Alternative IP Dispute Resolution Approach (ADR) and IP Litigation in Europe
Why do long-lasting and costly IP disputes develop?
The early stage
Competing companies in whatever field of industry depend on the freedom of action to carry out their businesses. That freedom of action may be limited by IP rights of competitors and/or third parties who possess patent rights covering business activities of the company concerned. Such IP rights exclude third parties to carry out commercial activities which are covered by the scope of the patents concerned. A major reason for most industrial companies to protect their business activities by patents is indeed to secure exclusivity and as much freedom of action as possible to operate.
However there may still be dominating patents which may exclude business activities of a company, e.g. the manufacturing and marketing of products and/or the operation of process plants, although that company possesses patents covering such activities.In practice a company which may infringe a patent of a competitor will receive a warning letter in which it is made aware of the existence of the patent of its competitor. Usually in such letter the company is requested to refrain from further commercial activities covered by the patent (‘the cease and desist letter’).
The emotional aspects
Opposing parties may in many cases not be aware of how the emotional aspects of a patent dispute may blur their rational thinking when the decision is made to refrain from entering into settlement negotiations. Parties usually only develop strategies and tactics to win the patent litigation. The option of an out of court settlement is usually not seriously considered. It is war and the enemy has to be beaten. However when studying past IP battles as described by the jurisprudence on IP litigation cases a clear picture can be obtained of the legal costs involved. In theNetherlands
Why should opposing parties let a forum of judges decide on a patent dispute and incur considerable costs on litigation before trying to reach a settlement?
If parties discuss the evidence with a view to reaching a settlement the parties will be free to negotiate terms of a licence agreement, which apply and be enforceable in the relevant member states of the European Union where corresponding patents are in force. In case parties so wish they can ask a mediator, e.g. from WIPO to facilitate such alternative dispute resolution discussions.
Parties may also organize a mock-trial before an agreed panel of patent attorneys and/or attorneys at law and/or judges. Such a mock trial should provide both parties with a good insight in their respective chances if they would confront each other in court. The learning from such a mock trial could lead parties to start negotiations with a view to reach an out of court settlement. Principles of alternative dispute resolution and mediation would provide additional guidance to the parties and enhance the chance of reaching a settlement through the conclusion of a licence agreement. When asking the question ‘What is the value of sufficient evidence in settlement negotiations' the answer will be clear. Parties will see the cards of each other and will be able to assess the strengths and weaknesses of the arguments of each other.
If parties would allow themselves to look at the patent dispute objectively without letting their emotions get in the way they may become aware of the following. Evidence on infringement gathered by the patent holder forms his cards to play with. The alleged infringer will also have gathered evidence that there is fair chance that a court will declare the patent null and void because of lack of novelty and/or inventive step due to prior art gathered by the alleged infringer. That prior art forms the cards in the hand of the alleged infringer. In case parties end up in court it will be there that the cards are laid open on the table and the parties disclose their full arguments. Parties leave it to the court to do the fact finding and to decide who is right and who is wrong. In fact they agree to lose control over the resolution process. One may wonder whether that is always a clever strategy, particularly when taking into account that technical aspects in patent litigation are usually decisive. And such technical aspects have to be considered and weighed by a panel of judges most of whom are technical laymen. Only in theUnited Kingdom Germany
Although a court decision creates a level of legal certainty for third parties assessing their chances in patent litigation by studying jurisprudence one may appreciate that the focus of parties involved in a dispute is not on the production of jurisprudence but on securing their freedom of action and/or their competitive position. If the price is right for maintaining a competitive position most patent holders will be prepared to give up their monopoly and grant a non-exclusive licence to the alleged infringer. Patent attorneys could play an important role in such negotiations both as negotiators and mediators in addition to their traditional functions.
