By Xenia P. Kobylarz
IP Law & Business/February 2008

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In the fall of 2004, Japanese camera maker Nikon Corp. announced the settlement of its nearly decade-long patent battle with bitter rivals ASML Holding NV, a Dutch company, and Carl Zeiss SMT AG of Germany. To those following the case, the news came as a surprise: The three companies had been slugging at each other endlessly in courts across three continents in an attempt to dominate the $5 billion market for optical lithography, a technology used in the manufacture of computer chips and liquid crystal displays. Harold McElhinny, a litigation partner at Morrison & Foerster in San Francisco and Nikon's lead settlement negotiator, got much of the credit for obtaining a $145 million settlement for Nikon. But both sides say that some of the credit for the agreement should go to retired magistrate judge Edward Infante.

Infante is a mediator for alternative dispute resolution provider JAMS (short for Judicial Arbitration and Mediation Services) in San Francisco, and U.S. district court chief judge Marilyn Hall Patel of the Northern District of California, the presiding judge in one of the pending cases, sent the warring parties to him, hoping Infante would be able to broker peace. He did.

But only after ten days of intense settlement negotiations that could easily rival Palestinian-Israeli peace talks in their difficulty. The parties were tremendously far apart in their views of who had a stronger case, how much their respective technologies were worth, who should pay and how much. The long, acrimonious, and expensive court battles had made the situation even more volatile than typical settlement negotiations, McElhinny says. Infante took charge of the situation from the start by arranging several separate daylong caucuses with each party before bringing them together for a joint mediation session. By the time the parties were ready to meet, Infante had already cobbled together a settlement proposal that included a cross-licensing deal. He had set a low and high dollar range that the parties could negotiate within and had floated the idea of total peace where the companies would never have to see each other in court again. "Judge Infante was enormously helpful," says William Lee of Wilmer Cutler Pickering Hale and Dorr, who represented ASML. In fact, Infante had so much credibility that the parties left it to him to draft the terms of the subsequent licensing agreements.

Patent settlement mediators like Infante rarely get the publicity or recognition reserved for top patent litigators. For the most part mediators toil alone and in relative obscurity, deliberately shunning publicity, as they are expected to keep everything that transpired during the mediation process private and confidential. But as companies become savvier about managing the ever-escalating cost of patent litigation (the most recent estimates by the American Intellectual Property Law Association put the median cost of a patent case between $1 million and $4 million, depending on the dollars at stake), experienced patent settlement mediators are now as highly sought-after as star litigators. Both JAMS and the Minneapolis-based National Arbitration Forum report a double-digit percentage increase in the number of IP cases they handled in the past three years. Early in 2007, IP auction firm Ocean Tomo in Chicago launched an IP alternative dispute resolution (ADR) service by hiring a handful of mediators, including seasoned patent attorney Kevin Casey, who is a former General Electric Company engineer and U.S. Court of Appeals for the Federal Circuit law clerk. Experts predict that demand for mediation will increase even more because of the U.S. Supreme Court's eBay decision, which makes it less certain that a winning plaintiff in a patent infringement case will get injunctive relief.

To be sure, there is no shortage of good private mediators peddling their services around the country, with expertise in handling everything from employment disputes to real estate disputes. But only a handful of them are experienced enough to handle complex negotiations involved in patent settlement talks. Mediators in patent cases are expected to understand the basics of patent law, be savvy about business and technology, and have some patent litigation and licensing experience. If you add to that esoteric list of qualifications a knack for reading and persuading people, you'd narrow the pool to about 20 or so nationally, according to veteran litigators. "Mediators are key to settling cases, and if you don't get the best, you're just wasting your time," says patent litigator Claude Stern, a partner at Quinn Emanuel Urquhart Oliver & Hedges. All parties in a litigation have to agree on who to hire and to share the cost. Respected mediators charge as high as $1,000 an hour and enjoy a celebrity status, with calendars booked months in advance and long waiting lists. "It's really an art form," with the required skills honed through years of experience, says James Pooley, a partner at Morrison & Foerster.

Infante's reputation as a premier patent mediator, for example, was largely established in the 1990s, when he served as a magistrate judge and then chief magistrate judge for the U.S. district court in San Jose. There he spent half of his time conducting settlement conferences and presiding over hundreds of civil trials, many involving high-tech businesses in Silicon Valley and their IP disputes. At the same court, retired federal district court judge Eugene Lynch, Infante's fellow mediator at JAMS, also benefited from his experience of sitting on hundreds of patent trials and settlements involving Silicon Valley companies.

Irell & Manella partner Layn Phillips also parlayed his four years on the federal bench in Oklahoma into a nationally recognized mediation practice. During his time as a judge, Phillips handled more than 700 cases a year: "I was in a district that was completely buried in cases, and that gave me a unique opportunity to really develop mediation skills." Phillips resigned from the bench in 1991 at age 39 and came to California to start a litigation practice. But, he says, he "walked into this tidal wave of ADR cases" sweeping California. "Many judicial dockets at the time became huge parking lots instead of freeways because there were a large number of unfilled openings in federal courts," Phillips recalls. Since becoming a mediator, Phillips has settled more than 20 cases, with up to $100 million each at stake. More recently, he successfully mediated the $920 million derivative suit filed by shareholders against UnitedHealth Group Inc. for stock options backdating irregularities.

