[PODCAST] JAMS Neutrals Discuss the Advantages of ADR in Resolving IP Disputes
In this podcast, JAMS neutrals Judge Elizabeth Laporte and Tom Creel give listeners a deeper look into the role alternative dispute resolution (ADR) plays in intellectual property disputes. They examine the options available to parties and the customizations offered by each one. Furthermore, they discuss their personal experiences overseeing intellectual property (IP) disputes and what strategies might be advantageous for different parties, such as incorporating JAMS International Rules into contracts before a dispute arises.
[00:00:00] Moderator: Welcome to this podcast from JAMS. Today, we're sitting down with two JAMS neutrals to discuss the role ADR plays in intellectual property disputes. With us today are Tom Creel, an IP litigator with more than 30 years of experience arbitrating IP and technology disputes, both at JAMS and with his former law firms, and Judge Elizabeth Laporte, who spent over two decades as a United States magistrate judge for the Northern District of California, where she presided over numerous patent, trademark, copyright and trade secret cases through summary judgment and trial; oversaw discovery disputes; and conducted hundreds of settlement conferences.
Thank you both for joining us today. I'd like to set the stage by talking through various options companies have when resolving IP disputes. Judge Laporte, can you walk us through some of those options?
[00:00:52] Judge Laporte: Yes, thank you. There are a number of options, some of which you can combine and use as alternatives, or in some cases adjuncts, if you wish to choose litigation. Arbitration, of course, is a prime one, where you can have far more confidentiality in your IP dispute than in court, where there are strict requirements that really limit what you can keep confidential. You can tailor the process to your particular needs and get a speedier result without appeal.
There's mediation—which you can use in conjunction with any of these—where you attempt to settle out of court and get the assistance of a mediator, and that can be done at all different stages of the dispute. There's neutral analysis, where a neutral can assist in evaluating the case for both sides and give an opinion that may help resolve it. Or there are other uses, such as consulting on a motion that is important to you.
There is also the opportunity to engage a special master—or in state court it might be called a referee—who can decide, if the parties agree, some of the disputes definitively, with appeal, if any, only to the court of appeal. Or a special master can be retained to help with making recommendations to the busy trial judge.
That can be discovery. It can be claim construction. It could be a variety of things. And in California and perhaps some other states, you can also agree to have a temporary judge, or judge pro tem, who, if the parties agree, decides everything in lieu of a state court judge. So those are a variety of options that parties can tailor to their own needs.
[00:02:47] Tom Creel: Could I just make a couple of comments too? I think it's important to note that these procedures that Judge Laporte mentioned—some are binding and some are nonbinding. Some, the neutral helps the parties reach agreement. Some, the neutral makes his own or her own decision. There's one other ADR procedure that I don't think anybody uses anymore, but it's negotiation, party-to-party or lawyer-to-lawyer without any intervention of any kind of a neutral at all.
[00:03:15] Moderator: Thank you, both. Tom, I understand you have years of experience arbitrating intellectual property disputes, particularly with regard to patents. In your experience, why do companies choose arbitration for their patent disputes?
[00:03:29] Tom Creel: Well, you know, people call it alternate dispute resolution. I call it customized resolution. In all of the things Judge Laporte mentioned, the parties have to agree, and they have complete control to make their resolution process what's best for their client's interest. It's not a one-size-fits-all situation as in litigation, but rather, this customized way to resolve is a tool.
Sometimes litigation is best. Sometimes an alternate way is best. But let me just go through quickly my 10 reasons to consider arbitration as your resolution mechanism. First is time. You can set the time however you want. You can tell the arbitrator, “I want this done in six months,” a year, whatever. The second is expense. You can limit discovery. You can limit the time, as I mentioned, and you can decide on who you want to decide your matter and the number. It could be one or could be three. And as Judge Laporte mentioned, claim construction. You could actually have somebody do claim construction in a patent matter. Federal judges have called these claim constructions the name of the game, and it often decides who wins and loses. You could pick someone knowledgeable about the technology and then either make that final or make that advisory to the arbitrator.
