Perspectives of an IP Neutral -- discussion on a few topics Peter L. Michaelson Attorney, Arbitrator and Mediator Michaelson ADR Chambers, LLC 590 Madison Avenue, 18th Floor New York, NY 10022 US Tel: 212-535-0010 [email protected] www.plmadr.com High Technology Law Group San Jose, California October 10, 2013 Slide 1 2013 P.L. Michaelson All rights reserved Michaelson ADR Chambers "Traditional litigation is a mistake that must be corrected... For some disputes trials will be the only means, but for many claims trial by adversarial contest must in time go the
way of the ancient trial by battle. ... Our system is too costly, too painful, too destructive, too inefficient for really civilized people." Chief Justice Warren E. Burger U.S. Supreme Court Slide 2 Michaelson ADR Chambers Discussion Syllabus: Choosing a neutral Misconceptions of arbitration: the process is far more flexible than you think Techniques for controlling ADR (arbitration) cost Mediation and its use, advantages and disadvantages How to build an ADR practice Slide 3 Michaelson ADR Chambers I. Choosing a Neutral
The most crucial element of any ADR process. The most important decision a party will make. Primary advantage of ADR: parties have complete autonomy in who they select as the neutral. But, an ADR process is only as good as the neutral conducting it. The quality of an arbitration is directly governed by the quality of the arbitrators. Arthur Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 190 (3rd ed.1999), and Julian D. M. Lew, Loukas A. Mistelis and Stefan M. Kroll, Comparative International Commercial Arbitration 223 (2003) However, there is no one size fits all approach for neutral selection. [Rothman 2004 re: arbitrator selection] Slide 4 Michaelson ADR Chambers Two basic tasks a) How do you learn of neutrals? -- basically, how do you the final decision-makers (either in-house counsel or a client executive with authority over legal matters) who will hire neutrals, get to know who we are?
b) Once you have a list of neutrals, then what do you do with it? --How do you pick the most suitable person(s) for the job? Slide 5 Michaelson ADR Chambers Learning of Neutrals Basically the neutrals problem -- classic marketing -- HOW DO WE GET WORD OUT TO OUR TARGET AUDIENCE? A) Institutions (e.g. AAA/ICDR, JAMS, WIPO, CPR, LCIA) Appointing authorities maintain lists of qualified neutrals, often quite difficult to become listed as institutions maintain very high standards for entry and are also dictated by market demand Institutions use selection procedures, often committees/personnel (in-house, outside or both) B) Neutrals Traditional reputational approach: typically built up on a case-by-case basis as counsel appear before or have experience with particular neutrals Word of mouth discussions amongst professionals Personal referrals among counsel; large law firms often maintain lists of preferred neutrals; judges may recommend neutrals
Neutrals also publish, attend conferences, teach; reporting in mass and legal media; etc. Professional organizations and Institutions often list their neutrals on their websites (access may be restricted to members) Law firm/neutral websites Web sites devoted to marketing neutrals -- legitimate sites are very selective, as to neutrals experience and reputation, in who they list (e.g. NADN Natl Assoc of Distinguished Neutrals, IMI); but there are fraudulent marketing web sites that are merely pay to list sites which are absolutely useless Advertisements by neutrals and/or their firms in legal newspapers Slide 6 Michaelson ADR Chambers Selecting a Neutral Goal: Identify several candidates and rank them. Select them in rank order. If possible, select more than one to yield alternates. Match the neutrals to the specifics of the dispute. Disputes are widely different; neutrals are widely different in terms of experience, expertise, background, temperament, med/arb philosophy, etc. There is no one neutral fits all. The approach: Carefully think about, formulate and then follow an
appropriate process of selecting a neutral that takes into account the primary characteristics of the dispute. Avoid selecting anyone without adequate forethought. If the results are not what you want, modify the process accordingly and iterate it. Slide 7 Michaelson ADR Chambers Neutral Qualifications Decide if you want a neutral to have any substantive/legal expertise in the field of the dispute if you are advocating a position contrary to common wisdom in the area or prefer to have someone with no preconceived notions whatsoever based on prior experience, you might want someone who has no knowledge of the field/ technology in question o allows both parties an opportunity to teach the neutral o alternatively, if your position comports with common wisdom and you want that person to credibly cut through misconceptions put forth by the other side, then expert in the field may make sense ADR clause may specify necessary qualifications (e.g., experience, expertise, training, education, nationality, language); but qualifications may be too narrowly drawn if qualifications are too narrowly drawn, then, in practice, no neutral will qualify or will be very hard to find
ADR clauses are usually prepared by transaction attorneys/contract negotiators who have no ADR/litigation experience; they often choose standard corporate boilerplate clauses with little/no forethought about what would result in a specific matter, hence adverse unintended results can occur; attention should be paid to drafting proper clause during contract negotiation If qualifications (expertise, background) were not stated in ADR clause but substantive experience is necessary, then what qualifications do you require For cases filed with an institution, ask the case manager to screen potential candidate neutrals (through keyword searches on Institutions neutral database based on customer needs, sometimes followed with additional screening through specialized queries posed directly by the case manager to those neutrals) [AAA-Enhanced Neutral Selection Process] For a selection process for international commercial arbitration, see [Moore 2013; Seppala 2008] Slide 8 Michaelson ADR Chambers Perform Due Diligence, Compare Results Perform due diligence on candidates (web searches, caution: some info on web can be false; firm/neutral web sites; directories, e.g., M-H, Juris, IMI (mediators only), NADN) If you dont have info on whether the neutral has the qualifications, request that info from the referring source, or ask the referring source to contact the neutral to get the info No numeric ratings exist of neutrals (lack of reliable ratings and whether/how to provide them are currently the subject of much controversial debate in the ADR field)