Having a federal judge with patent trial experience is very useful early in the negotiation process, when parties need "a reality check," says Jay Monahan, eBay's former head of IP litigation and now general counsel at Internet start-up Vuze, Inc. "If you have an experienced judge telling you what your chances are in front of the jury, then you can adjust your expectations, maybe lose your enthusiasm in pursuing the case or settle for a lower and more reasonable amount," Monahan says.

Still, not all former judges turn out to be good mediators. Many judges have been trained to rule and not negotiate. They sometimes focus too much on who is right rather than trying to reach a middle ground. Or worse, they think that they can just force one party to pay up without really understanding the business issues.

Some of the most successful mediators are former litigators. For instance, Antonio "Tony" Piazza, of the mediation boutique firm Gregorio, Haldeman, Piazza, Rotman & Matityahu in San Francisco, is one of the most renowned. The veteran mediator has his own ideas about confidentiality, declining numerous requests for interviews. His online resume says he has successfully mediated "over 3,000 major disputes throughout the United States and internationally." His most recent accomplishments include crafting the $250 million patent settlement deal between Transmeta Corp. and Intel Corp.

Piazza's third degree black belt in Aikido-the Japanese martial art based on principles of resolving conflict without escalating violence-has added to his mystique and legend. Many clients travel to Maui, where Piazza is based, to get him to handle their case. Attorneys often swap stories of being confined in a windowless room all day in a resort with the sound of surf audible. Or being fed sugar cookies and water for hours with no break. "He'll starve you to submission," jokes MoFo's Pooley. "Tony has a unique style. He creates an environment that can push people to settle. He also knows how to read people and understands what motivates them."

David Plant, a former patent litigator at IP boutique Fish & Neave (now part of Ropes & Gray), takes a different approach. The 76-year-old mediator runs a busy solo practice out of his home in New Hampshire and has been mediating patent cases for 25 years. He is mostly known for his congenial and gentlemanly style. "David is quiet and not one who tries to beat the principals over the head with the merits of the case, but he can be quite forceful if he needs to be," says veteran IP litigator Ford Farabow, a partner at Finnegan Henderson Farabow Garrett & Dunner. "Some mediators tell clients they have a lousy case, and nobody believes them. David really disregards that aspect of it and focuses on trying to get people to come up with a solution that makes business sense."

Attorneys often liken the process of picking a mediator to choosing a specialist surgeon: you pick the best person for a specific job. Knowing who to hire for what case is key to a successful settlement negotiation, according to Neel Chatterjee, a partner at Orrick, Herrington & Sutcliffe in Silicon Valley. Some mediators are "headbangers"-they scare clients by telling them how weak their cases are and how the jury will crucify them. "Sometimes you need headbangers for clients who refuse to listen," says Quinn Emanuel's Stern. Other mediators are better at massaging the egos of business executives by telling them how smart they are and coaxing them into coming up with a settlement position. Some conduct all the talks in separate caucuses, while others try to defuse tension and animosity between parties by putting them in a room for eight to nine hours to talk about anything but the case. "Mediation is very much a combination of legal analysis and psychology," says Wilmer's Lee. "The best mediators know what techniques to use and when."

For the most part, attorneys rely on word-of-mouth and reputation, which is not as reliable as some would like. Jonathan Singer, a partner at Fish & Richardson's Minneapolis office, hired a prominent Washington, D.C. mediator mentioned by a few attorneys. "We spent two days with the guy, and on the second day we realized he didn't really understand patent law," Singer says. "He thought that just because one claim was invalid, the rest of the claims were also invalid. After spending five figures per day on the guy, we were pretty much horrified, and we ended up settling the case on our own." MoFo's Pooley, who keeps his own short list of mediators, often refuses to hire anyone he doesn't know. "If you have a really difficult case, you've got to have the right person-otherwise, forget about it," he says. "In order to get people to move, you've got to understand what will scare them to act."

Phillips of Irell & Manella says that the pettiness of some of the disputes really gets to him. "Being a kindergarten teacher is some of the best training for mediation," he says. But he does like being part of a win-win situation where parties are mostly happy with the outcome. The downside to the job: It can be emotionally draining and lonely, according to David Plant. "It's all confidential so you can't even share your thoughts on the case with anyone, or celebrate some of your accomplishments."

The reluctance of some clients to try mediators with no patent settlement record makes it a difficult practice to break into. "You have to build your reputation brick by brick," Phillips says. Former patent litigators like Karen Boyd, who left her practice at Fish & Richardson in Palo Alto to concentrate on mediating patent cases last year, have to craft their own way. Boyd enrolled in mediation training where most of the participants were family practitioners, and her first mediation was a divorce case. But today she's earning her stripes by volunteering in the Northern District Court of California's ADR panel, where she handles early neutral evaluation of patent cases. She's also lucky enough to have had the chance to shadow Piazza in one of his cases.

How to fill the need for more talented and experienced patent mediators? Plant is trying to do his part: this month the International Chamber of Commerce is publishing his how-to book on mediation. The title: We Must Talk Because We Can.