The next one is procedure. You can set your own procedure. You can agree on something yourselves or use one of the organizations, like JAMS or American Arbitration Association and so forth, who have their own rules. The arbitration award itself is enforceable internationally in the signatories to the New York convention. That's not true of a judgment in a foreign court. The Federal Arbitration Act gives arbitrators nationwide subpoena power, which also is not true in court.
Confidentiality, Judge Laporte mentioned. You can have the award. Give the reasons why the arbitrator is making that award or not. You could just have a simple award, and that's the way the parties would like it. There's no appeal in an arbitration proceeding. However, if you do want an appeal, some organizations have established appellate panels within their organizations which can be used if the parties want it.
Finally, certainty, you get a decision that is non-appealable, that is not overturnable by the courts, except in rare instances. So those are my 10 reasons why you might want to decide on a customized way of resolving your dispute rather than through courts.
[00:06:08] Moderator: OK. And Judge Laporte, Tom spoke about patent disputes. What about other forms of IP, such as trade secrets? What can ADR provide for those disputes?
[00:06:20] Judge Laporte: Trade secrets has been a very active and even increasing area of dispute recently of course. Trade secrets don't expire, and you not only don't have to reveal them; you are trying to keep them secret.
You have to make reasonable efforts, but in particular, going to court over trade secrets poses some risk that your trade secrets become public, at least in part. So, it can be very advantageous to instead use an alternative forum like arbitration to resolve your dispute. As Creel said, you can tailor it to your particular needs.
One of the advantages of these alternatives: They can precede litigation. If for some reason you don’t choose arbitration, but you choose something like mediation, you can then go on to litigation, if need be, but you don’t have to file a lawsuit to get things started. And so, you don’t have that same risk of losing the very secrecy of the trade secrets that you’re trying to protect. And, of course, it can be faster, as was described.
[00:07:29] Moderator: Well, thank you, Judge. Tom, Judge Laporte mentioned neutral analysis at the top of the conversation. Can you talk a little bit more about neutral analysis and how it is used in IP disputes?
[00:07:42] Tom Creel: Yeah. Neutral analysis is a pretty broad term. Let me give you a few examples of things that I've been involved in.
There was a big arbitration going on, and one party wanted to test out its theories. There were three arbitrators that had already been selected, and they tried to get three of us. I was one of the three to match the characteristics of the people on the panel. I believe there was a judge, there was a law professor and there was a practicing lawyer or something like that. I don't remember exactly. They presented both sides of the argument, as they would in the actual arbitration. Then we debriefed them on what we thought was likely to be a winner, loser, or you might wanna change this or emphasize that.
Another one: I was asked to give a hypothetical award, and this was done in writing. I was presented with both sides’ cases in writing, and I wrote what I thought would be the outcome.
[00:09:28] Moderator: And Tom, what about before a dispute happens? What steps can companies take to manage their IP and how disputes will be handled through contract clauses?
[00:09:39] Tom Creel: Most of the arbitrations I've had—and I've had these for decades in the IP area, technology area—are arising out of some type of a licensing agreement. One party licenses their intellectual property to the other. An agreement is written about when they have to provide that, what they have to provide and so forth. In the back of the agreement is something called a dispute resolution clause. Both sides, when they do that, are looking to make money. They're happy with each other, and not much thought is given to that clause. So, it's often actually written by somebody in a law firm, who's not familiar with the dispute, who's not familiar with the technology, who's not familiar with arbitration and mediation and so forth.
So, somebody says, “Pick out a dispute clause.” All of the major organizations that provide arbitration services have clauses that you can use. You can modify them, of course, but that’s often put into the agreement as an afterthought because nobody negotiates that, because they know there are not going to be any disputes.
So, for example, those clauses normally say something like “Any dispute arising under disagreement shall be handled in accordance with the JAMS rules” or some other organization's rules. My point is, the parties should think about possible disputes when writing the agreement, because that’s when most of the dispute clauses are formulated. You can, of course, once a dispute arises, decide that you want to submit that to arbitration and have a post-dispute clause, but most of the ones I've seen are pre-dispute clauses.
[00:11:24] Moderator: Judge Laporte, can you talk a little bit about the JAMS rules?