o Directories and the like are often self-serving regarding statements in CVs/Bios Find out if neutrals have any prior writings of interest, previously taken any position on issues in dispute Ask colleagues at other firms for their thoughts on candidates Ask neutrals for conflicts: substantive, relationship, time (availability), financial interests in outcome; affinities with parties, witnesses, counsel or other arbitrators on tribunal or the institution itself (Ill talk about interviewing candidate neutrals very soon.) o There is a marked tendency among arbitrators, even those who are busy, to take on too many cases causing extended schedule conflicts when arranging lengthy hearings, causing delays ICC now asks for an arbitrators current caseload on a Statement of Acceptance form to ensure that an arbitrator has adequate time to handle the matter before confirming his/her appointment. Whether this technique really works or not is another question. If considering an ADR institution that is not well-known or with which you have no experience, undertake due diligence on the institution as to quality and selection of its neutrals, how neutrals are compensated, any relationships that may cause inherent biases or conflicts of interest with disputants of one side or another, industry reputation, governing ethics rules, organizational longevity, members, how organization is supported (filing fees, member contributions, etc), etc. [Mazadoorian 09-1996] Slide 9 Michaelson ADR Chambers Make initial cut -- eliminate clearly unqualified candidates on qualifications, conflicts and availability
What type of demeanor/temperament/perspective do you want: experienced practicing attorney, ex-judge (commands more authority but exhibits dictatorial conduct, and has far less subject matter or industry expertise); arbitrator who remains closely involved throughout proceeding and exercises proper muscular control throughout so proceeding doesnt explode (go ballistic) or follow a tangential path, and can reset it back on proper track when and if necessary; sensitive to cost v autonomy issues; someone able to make hard decisions and not just GAGA (go along, get along) person Possible psychological screening to identify incompatibilities [Michaelson 2010] Usually only done on substantial matters (large amount at stake, multiple hearing sessions, etc) Lesser importance today: neutral v. party-appointed arbitrators (current default is that all arbitrators are neutral; some industry specific panels, e.g. maritime or re-insurance, still use party-appt arbitrators) Interview candidates (telephonic or in person) Ex parte: general nature of case, suitability to hear case, availability, conflicts, language proficiency (if applicable), references, discussions concerning partys preference for chair if panel selected o Better to deal with these aspects through case manager and avoid any ex parte contact Inter partes: Only a very limited inquiry is permissible (Stds of Ethics exist) and not touching merits of case [CIArb Guidelines 2006; Dundas 2009; Bishop 1998], e.g., anything that is allowed ex parte, also what is panelists preferred
practice on awards if given discretion (fully reasoned, abbreviated reasoning, bald; provide draft award to parties for review, etc.), what is panelists view of attaining cost-effectiveness and efficiency, and similar Dont merely acquiesce in adversarys selection of neutral particularly if sole panelist (or mediator) Be pro-active, make your preferences known and stand steadfastly for them if need be [Kichaven 2007] Where institution is involved and a sole neutral is being appointed, strike procedure often used For mediation, try to identify underlying driving causes of dispute (e.g. relational, psychological, substantive) and appropriate skill set to deal with those causes and choose mediator with those skills [Young 2012] Compare remaining candidate neutrals, rank order them in terms of preference, and select top ranked persons [Donahey 2011, and for various 3-person panel/sole arbitrator selection procedures] Trust your instincts If you dont get useful results, modify the requirements and/or steps, and repeat the process as needed Slide 10 Michaelson ADR Chambers Illustrative CPR Pharma patent arb panel selection process 1. Within 25 days after receipt of a partys request to appoint an arbitration panel -- CPR provides list of 25 members of its panel of distinguished
neutrals who are not conflicted and are available to serve. 2. Within 10 days after receipt of list each party selects 15 out of 25 candidates and rank orders them. 15 candidates, from both lists, with highest combined ranking are finalists. 3. Within 2 months after receipt of 15 finalists parties shall jointly conduct interviews of the finalists. 4. Within 10 days after completing interviews, each party shall rank the finalists. Three candidates with highest combined rank from both parties will constitute the arbitration panel. (Panel will select its own chair). I will return to this illustrative arbitration later in the presentation to describe its highly concatenated hearing process. Slide 11 Michaelson ADR Chambers II. Misconceptions of Arbitration To appreciate arbitration, understand what it is: Historically, at its core, arbitration is VERY SIMPLE: Each side explains its case to a neutral third party and that neutral determines credibility and decides the issues in dispute according to the governing law. By mutual agreement, the parties define the procedure and who the neutral is.
