Mediation has been center stage in dispute resolution processes; it affords parties and their counsel many well known advantages: privacy, informality, an opportunity for a frank evaluation of the merits, and control including the ability to manage the costs and risks of litigation as well as the outcome. All these factors become even more pronounced when the dispute in question involves patents.
First and foremost, are the costs associated with patent litigation. Patent cases take an average of 2.5 years to resolve, according to PWC’s 2014 Patent Litigation Study, taking valuable time away from ‘business as usual’. And it is expensive: according to the AIPLA Report of the Economic Survey 2013, when $1-10 million is at stake, the median litigation costs through discovery amount to $1 million and total costs to $2 million. If $10-25 million is at stake, these figures jump to $2 million and $3.325 million respectively, and for matters with over $25 million at stake, the figures are $3 million and $5.5 million. Moreover, parties often head to larger law firms when their IP is at risk, ratcheting up each of these figures. For example, if over $25 million is at stake and the firm hired has over 60 employees, the litigation costs increase to $4.7 million through discovery and $7 million in total.
Mediation generally allows for greater possible outcomes than a court is able to order; this is especially so in patent disputes. With the assistance of a mediator, the parties can move away from entrenched legal positions and consider what’s in their business interests: whether they have other assets to exchange, whether any type of license or cross license is possible or whether a joint venture or merger might best resolve the dispute. Negotiating business objectives comes more naturally to clients then resolving disputes through a trial process.
And a mediation is private. In a confidential joint session, the parties can listen to the arguments of the opposing party giving them an opportunity to objectively consider the issues at hand. In private caucuses, the parties can discuss the risks of continuing to trial versus the benefits of a settlement and explore a range of possible settlement options. Should the parties resolve their dispute, they have control over whether the settlement remains confidential and which terms, if any, are disclosed to the public.
A mediated resolution provides certainty and finality, attributes which are often lacking in patent litigation. Even if a party wins at the district court level, given the high reversal rate at the Federal Circuit, the district court may well be reversed and the case remanded for further action.
So when is the best time to mediate? According to some, the earlier the better. An early mediation allows the parties to hear the opposing party’s case directly, engaging in a bit of reality testing before positions become too entrenched and litigation costs too high. Even if the matter doesn’t settle, the parties better understand the issues and the obstacles preventing settlement. Often, counsel are reluctant to engage in settlement discussions without significant discovery, and, certain information may be necessary for the parties to meaningfully discuss settlement. But, generally speaking, full blown discovery, which can be quite expensive, is not essential to a negotiated agreement. And parties in an early mediation have the opportunity to weigh the costs of discovery against their ultimate business goals.
While early mediation has its advantages, there are ample opportunities during the course of patent litigation to consider mediation including the case management hearing, the exchange of initial or final infringement and invalidity positions, the Markman hearing, and the issuance of the Markman ruling, to name a few. According to government statistics, as of March 2014, only 2.2 percent of patent cases reach trial. Given these odds, the sooner the matter is resolved, the more businesses will save and get back to the business at hand.