An alternative litigation strategy: ADR + IPR

To address current IP litigation concerns, an additional approach beyond strictly IPR and litigation could be considered

A number of commentators within the intellectual property field have provided views and insights regarding the use of an inter partes review (IPR) as an alternative to district court patent litigation. However, quite recently several of those same commentators have begun to express concerns regarding potential limitations of that procedure (e.g., inability to address damages, potential exclusions to the “estoppel effect”, continuation practice concerns, and jurisdictional considerations when obtaining a stay of litigation, among others). In a previous column, we expressed our view that the current IPR procedure is still in its infancy and that further modification to it, at this time, would appear to be premature. However, the real-world concerns with patent litigation continue. To address those concerns, an additional approach beyond strictly IPR and litigation could be considered.

An alternative strategy that could be utilized by patentees and patent challengers alike would be a combined IPR and alternative dispute resolution (ADR) approach. The players in such an approach would be two practicing entities, each having a significant patent portfolio. The key principles for such an approach would be to create a global framework for the parties to resolve the instant dispute and future disputes; use a standstill agreement to allow the parties time to negotiate, and potentially resolve, the instant dispute; use an IPR procedure as a component for a negotiation platform; and utilize a robust structure for information exchange and potential escalation of the instant dispute should the negotiations fail and the standstill period has expired.

The goal of such an approach allows each party to respect one another’s positions, patents and innovations, without some of the bravado or gamesmanship often present in litigation. Further, options are afforded by such an approach including, for example, the potential for a portfolio-based resolution; the ability to consider business-based trade-offs on non-core patents (i.e., cross-licensing or technology move-off outcomes); a structured mechanism to invalidate competitive patents (i.e., a timed and potentially vetted IPR position); and to provide time for each party to consider, prepare and potentially implement design-around options.

By way of example, the proposed alternative strategy utilizing a structured ADR + IPR approach could be as follows:

Step 1: Develop and implement a standstill agreement whereby no district court litigation or U.S. Patent Office procedure is instituted during the standstill period.

Step 2: Develop and agree to an ADR procedure and post-procedure outcomes (prior to the initiation of the ADR procedure, itself). The parties involved would need to:

  1. Exchange claim charts separately addressing infringement and invalidity positions.
  2. Conduct a series of agreed upon meetings with a fixed period of time to review and discuss infringement and invalidity positions.
  3. Conduct a series of agreed upon meetings with a fixed period of time to review and discuss potential settlement positions (i.e., licensing, cessation of activity with a move-off period, acquisition and other settlement options).
  4. Address through an IPR proceeding if an invalidity position is in dispute.
  5. (Post-IPR) Agree to one or more of the following outcomes if the challenger should not prevail:
    1. Obtain a license, with an established term sheet;
    2. Agree to a stipulated permanent injunction; and/or
    3. Agree to penalties (i.e., money damages, move-off periods, cessation of activity).

Step 3: If an infringement position is in dispute, address through arbitration or trial on damages.

As illustrated by Steps 1-3, the overall goal of the combined ADR + IPR approach is to reduce costs and risks while also attempting to provide greater certainty to the resolution of the underlying dispute (at least as to the issues involving invalidity). The IPR procedure when combined with an ADR approach appears to raise important new considerations for patentees and patent challengers alike. The development of the IPR proceeding was intended to promote greater certainty of patents, address the escalation of non-practicing entity litigation, and to reduce further burdens upon the court system. By combining the IPR and ADR together, these particular outcomes can be furthered in a potentially cost-effective and efficient manner. Moreover, the approach allows patentees and patent challengers to expand their use to a platform offering global solutions. For example, the same ADR approach could be utilized in combination with opposition proceedings, cancellation proceedings and the like. Additionally, the combined ADR approach allows parties to address future disputes, not just those of the moment. Should another patent issue raise concerns for both parties, the agreed upon combination approach could be used again, leading to greater predictability regarding patent portfolios, not just a singular patent.

Although this combined ADR + IPR approach is offered by commentators within the IP field for consideration and potential usage, it is appreciated that a number of other alternatives are available. However, if the goal is to improve the quality, consistency and predictability of potential outcomes with the new IPR procedure, the combinatorial approach may offer the best possible solution.

Contributing Author

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Troy Groetken

Troy Groetken (tgroetken@mcandrews-ip.com) is a shareholder at McAndrews. Troy has more than 15 years of experience in patent litigation and advanced prosecution matters in...

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Contributing Author

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Scott McBride

Scott McBride (smcbride@mcandrews-ip.com) is a shareholder at McAndrews, Held & Malloy. Scott has more than 15 years of experience in patent litigation and...

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