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IP: Achieve mediation success by building credibility

Tips for reaching a resolution in intellectual property disputes

Most intellectual property lawsuits involve some form of voluntary mediation that attempts to resolve the dispute. A resolution almost always works in the favor of both sides. But actually reaching that agreement oftentimes is very difficult.

Although each mediation is different, there are certain techniques that I have found helpful in my mediation experiences during the past 25 years. Foremost, it is important to face the reality that both sides must voluntarily agree to the settlement terms. Antagonizing the other side through chest-beating tactics or demeaning their lawyers through verbal assaults is counterproductive. Building credibility is the key. That is, success follows the establishment of:

  1. The credibility of the lawyer as perceived by the mediator and the opponent’s business persons
  2. The credibility of the merits of the case
  3. The credibility of the initial offer of settlement

Here’s how I try to do it:

It never helps to select a biased mediator. Try to find a neutral, hard-working person with a technical and legal background to match the dispute. To avoid concerns, either real or perceived, I stay away from mediators located in the hometown of the opposing lawyer or party, or who may be acquaintances with lawyers of my opponent’s law firm. Other than that, I find that the location, date and procedure to be followed are usually overrated—in the end, it almost always comes down to money.

A mediator that believes in you serves your client well. Establish credibility with the mediator by always being accurate with the facts and the law. Since most mediators do not have the opportunity to fully understand the entirety of the case, they rely on the lawyers. Once a lawyer feeds the mediator erroneous information, he loses credibility.

How the opposing client perceives your abilities may also make a difference in reaching a resolution. I treat the opposing side as I treat jurors at trial—with respect, courtesy and professionalism—to gain credibility. Treating them as jurors also restrains the tone and quality of any presentation of the merits, even when discussions get heated, in order to improve effectiveness.

When possible, I rely upon prior court rulings or the opponent’s own documents or deposition testimony to establish credibility on the merits.  Many times the court has already expressed views on things like claim construction in patent cases, discovery disputes or summary judgment proceedings. These sources are always more effective than any attorney argument.

In my opinion, the hardest part of mediation is determining the initial offer from the client. It has to be fair and reasonable to set the tone for the course of the discussions and to be considered by the opposing side, but there must also be ample room for negotiations.  In my experience it usually takes three to five different offers by each side before reaching a settlement.   To help with credibility, I recommend that any initial settlement offer be tied to some objective formula or the like. For example, as a patent owner seeking damages for IP infringement or misappropriation, your initial demand may be a percentage of lost profits. In contrast, the accused IP party may offer a percentage royalty on the accused sales in view of typical licensing in the industry. An unreasonable initial offer by either side is a precursor to failure of any mediation.

In addition to establishing credibility, I want to share three other valuable mediation tips. First, protect your client representative from offers that could put her in hot water with her employer. In most mediations, the client representative has settlement authority only up to a certain amount. The lawyer must protect the representative from using that entire authority if there is no settlement in sight. For example, the client representative will not make a good impression back at the company if he has to report that the entire settlement authority amount was offered, but without success.

Second, the technique of “bracketing” offers may help move the settlement forward when the parties seem far from an agreement. I seem to always be in mediations when the IP owner demands $50 million, while the accused party offers $1 million, and neither side wants to budge.  If this happens, try “bracketing” where, for example, your client (the IP owner) is willing to go to $40 million if the accused party goes up to $12 million, or something to that effect. The idea is to move the offers to more common ground in terms of brackets. As the negotiation continues, the brackets get smaller and smaller until there is final agreement on a number.

Third, if a settlement appears to be reached, make sure the businesspeople for both sides at least execute a bullet point term sheet.  A signed term sheet has been effective in preventing any renege after the parties leave.

Contributing Author

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Greg Vogler

Greg Vogler is one of the co-founders of McAndrews, Held & Malloy. He focuses on patent, trade secret and trademark litigation, as well as...

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