This is Part of Greg Wood's Series on Why to Choose Early Mediation in Intellectual Property Cases

Resolving disputes through litigation is expensive, time-consuming, emotionally and physically draining. The unique characteristics of IP cases make mediation ideal. Here's why.

Mediation Reduces Uncertainty and Multiplies Options

 

Uncertainty is bad for market value.  Long term challenges to the validity of a key intellectual property asset can make it difficult to exploit the asset by undercutting financing, or making it available only at ruinous rates. Worse yet, potential users are unwilling to expand or re-tool as needed to take advantage of the patent, fearing that their complementary investment will be wasted, if the invalid patent eliminates the need for it. Since the average IP litigation takes two and a half to three years (and an appeal can add another $1 million and 2 years) the cumulative direct and indirect costs can be very high. [1] A potentially invalid trademark creates similar concerns.

Sometimes, even an unsuccessful claim can be fatal to an enterprise.   

A good example is Intel’s patent infringement litigation against Cyrix, a startup competitor that made compatible microprocessors.  Cyrix won the case after more than a year.  But while it was pending, chip sales suffered, since Cyrix’s potential buyers were reluctant to go with a possibly infringing microprocessor. 

Ironically, Cyrix brought this litigation on itself.  It filed a declaratory relief action asserting that it was not infringing, and brought anti-trust claims against Intel. It could have mediated these claims prior to suit.  There is no indication that it did so.

After suit was filed, Intel ramped up chip development. Though Intel settled the anti-trust claims for millions, and the Court of Appeal dismissed the infringement claims, being right isn’t enough, because conflict carries its own costs. [2]

Cyrix lost its competitive advantage. It had only a small window of opportunity to compete in the marketplace. The infringement litigation helped close that window, and a weakened Cyrix was soon acquired by National Semiconductor. [3]

Cyrix might have been able to salvage some of the value of its IP by negotiating a sale of the technology, cross-licensing, or even entering into a joint venture with Intel – all of which could have been facilitated with the help of a knowledgeable neutral.  Staying out of litigation would have been better for the “winner,” Cyrix, than bringing it on.

By Greg Wood

ENDNOTES

[1] (Margiano, R. D. “US - Litigation: Cost and duration of patent litigation,” Managing Intellectual Property, http://www.managingip.com/Article/2089405/Cost-and-duration-of-patent-litigation.html February 2009).

[2] Cyrix Corp. v. Intel Corp., 879 F. Supp. 666, 879 F. Supp. 672 (E.D. Tex. 1995), aff’d 77 F.3d 1381, 37 U.S.P.Q.2d (BNA) 1884 (Fed. Cir. 1996) [hereinafter Cyrix III].

[3] Tobak, Steve “The Secret History of the Sub-$1,000 Computer” http://www.cnet.com/news/the-secret-history-of-the-sub-1000-computer/ (accessed July 8, 2014).

 

 

Drawing on an engineering background, thirty five years as an advocate in commercial, intellectual property and e-discovery disputes, twenty years serving as an arbitrator, 200+ mediations and 400+ hours of formal ADR training, Greg is “all in” in assisting parties in the speedy and economic resolution of disputes whether as a negotiation or settlement counselor, a mediator or an arbitrator. While Greg is available for mediation and arbitration of various disputes, his focus remains on complex commercial and intellectual property matters including e-discovery disputes. Greg can be reached at greg.wood@agencydr.com