Over many years, arbitration gained a bad reputation because it lost simplicity. It lost its historical focus. How? Arbitration became a LITIGATION look-alike held before a different tribunal. Yet, arbitration is not LITIGATION, was never intended to be and should not be. At its crux, the only similarity between the two: both are rearward looking, fact-finding processes designed to yield the truth of what happened. Slide 12 Michaelson ADR Chambers General advantages: [Sussman 2009][von Kann 2004] Faster and cheaper process is the parties process; they own it, they define it! Speed comparison (2008): o Median duration in AAA between filing demand to award was 7.9 months o Median length in ICDR was 12 months o Median length in CPR was 11.5 months; o Litigation: USDC SDNY Median delay through trial for jury case was 30.7 months, 27 Months for non-jury cases (similar in other districts at the time, likely longer now particularly with sequestration);
Median length from filing in USDC SDNY to ruling in appeal at 2d Circuit was 43.1 months Notion that arbitration is not any faster than litigation is a misconception: It can be as fast as the parties want it to be. Slide 13 Michaelson ADR Chambers General advantages (cont): Costs: litigation is very expensive, arbitration need not be by choice. It is a misconception that arbitration is always as expensive as litigation. Arbitration can cost just as much or as little as the parties wish it to cost. Sir Roland Burrows, KC (1930) (from CIArb Costs of International Arbitration Survey 2011, Chartered Institute of Arbitrators) Slide 14 Michaelson ADR Chambers
General advantages (cont): Costs (cont.) Facilities and judges o Courts are state-sponsored and free to litigants. Paid through Fed Government appropriations (presently reduced through sequestration) o Institutional and arbitrator fees are usually small when compared to attorneys fees and other case prep fees, particularly in patent area where amount in controversy frequently dwarfs all other fees by several orders of magnitude. The view that AAA, ICC and other institutional and arbitrator fees are high is a misconception particularly when viewed relative to other costs involved. ICC study of costs in typical intl arb: 82% of costs are spent by parties in case prep, including counsel fees; arbitrator and institutional fees were 18% Very difficult to control cost in Federal litigation given broad scope of Federal Rules Civil Procedure and Federal Rules Evidence Arbitrators and parties can readily streamline the process if all of them act on the will to do so, party and counsel complaining is not enough o Experienced counsel (in-house and outside) know and embrace the differences between arbitration and litigation, and know how to properly frame the process to gain efficiency for the client; if outside counsel balk at doing so, ask them why and, if necessary, hire different counsel. Slide 15
Michaelson ADR Chambers General advantages (cont): Flexible -- The process is what you make it! But you have to make it! -- If you merely pick a standard-fare arbitration clause that gives wide latitude to outside counsel and the arbitrator, then you get what you deserve. One extreme: expedited no discovery, no motion practice, decided on one round of submissions or oral presentations and a bald award; or Other extreme: litigation-style with extensive process and all the bells and whistles o Common default for litigation counsel who have little or no arbitration experience, scorched earth approach; often occurs through use of standard arb clauses Anything in between Burger King approach: You can have it your way. o What the parties need to do is thoughtfully decide what makes sense, and then implement what your way is (it is not enough to desire an efficient process a/k/a Field of Dreams (simply discuss it and it will be)), you have to actually implement it! Risks exist in concatenating the process, but finality and efficiency gains may outweigh the risks.
Subject matter expertise choose the arbitrator to have whatever expertise sides want (when was the last time you choose your judge?) Arbitrator can (should) provide rapid attention as needed to ensure process stays on track. Finality -- Very important to execs so they can get on with business Judicial review is very restricted (see Federal Arbitration Act, 9 USC 1-16). No judicial appeal of an arbitral award is possible. Appeal procedures exist at some institutions [CPR appeal 2007] Confidentiality of proceedings Process is confidential While arbitrator is ethically bound to keep information confidential, parties are not in absence of confidentiality agreement between them Slide 16 Michaelson ADR Chambers Advantages in international settings: Cross-border expertise Can choose neutrals on 3-person panel to each have specific expertise Neutrals with desired expertise both in substantive law and law of seat: common, civil, Sharia; and law in location where award may be enforced
Understand cross-cultural differences Fluent in desired language(s) Neutrality No home court advantage, i.e. prejudice by local courts towards their nationals, in arbitral forums or by neutrals Neutrals on tripartite panel can be selected from different countries/regions from parties and/or counsel to further eliminate any possible concern over national-based prejudices Global enforceability by treaty New York Convention (>140 countries are signatories) Award must meet requirements of Convention, Institutions will review their awards to be sure this occurs No treaty enforcement for national court awards Slide 17 Michaelson ADR Chambers Advantages of arbitration as perceived by users: Cornell/PERC/PriceWaterhouse Survey of Fortune 1,000 Companies (1997) :
Saves time Saves money More satisfactory process than litigation Limited discovery (and motion practice) Neutral expertise Privacy (Confidential) Party selection of expert decision makers Venue selection to avoid local prejudices AAA Alternative Dispute Resolution Basics FAQs adds: Process is driven by parties agreement Extensive training of neutrals (substantive and process expertise) Less antagonistic and more collaborative than litigation, more likely to preserve ongoing business relationships For current survey-based perspectives on corporate ADR practices, perception and use, see
