As noted in Part I of this series, patent litigation can be a mechanism for parties to spar and evaluate patent rights, as well as each other, prior to making the business agreements that settle such disputes. Once a patent is asserted to be infringed with the filing of a lawsuit, the dispute can become risky and costly for both sides. Opportunities for settlement, discussed in Part II of this series, may appear and foster discussion. But agreeing on terms for resolution of a patent dispute often requires the assistance of a neutral third party in some form of Alternative Dispute Resolution (“ADR”). We discuss several options here.

It is rare for a patent litigation to continue all the way to trial and the majority are resolved by settlement between the parties, as discussed in Part I. As discussed in Part II, parties can settle at a variety of stages in the litigation process. But how do they do it?

In some cases, the parties themselves may discuss and agree on terms for settlement, with and/or without the involvement of their attorneys. For example, in a patent litigation involving mid-sized competitors, the company CEOs might enter into a personal dialogue and decide ― as a matter of business ― on a deal that ends the litigation. Alternatively or in addition, attorneys for the parties might effectively broker such a deal, exchanging and discussing offers for settlement until agreement is reached.

In many cases, though, reaching an agreement that ends patent litigation requires some help from an outsider. The Alternative Dispute Resolution Act of 1998 (the “Act”) defined ADR as “any process or procedure, other than an adjudication by a presiding judge, in which a neutral third party participates to assist in the resolution of issues in controversy.” It recognized that ADR can provide “innovative methods of resolving disputes” and may increase both “satisfaction of the parties” and “efficiency in achieving settlement.”

Importantly, the Act required the federal courts to implement ADR programs and authorize the use of ADR in every civil action. Patent cases can only be filed in a federal court, so this means that some form of court-sanctioned ADR is available in every patent litigation.

The various federal courts have responded to the Act in various ways, as summarized and referenced here. In some courts, such as those in the Northern District of California, ADR is mandatory and there is a rigid process by which the parties assess and select an ADR process. In most courts, ADR is available but not required. Instead, it can be requested by one or more of the parties and occurs in response to a Court’s order.

The form of court-sponsored ADR also varies. It may be, for example, an “evaluation” of the case or “settlement conference” with another judge (usually a magistrate judge) or “mediation” between the parties by a designated third-party. An early neutral evaluation or “ENE” may help the parties appreciate the merits of the case and understand what constitutes reasonable terms for settlement. This can be useful when the parties are not fully or well-informed about the merits. A judicial settlement conference may help the parties explore alternative provisions for settlement. This can be useful when there are strong-minded or influential decision-makers involved. Mediation may combine the benefits of educating the parties on the merits of their positions and overcoming personality-based blocks to settlement.

Participation in an ENE or judicial settlement conference justifiably requires court approval, as the court is expending its own resources. However, with or without an order of the court, parties may participate in private settlement discussions including mediation by a party of their own choosing. So-called “private mediation” can be more effective than court-sponsored ADR including court-sponsored mediation, in part because the parties are obliged to pay, often significantly, for the services. Indeed, private mediation may be the most common mechanism for settling patent litigations, especially higher value patent litigations.

The Federal Judicial Center’s Patent Mediation Guide offers detailed guidance for mediation of patent disputes ― including perspectives on the benefits it provides and tips for successful conduct of mediation. Many retired judges with experience presiding over patent litigations offer their services as patent mediators. Their expertise and authority can be instrumental in resolving hard-fought patent disputes. They and other qualified mediators can be found, for example, through organizations such as JAMS or intellectual property groups such as AIPLA.

All these forms of ADR will work in conjunction with ― i.e. alongside ― an active litigation. This contrasts with arbitration, which is usually an alternative to litigation and is generally used only with consent of or agreement by the parties. The continuation of the litigation can be important, as it may serve as a backstop to the dispute resolution process. It may help ensure that the parties work in good faith to avoid, if possible, what will otherwise be a mutually costly and risky endeavor.

In summary, litigants who position themselves in patent litigation to take advantage of opportunities for settlement and are prepared to engage appropriately in alternative dispute resolution will be best positioned to use patent litigation to achieve their business goals.