fact-finding
Where in litigation a patent will be thoroughly examined by the patent attorneys, attorneys at law and the judges, one may wonder why such a thorough examination could not be organized between the parties out of court as discussed above. In a fact-finding meeting both parties together with their IP counsels could indeed do such an examination as is done in court by the judges. This can be a useful starting point of an alternative IP dispute resolution approach. Also the court needs to know the facts before it can make a decision and therefore carries out a fact- finding exercise in court during a hearing. During litigation proceedings in their pleadings the parties lay their cards (infringement, invalidity and/or non-infringement arguments) on the table and leave it to the court to decide on infringement and validity of the allegedly infringed patent. Companies that first try to settle patent disputes out of court will be prepared to show their cards to each other in a fact-finding meeting. These parties realize that there is sufficient know how with patent attorneys and attorneys at law on either side to be able to predict on the basis of jurisprudence what the outcome will be when a court action would be initiated. A precondition for a successful meeting is that parties leave their aggressive emotions at home and are willing to conduct a negotiation with their opponent on the basis of arguments and mutual respect. A clear advantage of organizing a fact-finding meeting out of court is that there is no need to educate judges in the technical aspects of the case. The reason why surprising decisions are made by courts can more than incidentally been found in the fact that judges have not fully grasped and/or misunderstood the technical aspects of the case. One should not blame the judges because patent cases could be extremely complex from a technical point of view even for patent attorneys. There are judges that simply take over rulings of a patent office that has given advice on validity of a patent and are not able to spot flaws in the advice. There are of course also judges with a technical background or with a feel for technology and science who do want to fully understand the technical aspects before they make a decision. These judges do not take an opinion or advices from expert bodies or even expert witnesses for granted and usually make high quality decisions. Such decisions do not leave the parties and others who study the decisions wondering whether the court has understood the technical aspects of the case. So it is a tricky thing to litigate technically complex cases before courts with no technical judges. The outcome will likely be unpredictable. However in case there are technical judges, e.g. patent attorneys, in courts that traditionally had no technical judges, can one expect decisions which are not only better predictable but also of a higher quality.
As soon as the litigation wheel is set in motion the business manager in many cases loses control on the dispute. The litigation process is further controlled by the attorney at law and the patent attorney although the business manager formally takes the decisions. It is the sheer lack of knowledge of patent law and procedural law on the side of the business manager client that makes him leave the litigation process in the hands of his IP counsels.
Patent attorneys having not only received training in patent litigation but also in technology licensing, which entails the drafting and negotiation of licence agreements, should preferably lead the team of IP counsels dealing with the out of court negotiations regarding a patent dispute. These patent attorneys will be able, as IP manager, to coordinate all aspects of the out of court negotiation, such as gathering of evidence, seeking advice from commercial and financial advisors, technical experts, attorneys at law, tax advisors and the like. A steering team could suitably be set up in which the business manager and the IP manager take decisions and steer the resolution of the patent dispute. In such a steering committee the business manager client is able to remain in the driving seat. Assisted by his IP manager he will be able to properly instruct his attorney(s) at law and steer the patent litigation process and/or the dispute resolution process.
These observations may lead to the conclusion that the aggressive mode of IP dispute resolution, i.e. patent litigation and the friendly mode of dispute resolution, i.e. the alternative IP dispute resolution approach, are two complementary modes of negotiation which should preferably be used at least simultaneously for speeding up IP dispute resolutions. For both approaches the gathering of sufficient evidence of infringement (and invalidity of the patent) is of paramount importance.
The Hague, 2 June 2011
Jowi Burger
(c) 2011 Jowi IPS Intellectual Property Services
Why do long-lasting and costly IP disputes develop?
Competing companies in whatever field of industry depend on the freedom of action to carry out their businesses. That freedom of action may be limited by IP rights of competitors and/or third parties who possess patent rights covering business activities of the company concerned. Such IP rights exclude third parties to carry out commercial activities which are covered by the scope of the patents concerned. A major reason for most industrial companies to protect their business activities by patents is indeed to secure exclusivity and as much freedom of action as possible to operate.
Opposing parties may in many cases not be aware of how the emotional aspects of a patent dispute may blur their rational thinking when the decision is made to refrain from entering into settlement negotiations. Parties usually only develop strategies and tactics to win the patent litigation. The option of an out of court settlement is usually not seriously considered. It is war and the enemy has to be beaten. However when studying past IP battles as described by the jurisprudence on IP litigation cases a clear picture can be obtained of the legal costs involved. In the
Why should opposing parties let a forum of judges decide on a patent dispute and incur considerable costs on litigation before trying to reach a settlement?
If parties discuss the evidence with a view to reaching a settlement the parties will be free to negotiate terms of a licence agreement, which apply and be enforceable in the relevant member states of the European Union where corresponding patents are in force. In case parties so wish they can ask a mediator, e.g. from WIPO to facilitate such alternative dispute resolution discussions.
Parties may also organize a mock-trial before an agreed panel of patent attorneys and/or attorneys at law and/or judges. Such a mock trial should provide both parties with a good insight in their respective chances if they would confront each other in court. The learning from such a mock trial could lead parties to start negotiations with a view to reach an out of court settlement. Principles of alternative dispute resolution and mediation would provide additional guidance to the parties and enhance the chance of reaching a settlement through the conclusion of a licence agreement. When asking the question ‘What is the value of sufficient evidence in settlement negotiations' the answer will be clear. Parties will see the cards of each other and will be able to assess the strengths and weaknesses of the arguments of each other.