[Stipanowich 2013]. Slide 18 Michaelson ADR Chambers For many, the benefits boil down to just one basic element PARTY AUTONOMY Ultimately, many business users regard control over the process the flexibility to make arbitration what you want it to be as the single most important advantage of binding arbitration and other forms of ADR. CPR COMMISSION ON THE FUTURE OF ARBITRATION, COMMERCIAL ARBITRATION AT ITS BEST (2001) Slide 19 Michaelson ADR Chambers Why is AUTONOMY important? Party Autonomy => Party Ownership of the Process The Parties choose their process and maintain end-to-end
control over it. They do not abdicate that control to a third party, e.g., a court. Why is AUTONOMY necessary? Parties business needs and goals in dispute management often vary across disputes and need to be accommodated to reduce unnecessary business risk. Autonomy affords the parties nearly complete flexibility in tailoring and adapting the arbitral process to properly meet their needs and goals flexibility which is just not present in litigation. Slide 20 Michaelson ADR Chambers Illustrative CPR Pharma patent arb hearing process 1. Beginning on the date the arbitration panel is appointed, each party is to provide disclosure to the other of relevant materials (per CPR Rule 4.1(a) for Non-admin Arbitration of Patent and Trade Secret Disputes). Claimant has 30 days after commencing arbitration; respondent has 45 days. 2. Within 10 business days after respondents disclosure, the arbitration panel holds prehearing conference. 3. Within 10 business days after completion of discovery, each party submits, to the other and
the panel, written testimony from fact & expert witnesses setting forth relevant facts and expert opinions with respect to the disputed matter and a memo (up to 25 pages) providing that partys position regarding resolution of the disputed matter. 4. Within 10 business days after submissions are provided to panel, arbitration hearing occurs in New York City. Each party has up to 2 hours to present its arguments and 30 additional minutes to rebut arguments made by other party. 5. Within 5 business days after hearing, the arbitration panel renders its written decision. 6. Each party bears its own costs, with cost of the arbitration panel to be split equally between the parties. Slide 21 Michaelson ADR Chambers III. Controlling Arbitration Cost The theoretical advantages of arbitration over court adjudication are manifold ... These theoretical advantages [however] are not always fully realized. Frank E. A. Sander (2007) (from CIArb Costs of International Arbitration Survey 2011, Chartered Institute of Arbitrators)
Slide 22 Michaelson ADR Chambers With all arbitrations advantages, what happened? Slide 23 Michaelson ADR Chambers Lawyers We have seen the enemy, and theyre us! Slide 24 Michaelson ADR Chambers Why? What happened? With all our good-intentions of zealous client representation, over the past few decades lawyers made arbitration resemble litigation! With all its trappings yet none of its procedural and substantive safeguards:
extensive discovery (including e-discovery) and motion practice highly contentious advocacy Resulting in long pendency time (start to finish) and high cost [ICC Report 2007][CIArb 2011][Lovells 2008] Over the last 10-20 years, corporate users became disillusioned and very dissatisfied. For complex disputes, commercial arbitration fell out of favor! So much so that some corporate counsel and their clients have removed arbitration provisions from certain contracts and exhibit a distinct reluctance to use it in others. Simply: Users are rebelling! -- Though they did it to themselves by not exercising proper control over the process. Slide 25 Michaelson ADR Chambers What users say -- Arbitration is often unsatisfactory because litigators have been given the keys to run
the arbitration and they run it exactly like a piece of litigation. Its the corporate counsels fault by simply turning over the keys to a matter. Jeffrey W. Carr Vice President & General Counsel FMC Technologies, Inc. Slide 26 Michaelson ADR Chambers What users say -- (cont.) [I]f you simply provide for arbitration under [standard rules] without specifying in more detail . . . how discovery will be handled . . . you will end up with a proceeding similar to litigation. James Bender General Counsel Williams Companies Slide 27
Michaelson ADR Chambers What users say -- (cont.) Arbitration can cost just as much or as little as the parties wish it to cost. Sir Roland Burrows, KC (1930) (from CIArb Costs of International Arbitration Survey 2011, Chartered Institute of Arbitrators) Slide 28 Michaelson ADR Chambers General response -- FOCUSED Approach taken by many administering organizations, institutions, ABA and state bar groups: focus on a specific aspect of an arbitration and draft guidelines, protocols, rules or best practices for that one aspect, for example: Document disclosure ICDR Guidelines for Arbitrators Concerning Exchanges of Information (2008) CPR Protocol on Disclosure of Documents and
Presentation of Witnesses in Commercial Arbitration (2009) (four alternate modes of e-disclosure) Chartered Institute of Arbitrators Protocol for E-Disclosure in Arbitration (2008) Damages CPR Protocol on Determination of Damages in Arbitration (2010) Pre-hearing Phase New York State Bar Assn, Dispute Resolution Section Guidelines for the Arbitrators Conduct of the Pre-Hearing Phase of Domestic (International) Arbitrations (2011) Rule Sets for Expedited Proceedings CPR Global Rules for Accelerated Commercial Arbitration (2009) Evidence IBA Guidelines on the Taking of Evidence (rev. 2010) Slide 29 Michaelson ADR Chambers Cost control
Some basic focused suggestions (all valid, all useful, but miss the big picture): Use sole arbitrator, Use expedited procedures Reduce scope of discovery (no depositions) Constrain length of proceeding between filing and award Restrict or no motion practice Use bald or abbreviated reasoning in awards or baseball arbitration Select governing rule set that facilitate time and cost efficiency
