L I C E N S I N G E X E C U T I V E S S O C I E T Y( U S A A N D C A N A D A )

N O V E M B E R 6 , 2 0 1 3N E W Y O R K , N E W Y O R K

J O H N M . D E L E H A N T Y T H O M A S A . Z A L E W S K IM I N T Z L E V I N D A Y P I T N E Y L L P

Alternate Dispute Resolutionand Licensing

What is ADR?

Any means of resolving a dispute except forlitigation

Negotiation

Facilitated negotiation

Mediation

Conciliation

Arbitration

Courts also encourage or mandate forms of ADR toresolve pending litigation or in some states as apredicate to litigation

Basic Requirement for All ADR

Willingness of parties toparticipate in process andresolve dispute

No matter how thorough or compelling the ADRprovisions in a license agreement are, they do not alwaysforeclose the use of litigation to delay or obstruct theprocess, at least temporarily. But litigation can also be auseful tool to force compliance with ADR agreements andobtain interim relief.

Negotiation

Should be predicate for any ADR or litigation Provision mandating negotiation as a condition for ADR or

litigation is valuable, enforceable and consistent with thenatural instincts of executives

Advantages Can be quick and inexpensive

Can lead to creative business solutions not available inarbitration or litigation

Non-binding

Negotiation continued

Disadvantages Imperfect information (no formal specification of claims or

factual discovery)

The skills of negotiators may vary

May be paid “lip service”

Facilitated Negotiation

Use a Neutral to hear both sides and comment onstrengths and weaknesses of respective positions

Effective where issue in dispute is legal or technicaland expertise of Neutral educates parties

Advantages

Assists weak negotiator

Neutral may contribute to solution

Cost Effective

Facilitated Negotiation continued

Disadvantages Parties may not disclose all information necessary for Neutral

to reach valid conclusion

No formal ADR process or enforcement mechanism

Mediation

Neutral mediator listens to both sides and endeavorsto bring them to agreement

Mediation is not binding; Neutral does not "decide" the case

Neutral should be selected for mediation skill, not necessarilytechnical or legal expertise

Unless requested by parties, Neutral does not suggest solutionor impose own views

After initial joint session, Neutral caucuses with each partyseparately or serves as a conduit for the in-person exchange ofparty positions and the narrowing of the gap between them

Mediation continued

Advantages Quick, less expensive than arbitration or litigation, non-

binding unless settlement reached

Effective where parties want to reach solution

Disadvantages Depends on trust between parties

Each party may hide inconvenient facts

Conciliation or Evaluative Mediation

Mediation where Neutral provides informed opinion

Each side presents case and Neutral conveys to eachparty his/her view of strengths, weaknesses andvalue of the case

Sometimes called “mini trial”

Advantages

Gives each party benefit of views of qualified Neutral

Non-binding

Conciliation or Evaluative Mediation continued

Disadvantages

Depends on content and skill of each party’s presentation

Depends on qualifications of Neutral

Discloses theory of case and facts to other party

Arbitration

Formal presentation of dispute to decision maker(s) Usually one or three arbitrators

Panel of three could include two non-Neutrals or "party" arbitrators

When agreed to in contract or license, legally mandated 9 U.S.C. § 4

Deprenyl v. University of Toronto, 297 F.2d 1343 (Fed. Cir. 2002)

Absent contrary agreement, result binding on parties

Very limited grounds for appeal 9 U.S.C. § 10-11; fraud, partiality, misconduct, exceeding powers,

miscalculation

Arbitration continued

Cannot expand grounds for appeal by contract

Hall Street v. Mattel, 552 U.S. 576 (2008)

"Manifest disregard the law"

May be facilitated by specialized organizations Qualified arbitrators, rules and administration

AAA, ICC, WIPO, CIETAC

Maintain lists of qualified mediators & arbitrators

Fees to administering organization based on amount in disputein addition to arbitrators' fees

