drawing and a document camera may be all you need.
You can spend a small fortune on computer animations and the like, but this is rarely necessary. Most patent arbitrators can visualize what is necessary from drawings or photos without the expense of animations that may or may not be completely accurate.
Of course, you can simply bring smaller devices to the hearing or take a field trip to observe large devices or systems in operation.
It has become more and more common for counsel to provide arbitrators with documents electronically, either on a USB drive or by emailing pdfs. Patent arbitrations tend to involve traveling to the hearing, so this is a good way to allow everyone having a computer or tablet to easily retrieve exhibits at the hearing and for review afterwards. One typically can’t take notes on the documents (absent some extra software and practice using it), but having them easily accessible anywhere is a real plus. Talk this over with the arbitrator early on to see whether he or she uses a computer or tablet and in what format to provide the documents.
Parties usually provide exhibits in books or electronically that they don’t end up using and that never make it into the record. You may be worried that the arbitrator will go off on his or her own quest and review unused exhibits and use them to come to conclusions. The arbitrators I know are very unlikely to do that. There is always plenty to consider without looking for more outside the record, and it is thought to be unfair to consider documents that are not part of the record. In fact, many arbitrators tell the parties that if an exhibit is in the record, but hasn’t been discussed with a witness, you shouldn’t expect them to consider it.
But if you are worried about having exhibits available to the arbitrator that aren’t in the record, the arbitrator will certainly let you remove them from the notebooks. You will have to keep track of what exhibits are in the record and agree with opposing counsel on that. If you provided pdfs of exhibits, you’ll have to ask the arbitrator to delete the old set and substitute a new set you’ll provide with only the exhibits of record.
This entry was posted in Patent Arbitration and tagged admissible, arbitrate, arbitration, document camera, documents, electronic, hearing, notebooks, notes, pdfs, record, trial diretor, witnesses on July 7, 2015 by David Allgeyer.
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.
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 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.
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.
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.
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.
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?
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.
This entry was posted in Patent Arbitration and tagged arbitrate, arbitrator, dispute, evidence, privilege, sanctions, sequester, sequestration, witnesses on June 17, 2015 by David Allgeyer.
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.
This entry was posted in Patent Arbitration and tagged arbitrate, arbitration, arbitrator, damages, expert witness, experts, technical on May 21, 2015 by David Allgeyer.
In earlier articles in this series we looked at patent disputes most suitable for arbitration, choice of arbitrator, arbitration clauses to use and avoid, the prehearing conference, discovery, and prehearing matters such as claim construction and summary judgment. Before we continue on, let’s stop to explore the statutes that specifically provide for arbitration of patent disputes: 35 U.S.C. §§135 and 294. I’ve received a question on patent statutes and arbitration, so there is no time like the present to address the matter.
Derivation proceedings. Section 135 is straightforward. It allows parties to a derivation proceeding to submit their contest to an arbitrator. A derivation proceeding is used to determined whether the first-to-file inventor was the true inventor or whether he or she derived the invention from another.
If the parties determine to arbitrate the matter instead of submit it to the Patent Office, they are to give the Director of the Patent Office notice of the arbitration award – which is the arbitration term for a decision or order. The award is then binding on the parties. The arbitration award is not enforceable until notice is given to the Director. The award is noted as part of the patent’s prosecution record. The Director may still determine the patentability of the invention claimed in the patent.
This makes sense. The arbitration will bind the parties. But the patentability of the invention goes to the public interest in having only valid patents in existence. That is not something the parties should be able determine for others in a private arbitration. It remains the Director’s responsibility.
Contracts involving patent rights. Section 294 allows arbitration of any contractual dispute relating to patent validity or infringement. This would most typically relate to patent license agreements, although it is not limited to that. The parties can provide for arbitration either in the contract itself or later agree to it in writing. Section 294(a) says such a provision is “valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for revocation of a contract.” Those grounds are very narrow.
According to House Report 97-542 (1982), this provision was enacted, in part, in response to cases such as Beckman Instruments, Inc. v. Technical Developments Corp., 433 F.2d 55 (7th Cir. 1965). The Beckman court found that patent issues were “inappropriate for arbitration proceedings and should be decided by a court of law, given the great public interest in challenging invalid patents.” Congress decided allowing arbitration was in the public interest to save time, money and burden on the courts.
The arbitration is governed by the Federal Arbitration Act. The arbitrator must consider defenses under 35 U.S.C. § 282. These include (1) non-infringement, (2) invalidity, (2) unenforceability, (3) failure to comply with 35 U.S.C. §112 – including, for example, failure to meet the written description, definiteness, enablement, and other requirements of section 112, and (4) failure to comply with any requirement of 35 U.S.C. § 251, which among other things prohibits broadening the scope of re-issued patents.