Schedule early dates for hearing and stick to them Limit time at hearing available for each side Use technology to reduce expense, such as videoconferencing Have experts hot tub Above all: SELECT EXPERIENCED ARBITRATORS AND ARBITRATION COUNSEL (well hear more about this later) Slide 30 Michaelson ADR Chambers The College of Commercial Arbitrators took a different approach: HOLISTIC. The CCA- Non-profit professional organization established in 2001 Mission: To promote highest standards of conduct, professionalism and ethics in commercial arbitration To develop Best Practices guidelines and materials To provide peer training and professional development Members: Approximately 300 Leading Commercial Arbitrators (Fellows) throughout US Slide 31
Michaelson ADR Chambers What did the College do? It studied perceived problems in commercial arbitration and formulated Protocols for Expeditious, Cost-Effective Arbitration. How? First, the College appointed Task Forces composed of corporate counsel, outside counsel and arbitrators to study issues and provide insight and perspective concerning problems with B2B commercial arbitration and possible solutions. A draft report was then prepared based on submissions from the Task Forces. The report contained four protocols containing proposed action steps for four different arbitration constituencies. Second, in late October 2009, the College convened a National Summit on B2B commercial arbitration at the Capitol Hilton in Washington, DC sponsored by: 72 Sponsoring Fellows of the CCA American Arbitration Association ABA Dispute Resolution Section Chartered Institute of Arbitrators CPR JAMS Straus Institute for Dispute Resolution, Pepperdine University School of Law Slide 32
Michaelson ADR Chambers What did the College do? (cont.) > 180 people (in-house counsel, outside counsel, representatives of arbitration providers, academics and arbitrators) attended the Summit to provide their input on the draft protocols, at which: First, each draft protocol was presented, followed by the attendees giving their comments and amendments on it. Then, a town hall meeting occurred through which the attendees, using hand-held electronic voting devices, provided their opinions to specific survey questions and proposed action steps. The results of the Summit were then analyzed along with various recommendations. The Protocols (and accompanying commentary [CCA Protocols 2010]) resulted and were widely distributed for free (at last count, the College printed approx 17,000 copies of the Protocols). Slide 33 Michaelson ADR Chambers General Principles of the Protocols Recognition that pace and costs of commercial arbitration are
driven by inter-dependent (correlated) variables: Namely certain specific steps taken or not by each of four constituencies affect the other constituencies: a) Business Users (Parties) and In-house Counsel, b) Outside Counsel (advocates), c) Arbitration Providers (Institutions) and d) Arbitrators. Protocols provide specific steps each constituency can take to alter current trajectory of costs and time but as guidelines not mandates. By adopting all or at least some of the steps, the four constituencies can strive to cooperate and coordinate their actions to yield maximum beneficial impact for the process and ultimately themselves. Slide 34 Michaelson ADR Chambers Underlying the Protocols -- Overarching Principles for each Constituency Be deliberate and proactive Control discovery Control motion practice
Control the schedule Use the Protocols as a tool, with necessary discretion, not as a club Remember arbitration is a consensual process Slide 35 Michaelson ADR Chambers Protocol for Business Users and In-house Counsel 1. Use arbitration in a way that best serves economy, efficiency and other business priorities. Be deliberate, but careful, about choosing between one-size-fits-all arbitration procedures with lots of wiggle room and more streamlined or bounded procedures. 2. Limit discovery to what is essential. Dont simply replicate court discovery. 3. Set specific time limits on arbitration. Make sure deadlines are enforced to extent practical. 4. Use fast-track arbitration in appropriate cases. 5. Stay actively involved throughout the dispute resolution process to pursue speed- and cost-control. I use regular and periodic status teleconferences with spacing set (every 2, 3 or 4 weeks) to closely supervise activities then underway by Counsel coupled with a need
to continually but subtly apply firm pressure to keep the process moving on track and schedule towards its endpoint. 6. Select outside counsel having arbitration expertise and commitment to business goals [not, merely for historic reasons, the same old firm that has been used for countless years]. An important point made earlier. Slide 36 Michaelson ADR Chambers Protocol for Business Users and In-house Counsel (cont.) 7. Select arbitrators with strong case management skills. 8. Determine issues, claims, defenses, and other arbitration parameters early in the process. 9. Control motion practice. 10. Use a single arbitrator where appropriate to save time and cost. 11. Specify the form of the award, e.g., bald (a number, a yes/no answer or matrix of such results) or reasoned and, if latter, extent of reasoning desired and any limits on award and remedies requested. Do not provide for judicial review for errors of law or fact [or an
appellate process]. This only applies to unnecessary litigation as Courts do not allow such review. Courts strongly defer to arbitration awards. Very limited grounds exist under Federal Arbitration Act (9 USC 1-16) to vacate awards. 12. Conduct a post-process lessons learned review and make appropriate process adjustments for use in subsequent arbitrations. Slide 37 Michaelson ADR Chambers Protocol for Outside Counsel Be sure you can pursue the clients goals expeditiously. Memorialize early assessment and client understandings. Select arbitrators with proven management ability. Be forthright with the arbitrators regarding your expectations of a speedy and efficient proceeding. Cooperate with opposing counsel on procedural matters. Seek to limit discovery in a manner consistent with client goals
(e.g., time and cost). Periodically discuss settlement opportunities with your client. 1. 2. 3. 4. 5. 6. Explore use of Mediation can occur concurrently with arbitration or during short suspension. (Ill talk about mediation shortly.) 7. Offer clients alternative billing methods. 8. Recognize and exploit the differences between arbitration and litigation.