[00:11:28] Judge Laporte: Yes. There are standard rules that permit for and contemplate customization. There's an expedited option, which has more streamlined discovery. The rules address all the stages of arbitration, such as notice; emergency or preliminary relief; selection of the arbitrator, including whether you want a sole arbitrator or a panel of three; optional appeal, which is rare but does exist. I've done that. It went to a panel of three neutrals, who review what was decided by the original arbitrator. There is the option of dispositive motions with the permission of the arbitrator or the agreement of the parties.
There are subpoenas, hearings, generally an award within 30 days, which just is not the deadline in court—pretty short deadline. There is the provision that the arbitrator at least maintained confidentiality in the standard rules and even options for bracketed, high-low arbitration, or baseball arbitration. So, there are all sorts of ways that those standard rules apply.
Then in addition, parties can choose—and in IP cases, this might be particularly advantageous—the JAMS International Rules, for example. A patent holder who wants to protect their intellectual property and is, for example, creating a licensing agreement can incorporate those rules and the JAMS rules, which are somewhat different from some of the other standard arbitration provisions in other organizations and allow a lesser showing of probability of prevailing. Instead, a reasonable possibility is that the requesting party will succeed for preliminary relief.
So, if you're a patent holder or an IP holder, that could be very advantageous to you because sometimes it's quite hard at the beginning, when you don't have all the facts, to show likelihood of prevailing, but reasonable possibility. Then it doesn't require irreparable harm in the traditional sense, but harm that's not adequately reparable by an award of damages is likely to result, absent preliminary relief, and that harm would substantially outweigh the harm likely against the other party if the relief is granted.
Further, it explicitly provides for confidentiality that binds the parties as well as the arbitrator. So, there are some big advantages, really, to these JAMS International Rules that parties should consider whether they want to incorporate in advance. As Tom Creel said, you do have the option of varying your approach later when a dispute arises, but then, of course, it's harder to get agreement because you're already polarized in position.
[00:14:18] Moderator: Right. Absolutely. Very helpful, Judge. Thank you so much. Tom, do you have any final thoughts?
[00:14:24] Tom Creel: Sure. I think for any dispute, you ought to think about how best to resolve this for the interest of your client. So, arbitration is one tool that has to be, or should be, considered—and carefully considered. When you're writing these license agreements, don't be lulled into thinking that no dispute’s going to arise and just stick in a standard clause. Think about, in your particular situation, what is likely to happen or what could happen. Think some about how you're going to resolve that if it does arise. Finally, I mean, who wouldn't want a customized way to resolve a dispute? I mean, it's like getting a custom suit or a custom automobile at a lower price, and better than the standard model. So at least consider it.
[00:15:11] Moderator: Very good. And Judge, any final thoughts from you?
[00:15:14] Judge Laporte: I agree with everything my colleague has said, and I would just add that in addition to customizing your arbitration option, look at those other possibilities, which include, of course, mediation, which can be combined, and it can include it. It can be at different stages. For example, sometimes it's more advantageous when there's the threat of a preliminary injunction or preliminary relief, whether in arbitration or in court. Sometimes it's claim constructions teed up but hasn't happened. There are different stages where there can be productive settlement discussions. If you are in court and you're facing those delays—and that is a problem that a lot of courts just are very busy. And the pandemic hasn't necessarily helped with that. Looking to expedite the procedure through the use of special masters in whole or in part to decide key disputes more expeditiously, or even the judge pro tem, the temporary judge, to decide everything. I've been hired to do that.
All of these different approaches can help. Then, of course, there's, as we discussed before, neutral analysis, where you may have a key motion in court or in front of an arbitrator, and you can test out your arguments and get some helpful feedback. So, these are all options that can aid you, whether it's by keeping you out of court or helping make the court process more expeditious and successful for you.
[00:16:51] Moderator: OK. We'll leave it there. Judge Laporte, Tom, thank you so much. You've been listening to a podcast from JAMS, the world's largest private alternative dispute resolution provider. Our guests have been JAMS neutrals Tom Creel and Judge Elizabeth Laporte.
For more information about JAMS, please visit www.jamsadr.com. Thank you for listening to this podcast from JAMS.
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