Significantly, section 294(c) provides that the arbitration award binds the parties, but no one else. This may have some benefit for the patent holder, but that is not clear. Consider a case where the licensee successfully defends by proving the licensed patent is invalid Recall that in Lear v. Atkins, 295 U.S. 653 (1969), the Supreme Court held that, in light of “the strong federal policy favoring the full and free use of ideas in the public domain,” licensees are not required not to pay patent royalties if they establish the licensed patent is invalid.
But does an invalidity finding bind the patent holder when it later sues someone else on the patent or seeks royalty payments from a different licensee of the patent? The issue is unclear. In fact, section 294(c) says the arbitration binds parties, and the patent holder is a party. So one might think that a later accused infringer could make use of the arbitration decision to invalidate the patent. After all, in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, (1971), the Supreme Court held that, where a patent has been declared invalid in a proceeding in which the patent holder “ has had a full and fair chance to litigate the validity of his patent,” the patent holder is collaterally estopped from re-litigating the patent’s validity.
But one might suppose there must be some reason Congress made it clear that the arbitration decision only binds parties to the arbitration. An arbitrator’s finding the patent is valid wouldn’t bind a third part in later proceedings anyway, so why does the statute specifically say third parties aren’t bound? Maybe the idea was just to make it clear that the drafters understood that.
Or perhaps the idea was to meet the concern that validity issues implicate the public interest so much, as recognized by Lear and later cases, that an arbitration is not the way to determine them except as between the parties who agreed to arbitrate. Just as the issue of validity was specifically carved out from derivation arbitrations under section 135, noted above, perhaps Congress meant to carve it out so that only within the arbitration itself would the validity decision be of any effect.
But that isn’t what the literal language of the statute says. After all, if a patent holder is satisfied to submit the issue of validity of a patent to arbitration and loses, the only interest at stake is the holder’s interest in having a patent monopoly. The public’s interest in eliminating invalid patents is not disserved.
And if the arbitration decision is to have no effect on the patent’s validity in other proceedings, why does section 294(d) of the statute require that one of the parties inform the Director of the arbitration award on pain of the award otherwise being unenforceable? In fact, the award is also entered publicly in the patent’s prosecution record. One might assume that making the award of record is necessary to give the award preclusive effect. But perhaps the idea is only to give a later licensee notice that a validity challenge has been successful even though it isn’t binding in subsequent proceedings.
Unfortunately, there appear to be no decided cases on the matter, so we are left to wonder.
Practical considerations. A few observations can be made about all this as a practical matter. First, whether or not the arbitration has a collateral estoppel effect or not provides no real disincentive to a licensor to include an arbitration clause. Collateral estoppel would surely apply if the licensor chose to litigate instead of arbitrate, unless it could show it did not have a full and fair opportunity to present its case. Thus, arbitration provides no disadvantage over court in this regard.
Second, a licensor worried about the matter could suggest a provision in the arbitration clause that the award would simply say what if anything was owed in royalties without specifying the reasons. Thus, no specific finding of validity would be required. To be sure, the arbitrator is required to consider an invalidity defense, as noted above. But that probably doesn’t mean the arbitrator has to include a specific finding on it in the award. Without a specific finding, no collateral estoppel effect is likely.
Third, the licensor still has an argument that section 294(c) should be read to eliminate the effect of an invalidity finding concerning a third party, as noted above. This is no sure thing, but the issue could be decided in the licensor’s favor.
Finally, it seems unlikely the licensee will be concerned about whether a third party could or could not raise invalidity as a defense against its former licensor. So long as the licensee is found not to have to pay royalties because the patent is invalid, whether or not its competitors have to pay is of little concern to the licensee. In fact, if its competitors have to pay and the licensee doesn’t, it will enjoy a competitive advantage.
Similar questions could arise concerning infringement findings in an arbitration. Section 294 requires that the award be provided to the Director, which would include an infringement determination. Again, a finding that the products at issue infringe the licensed patent would not be binding on a party in a later proceeding that was not a party to the arbitration. A finding of non-infringement is much less likely to bind the licensor in subsequent disputes than a finding of invalidity. The requirements of collateral estoppel may well not be met under the facts of the second case because different issues are being presented, depending on the products involved and the like. And section 294(c) may foreclose use of a non-infringement finding in a later dispute involving a different licensee. But it may not, as discussed above in the context of an invalidity finding.
Thus, arbitration remains a viable way to settle contractual disputes involving patents. While it would be better if the statute was clearer on the precise effect arbitration determinations have in later proceedings, it is a benefit that there is a statute with the express purpose of allowing arbitration of patent disputes.
Next up. In the next article, we will proceed through the next stages in the process of arbitrating patent disputes, focusing on the use of experts.
This entry was posted in Patent Arbitration and tagged arbitrate, award, collateral estoppel, derivation, director, effect, file, patent office, res judicata, statutes on May 21, 2015 by David Allgeyer.

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