Qualified arbitrators and rules

Arbitration continued

JAMS, CPR

Maintain lists of qualified mediators and arbitrators

Usually non-administered; no fees to administering organization

Rules

UNICTRL

Established rules provide process & time limits

Parties may create their own or modify existing rules Accelerated arbitration without discovery

Must select arbitrators and pay them

Arbitration Process

Select arbitrators Neutral, qualified, available

Organization lists or own resources

Various procedures for selection process

Panel sets schedule, decides preliminary motions,monitors discovery, if any, receives written briefs

Formal hearing with witnesses, documentary anddemonstrative evidence, expert testimony, argument

Arbitration Process continued

Alternatives to open-ended decision-making “Baseball Arbitration"

Day Baseball and Night Baseball

Selections from respective party positions

Award Absent party mandate, no written opinion

Enforcement of Arbitration Award 9 U.S.C. § 9

International Disputes

Most developed countries are parties to New YorkConvention Worldwide recognition of arbitration awards

More effective cross border enforcement than of court orders

U.S. courts enforce contracts agreeing to foreignarbitration Mitsubishi v. Soler Chrysler, 473 U.S. 614 (1985)

Arbitration Advantages

May be less expensive than litigation— but not always

Expert decision maker(s)

Remedies can be flexible if parties agree

Confidential Agreement must require parties to hold proceedings and award in

confidence

Can be quicker than litigation Depends on scope of discovery, whether depositions are allowed, and

amount of motion practice permitted by arbitrators

Arbitration Advantages continued

Decision binding on parties Not binding on others (no res judicata)

Decision enforceable by courts worldwide

Limited grounds for appeal

Arbitration Disadvantages

Normally limited or no discovery Some agree to discovery, IBA rules

No third party discovery unless ordered by Court in parallellitigation

May be more expensive and longer than litigation Complex cases, paying for and scheduling time of three

arbitrators

Lack of party cooperation

Deprenyl v. University of Toronto, 297 F.2d 1343 (Fed. Cir. 2002)

Arbitration Disadvantages continued

Arbitrator reputation for “splitting baby”

Binding on parties but not on others

Lack of interim relief unless ordered by Court inparallel proceeding

Agreement for ADR

Can wait until dispute arises, but may be contentious

Normally included in license agreement Requires generic agreement applicable to most disputes

Can focus scope of ADR application

No patent validity, no infringement, only royalty payments

Lack of attention can involve disputes peripheral to license

“any disputes arising under or related to the license”

Court will determine validity of arbitration provision Prima Paint v. Flood, 388 U.S. 395 (1967)

Parties can agree to arbitrate what can be arbitrated Rent-a-Center v. Jackson, 130 S.Ct. 2772 (2010) (must be clear and

express provision in which parties agree to arbitrate and in which scopeof agreed arbitration is clear)

Agreement for Staged ADR

Common to include requirement for staged disputeresolution Negotiation within specified period after notice of dispute

Specify level of party representatives—CEO, division manager

If negotiation unsuccessful, either party may invoke mediation

Specify source and process for selection of mediator

Specify time and location for mediation

If mediation unsuccessful, either party may initiate arbitration

Arbitration Agreement Elements

Agreement to arbitrate

Scope of issues subject to arbitration

Rules, administration AAA, ICC, WIPO, CIETAC, JAMS, CPR

Panel size and composition

Location, language, law

Time for completion

Scope of Discovery, including depositions

Arbitration Agreement Elements continued

Nature of award

Jurisdiction for enforcement/entry of judgment

Confidentiality

Authority to grant provisional remedies

Remedies available/not available to the arbitrators

Agreement to pay arbitrators

Conclusion

ADR must be tailored to parties' business objectives,including time, cost and the need for certainty

Non-binding negotiation and mediation Forces parties to talk before fight

In view of costs and uncertainty of litigation, usually a goodidea

Binding ADR (arbitration) Give up some discovery and right to appeal for quicker and

final resolution

Where dispute does not involve “family jewels” may be good

Conclusion continued

Many companies require arbitration for all licenses

Many companies have policy against arbitration

ADR is generally a better choice for internationalagreements