If parties would allow themselves to look at the patent dispute objectively without letting their emotions get in the way they may become aware of the following. Evidence on infringement gathered by the patent holder forms his cards to play with. The alleged infringer will also have gathered evidence that there is fair chance that a court will declare the patent null and void because of lack of novelty and/or inventive step due to prior art gathered by the alleged infringer. That prior art forms the cards in the hand of the alleged infringer. In case parties end up in court it will be there that the cards are laid open on the table and the parties disclose their full arguments. Parties leave it to the court to do the fact finding and to decide who is right and who is wrong. In fact they agree to lose control over the resolution process. One may wonder whether that is always a clever strategy, particularly when taking into account that technical aspects in patent litigation are usually decisive. And such technical aspects have to be considered and weighed by a panel of judges most of whom are technical laymen. Only in the
Although a court decision creates a level of legal certainty for third parties assessing their chances in patent litigation by studying jurisprudence one may appreciate that the focus of parties involved in a dispute is not on the production of jurisprudence but on securing their freedom of action and/or their competitive position. If the price is right for maintaining a competitive position most patent holders will be prepared to give up their monopoly and grant a non-exclusive licence to the alleged infringer. Patent attorneys could play an important role in such negotiations both as negotiators and mediators in addition to their traditional functions.
fact-finding
Where in litigation a patent will be thoroughly examined by the patent attorneys, attorneys at law and the judges, one may wonder why such a thorough examination could not be organized between the parties out of court as discussed above. In a fact-finding meeting both parties together with their IP counsels could indeed do such an examination as is done in court by the judges. This can be a useful starting point of an alternative IP dispute resolution approach. Also the court needs to know the facts before it can make a decision and therefore carries out a fact- finding exercise in court during a hearing. During litigation proceedings in their pleadings the parties lay their cards (infringement, invalidity and/or non-infringement arguments) on the table and leave it to the court to decide on infringement and validity of the allegedly infringed patent. Companies that first try to settle patent disputes out of court will be prepared to show their cards to each other in a fact-finding meeting. These parties realize that there is sufficient know how with patent attorneys and attorneys at law on either side to be able to predict on the basis of jurisprudence what the outcome will be when a court action would be initiated. A precondition for a successful meeting is that parties leave their aggressive emotions at home and are willing to conduct a negotiation with their opponent on the basis of arguments and mutual respect. A clear advantage of organizing a fact-finding meeting out of court is that there is no need to educate judges in the technical aspects of the case. The reason why surprising decisions are made by courts can more than incidentally been found in the fact that judges have not fully grasped and/or misunderstood the technical aspects of the case. One should not blame the judges because patent cases could be extremely complex from a technical point of view even for patent attorneys. There are judges that simply take over rulings of a patent office that has given advice on validity of a patent and are not able to spot flaws in the advice. There are of course also judges with a technical background or with a feel for technology and science who do want to fully understand the technical aspects before they make a decision. These judges do not take an opinion or advices from expert bodies or even expert witnesses for granted and usually make high quality decisions. Such decisions do not leave the parties and others who study the decisions wondering whether the court has understood the technical aspects of the case. So it is a tricky thing to litigate technically complex cases before courts with no technical judges. The outcome will likely be unpredictable. However in case there are technical judges, e.g. patent attorneys, in courts that traditionally had no technical judges, can one expect decisions which are not only better predictable but also of a higher quality.
As soon as the litigation wheel is set in motion the business manager in many cases loses control on the dispute. The litigation process is further controlled by the attorney at law and the patent attorney although the business manager formally takes the decisions. It is the sheer lack of knowledge of patent law and procedural law on the side of the business manager client that makes him leave the litigation process in the hands of his IP counsels.
Patent attorneys having not only received training in patent litigation but also in technology licensing, which entails the drafting and negotiation of licence agreements, should preferably lead the team of IP counsels dealing with the out of court negotiations regarding a patent dispute. These patent attorneys will be able, as IP manager, to coordinate all aspects of the out of court negotiation, such as gathering of evidence, seeking advice from commercial and financial advisors, technical experts, attorneys at law, tax advisors and the like. A steering team could suitably be set up in which the business manager and the IP manager take decisions and steer the resolution of the patent dispute. In such a steering committee the business manager client is able to remain in the driving seat. Assisted by his IP manager he will be able to properly instruct his attorney(s) at law and steer the patent litigation process and/or the dispute resolution process.
These observations may lead to the conclusion that the aggressive mode of IP dispute resolution, i.e. patent litigation and the friendly mode of dispute resolution, i.e. the alternative IP dispute resolution approach, are two complementary modes of negotiation which should preferably be used at least simultaneously for speeding up IP dispute resolutions. For both approaches the gathering of sufficient evidence of infringement (and invalidity of the patent) is of paramount importance.
The Hague, 2 June 2011
Jowi Burger
(c) 2011 Jowi IPS Intellectual Property Services