Implications for Mediation of Patent Infringement Suits from Investors in Patentees Case


Most mediators will agree that a key to reaching a settlement is to have the right people in the room at the mediation. Unless all interested parties are represented by people having the authority to settle on their behalves, settlement is unlikely at the mediation session. In the patent infringement context, this typically means that the attendees for the patentee should include a person authorized to negotiate and approve a settlement for it and, where the matter is in litigation, lead outside counsel. The presence of the latter is particularly important where outside counsel has a contingent fee arrangement with the patentee and therefore a direct financial interest in a settlement; the interests of both must be satisfied.

Patent infringement mediations have recently become more complicated where the patentee has sold interests in its cause to investors. The use of this type of financing of patent infringement litigation has increased of late and is usually coupled with a contingent fee arrangement with outside counsel. Unfortunately, from my experience with such cases, settlement is often very difficult to achieve. In many instances, this is largely due to the fact that the investors are not represented at the mediation by persons other than the patentee and/or the investor/patentee agreement does not make clear the degree to or manner in which investor approval of a settlement is required. The frequent result is that (1) if a representative of the investors authorized to act on their behalves is not present, a good deal of time is spent on the phone between those who are present for the patentee and the absent investors (with the attendant disconnect that the investors have not experienced the negotiation process or learned additional information that has surfaced at the mediation) or (2) there is difference of opinion between the patentee and the investor representative on the terms of settlement, with no clear means of resolving that dispute. In either situation, it is highly unlikely that the matter can be resolved at that time.

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Topics:  Mediation, Patent Infringement, Patent Litigation, Patents

Published In: Alternative Dispute Resolution (ADR) Updates, Finance & Banking Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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