Take advantage of arbitrations flexibility in designing the process. Slide 38 Michaelson ADR Chambers Protocol for Outside Counsel (cont.) 9. Keep the arbitrators informed and enlist their help promptly (dont delay); rely on the chair as much as possible. 10. Help your client make appropriate changes based on lessons learned from prior arbitrations. 11. Work with providers to improve arbitration processes. 12. Encourage better arbitration education and training. Slide 39 Michaelson ADR Chambers
Protocol for Arbitration Providers (Institutions) 1. 2. 3. 4. 5. 6. Offer business users clear options to fit their priorities. Promote arbitration in the context of a range of process choices, including stepped dispute resolution processes. Develop and publish rules that provide effective ways of limiting discovery to essential information. Offer rules that set strict presumptive deadlines for completion of arbitration; train arbitrators in the importance of enforcing stipulated deadlines. Publish and promote fast-track arbitration rules. Develop procedures that promote restrained, effective motion practice. Slide 40
Michaelson ADR Chambers Protocol for Arbitration Providers (cont.) 7. 8. 9. 10. 11. 12. 13. Require arbitrators to have training in process management skills and commitment to cost- and time-saving. Require fact pleadings, early disclosure of documents and witnesses. Provide for electronic service of submissions and orders (direct communication between parties and arbitrators). Obtain and make available information on arbitrator effectiveness. Provide for expedited appointment of arbitrators. Require arbitrators to confirm availability. Afford users an effective mechanism for raising and addressing concerns about arbitrator case management.
Slide 41 Michaelson ADR Chambers Protocol for Arbitrators Get training in managing commercial arbitrations. Insist on cooperation and professionalism of all Counsel involved. Actively manage and shape the arbitration process; enforce contractual deadlines and timetables. Conduct a thorough preliminary conference and issue comprehensive case management orders. Schedule consecutive hearing days [with reserve days]. Streamline discovery; supervise pre-hearing activities. Discourage the filing of unproductive motions; limit motions for summary disposition to those that hold reasonable promise for streamlining or focusing the arbitration process, but act affirmatively on those. 1. 2. 3. 4.
5. 6. 7. While I do not prohibit dispositive motions, I require the moving party to first file a short letter brief (2-5 pages at most) explaining why the panel will, more likely than not, grant the motion. Of course, the non-moving party can file an opposing brief. If the moving party fails to convince me, I deny the moving party leave to file its motion. As summary judgment and other dispositive motions can be expensive, this technique can save a decent amount of time and money, if the motion is not justified, but will add relatively little cost if the motion is justified. Slide 42 Michaelson ADR Chambers Protocol for Arbitrators (cont.) 8. Be available to counsel. 9.
Conduct fair but expeditious hearings. 10. Issue timely and careful awards. Be sure to learn parties expectations for awards, i.e. bald, fully reasoned, length and extent of reasoning, etc). Prepare award in line with those expectations. In some instances where justified, err on side of providing more reasoning than not enough. Awards are for the losing party so provide adequate and clear explanation of why that party lost. Unless parties specifically agree to bald award or one with reduced reasoning, provide enough reasoning so that a reviewing court can understand the arbitrators rationale underlying the award. Slide 43
Michaelson ADR Chambers IV. Mediation Its Use, Advantages and Disadvantages Routes to Mediation ADR Clauses Each administering organization has its own; parties can draft their own, though, if they do, pathologic clauses can result that can be quite problematic in practice Usually pre-dispute in nature and included in underlying agreement between parties Through ADR clause, parties may customize the chosen process to their needs Voluntary Decision of the parties After dispute arises (no ADR clause in underlying contract) Disputants can execute post-dispute ADR agreement Clauses govern, with parties often tailoring the process to their own needs Court annexed Court ordered, though litigants can request Court referral Use outside or court personnel (e.g. magistrate) as neutral (depends on court) Slide 44 Michaelson ADR Chambers
Core of any Mediation Two essential steps: 1. First, a mediation over process (i.e. what will the process be? --party autonomy: they choose it; they have ownership of it) 2. Then, a substantive mediation using the agreed process (very similar 2-step approach in arbitration & hybrid process) --with iteration back to step 1 and then continuing forward with step 2, and so forth as appropriate, until conclusion Slide 45 Michaelson ADR Chambers Essential aspects to enhance likelihood of success: Proper timing: Mediation must not be too early. Proper knowledge: Parties need to know enough information to adequately
assess their risk calculus (and that of their adversary) to: make an informed business decision, with reasonable confidence, regarding parameters of any settlement (BATNA, WATNA, options, etc), and conduct meaningful settlement negotiations to a satisfactory conclusion. All stake-holders must participate, with every party having settlement authority present or readily accessible. For other effective practices, see [CPR Patent Mediation Task Force Report 2013]. Slide 46 Michaelson ADR Chambers General Mediation Process Contact to mediator directly by a party (ad hoc); or through admin. org. w/ filed mediation request Mediator selected by parties, Agreement between mediator and parties, if ad hoc; formal
appointment, if administered Process mediation (procedural) -usually >1 teleconf; in complex and/or multi-party case, may have actual conf(s) with reps of all stakeholders present COMMENCEMENT MEDIATOR APPOINTMENT PRELIMINARY CONFERENCE Substantive mediation -Usually initial joint session, then separate caucuses, further joint sessions as needed, and so forth; possibly pre-session caucuses SUBSTANTIVE SESSIONS Often post-session pre-settlement activity (telephone calls, etc); if impasse, parties may adjourn session and re-engage later
SETTLEMENT or IMPASSE Slide 47 Michaelson ADR Chambers Advantages of Mediation [Sussman 2008] Fast and efficient: Entire process takes place over a few weeks or a couple of months; session itself is often just a day or two Basically unlimited solution space: Mediation is about finding a deal that satisfies parties interests and does not involve deciding between legal positions; everything can be on the table, not limited at all to legal remedies Forward-looking process: preserves and enhances business relationships and promotes future business dealings; settlements, being in parties economic interest, are usually self-policing Very flexible: parties and mediator design process tailored to dispute Totally confidential: two-levels of confidentiality (basic level at joint session, higher level at caucuses) Cost-effective: far less expensive than litigation or arbitration; perhaps 3-5% of cost of litigation, often less than 1% (including fees of mediator and administering org), high probability of success in patent disputes: 50% (court annexed) to 60-80% (non-court annexed, including ad hoc) settlement rate Parties choose their mediator: in patent matters, subject matter/industry expertise may be very
useful as mediator is familiar with industry practices and lingua franca of underlying transaction and technology Discovery, if any, is very limited and focused: generally just a targeted document exchange Non-binding if settlement not reached: status quo preserved, parties leave mediation with useful additional knowledge they would not have received any other way; settlement often occurs later Slide 48 Michaelson ADR Chambers Pete Michaelsons IP (Patent) Mediation Process Pre-session activities: Preliminary teleconference (discuss logistics, discuss and agree on process going forward process mediation; ground rules) with all counsel and party representatives (having settlement authority and who will attend the substantive mediation session) If administered, I will discuss amount of deposits and necessary logistics w/ case manager; if ad hoc, I will get written services agreement (Agreement with Mediator) in place w/counsel and parties Be sure all deposits are received before I expend any appreciable time Separate confidential pre-session teleconference (or in-person meeting) with each party and its Counsel Targeted exchange of docs and very narrowly focused discovery (to extent necessary)
Basic purpose of mediation is not to find truth, but to make a business deal that meets the parties' needs. Relatively little documentary discovery, if any, is required for mediation. Depositions are rarely necessary, if at all. No need for any litigation-style discovery at all. Mediation statements submitted to me Highly confidential, not exchanged to encourage openness and candor of parties; loose page limit so as not to either overwhelm me or overly constrain parties Conduct further separate telephone caucuses (meetings) with each party and its counsel, to the extent needed and useful; Joint teleconference(s) and/or joint meeting(s), if beneficial, etc. Slide 49 Michaelson ADR Chambers Pete Michaelsons Mediation Process (cont.) Substantive mediation session(s): Two days minimally are reserved (difficult to reconvene everyone later, so schedule sufficient time early on; if the mediation session ends early, fine) Opening joint session: presentations by business people first (may be first time business
adversaries have met and/or discussed the dispute), Q&A of business people, lawyer presentations, Q&A of lawyers (with "no interruption" rule) Then, continue in joint session or break into caucuses, and/or subsequently more caucuses and/or joint session(s) as needed with their selection and timing depending on inter-party dynamics and negotiation context Conclusion: If settlement reached, have counsel (not mediator) prepare and all parties sign written term sheet before session concludes and parties and counsel leave (counsel can draw up a formal settlement agreement later) If settlement not reached, schedule further sessions (telephonic and/or in-person) at a later date, etc. be relentless until "unbreakable" impasse or settlement reached Report back to institution or referring court that mediation session was held and whether or not case was resolved, and other status info If institution involved, request its assistance throughout process, as needed and when needed; keep it fully informed of status and changes to process Slide 50 Michaelson ADR Chambers Disadvantages of Mediation
Worst case: if mediation fails, status quo continues with a bit of time and money expended but each side having gained a bit of business education (interests) they would not otherwise have. Cost: minimal when compared to arbitration and certainly litigation expenses Delay: process may delay onset or progress of further contested proceeding (arbitration, litigation, etc), but often mediation occurs concurrently with that proceeding hence delay many not arise Delay, where it occurs, is very small, perhaps a few weeks or a couple of months, insignificant compared to litigation and arbitration time frames, so delay is not problematic If time is of essence, mediation is probably not the proper technique to use Timing: mediation may occur too early and frustrate settlement (frequently occurs in court-annexed mediations) Lack of information: mediator can implement targeted document/information exchange Lack of serious commitment to settle or entrenched opening positions: postpone mediation to later, let contested proceeding continue and legal bills mount since they can eventually motivate settlement Mediator can also assess proper time for mediation during preliminary discussions with parties Information: party may divulge information to adversary that lies outside scope of legitimate discovery Information may enhance education of adversary to real interests at stake and, if impasse occurs during mediation, it could enhance prospects of a subsequent settlement Protective agreements can be used to limit dissemination of information; but if maintaining confidentiality is crucial, then disclose in camera to mediator only, or do not disclose information at all but that may compromise likelihood of settlement
Slide 51 Michaelson ADR Chambers Take-away Thought about Mediation: "You can't always get what you want ... But if you try sometimes well you just might find You get what you need." "You Can't Always Get What You Want" Rolling Stones http://www.youtube.com/watch?v=mKFsXJbFB_o Slide 52 Michaelson ADR Chambers V. Building an ADR Practice An old saying: How do you get to Carnegie Hall? Practice, practice, practice My perspective on ADR practice: How do you get to be a successful neutral?
Experience, experience, experience There is no substitute. Getting it requires significant time, effort and commitment! (Just like any other profession) Slide 53 Michaelson ADR Chambers Thank you! Slide 54 Michaelson ADR Chambers References: 1. Choosing a Neutral a) b) c) d) e) f) g) h)
i) j) k) l) Fact Sheet: Enhance Neutral Selection Process for Large Complex Cases, American Arbitration Association. Practice Guideline 16: The Interviewing of Prospective Arbitrators, Chartered Institute of Arbitrators, 2006. D. Bishop et al, Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration, Arbitration International, Vol. 14, No. 4,1998, p. 395-429. M. Scott Donahey, Your New Guide to Arbitration Clauses, Part I, Alternatives, Vol. 29, No. 11, December 2011, p. 198-200. H. R. Dundas, Guidelines for Interviewing Prospective Arbitrators, New York Dispute Resolution Lawyer, New York State Bar Association, Spring 2009, Vol. 2, No. 1, p. 33-35. J. Kichaven, Youre Letting em Choose the Mediator? Your Case Isnt That Good! Getting to Settlement Demands Mutual Participation in Selection, Alternatives, Vol. 25, No.7, July/August 2007, p. 115-116. H. N. Mazadoorian, Disclosure Questions for ADR counsel to Ask When Choosing Neutrals or Provider Groups, Alternatives, Vol. 14, No. 8, September 1996, p. 95. P. L. Michaelson, Enhanced Tribunals: Why Its Time to Use Personality Screening to Supplement Selection Criteria, Alternatives, Vol. 28, No. 10, November 2010, p.189, 194-199 (part 1 of 2-part article); and P. L. Michaelson, Can Conflicting Styles Be Detected? How Personality Screens Make Tribunal Matches for More Effective Arbitration, Alternatives, Vol. 28, No 11, December 2010, p. 205, 209-213 (part 2 of 2-part article). M. Moore, How to .. Select an Arbitrator, The Resolver (Chartered Institute of Arbitrators), August 2013.
D. Rothman et al, Litigators Views and Goals Vary on Selecting their Arbitrators, Alternatives, Vol. 22, No. 1, January 2004, p. 13-15. C. R. Seppala, Recommended Strategy for Getting the Right International Arbitral Tribunal: A Practitioners View July 4, 2008. M. Young, Rethinking Mediation: A New and Better Path to Neutral Selection, Alternatives, Vol. 30, No. 5, May 5, 2012, p. 111-114. Slide 55 Michaelson ADR Chambers 2. Misconceptions of Arbitration a) b) c) d) CPR Arbitration Appeal Procedure, CPR, 2007. CPR Rules for Non-administered Arbitration of Patent & Trade Secret Disputes, CPR, 2005. E. Sussman, Why Arbitrate? The Benefits and Savings, New York State Bar Association Journal, October 2009. Corporate choices in International Arbitration Industry Perspectives, 2013 International Arbitration Survey by Price Waterhouse Cooper and Queen Mary University of London, School of International Arbitration, 2013. e) T. Stipanowich et al, Living with ADR: Evolving Perceptions and Use of Mediation, Arbitration and Conflict
Management in Fortune 1000 Corporations, Legal Studies Research Paper Series, Paper Number 2013/16, Pepperdine University School of Law, March 2013. f) C. E. von Kann, Not so Quick, Not So Cheap But a new hybrid form of commercial arbitration has value, too, Legal Times, Vol. 27, No. 38, September 20, 2004. 3. Controlling Arbitration Costs a) Alternative Dispute Resolution Basics FAQs, American Arbitration Association, AAA Online Library. b) Corporate Choices in International Arbitration Industry Perspectives, 2013 International Arbitration Survey, Price Waterhouse Coopers and Queen Mary University of London, 2013. c) CPR Global Rules for Accelerated Commercial Arbitration, CPR, August 2009. d) CPR Protocol on Determination of Damages in Arbitration, CPR, 2010. e) CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration, CPR, 2009. f) Protocol for E-Disclosure in Arbitration, Chartered Institute of Arbitrators, October 2008. g) Protocols for Expeditious, Cost-Effective Commercial Arbitration, College of Commercial Arbitrators, 2010. h) S. Nesbitt et al, The Cost of International Arbitration, Lovells, July 2008. i) Techniques for Controlling Time and Costs in Arbitration Report from the ICC Commission on Arbitration, ICC, 2007. j) T. E. Willging et al, In Their Words: Attorney Views About Costs and Procedures in Civil Litigation, Federal Judicial Center, 2010. 4. Mediation a) Report of the CPR Patent Mediation Task Force Effective Practices Protocol, Draft report, CPR, January 2013. b) E. Sussman, The Reasons for Mediations Bright Future, New York Dispute Resolution Lawyer, New York State Bar Association, Vol.1, No. 1, Fall 2008.