There Is More Than One Way to Skin A Cat: Cost Effective Alternatives to Litigating IP Disputes

1. There Is More Than One Way to Skin A Cat: Cost Effective Alternatives to Litigating IP Disputes Presented by the Corporate Practice and ADR Committees May 14, 2009

2. HOW TO ASK A QUESTION

3. Our Panel - Law Firm Sponsor and Speaker • Lee Carl Bromberg, Partner and Founder Bromberg & Sunstein

4. Our Panel – Speakers (cont.) • The Honorable Louisa S. Porter • United States Magistrate Judge, United States District Court for the So. District of California

5. Our Panel – Speakers (cont.) • Honorable William F. McDonald (Ret.) • JAMS

6. Our Panel – Speakers (cont.) • Thomas J. Stipanowich • Professor of Law and Academic Director • Straus Institute for Dispute Resolutionm Pepperdine School of Law

7. Our Panel – Speakers (cont.) • Freddie K. Park • Vice President, Intellectual Property for • BioForm Medical, Inc.

8. Our Panel – Moderator • Georgann Grunebach, VP Intellectual Property, Fox Entertainment Group • Vice Chair, Corporate Practice Committee

9. Our Topic • Program Summary: • Corporate counsel are constantly confronted with handling disputes about intellectual property.   • Disputes may range from oral exchanges, to written exchanges, to formal papers filed with adjudicatory tribunals.   • Each dispute deserves attention and requires resources to resolve. • Through generalized examples the presenters will provide practical ideas for using and customizing ADR for creatively resolving domestic and international IP disputes in comparison to litigated alternatives.  

10. WORST CASE SCENARIOS

11. chocolate

12. Dialogue Dialogue Dialogue

13. BE CREATIVE

14. I AM NOT YOUR MOM!!!!!!!!!!

15. Worst ADR Experience • Defendant rejects judge’s suggested compromise

16. An Expensive Litigation Follows: • Detailed damages models prepared • Client witnesses presented • Reasonable royalty, lost profits experts • Accounting experts • Marketing and technical experts • Four-week trial • Plaintiff’s resources exhausted • Defendant’s resources expended But …

17. Judgment for $37.5 Million (2009 Dollars)

18. Your Money is FLYING AWAY. . .

19. Drafting and Negotiation of Effective ADR Contract Terms Lee Carl Bromberg Freddie Park Hon. Louisa S. Porter Hon. William F. McDonald (Ret.)

20. Consider Before You Sign!

21. Drafting Arbitration Clauses • Necessary provisions: • Scope of arbitration • Arbitrator selection procedure • Choice of rules • Reference to emergency procedures • Location of arbitration • Choice of law • Choice of language • Detailed arbitration clauses are rare since parties cannot foresee nature of future fight

22. Partial (But Long) List of Issues to Consider in Choosing to Arbitrate • Identify administering agency, whose rules will govern • Must arbitration be preceded by mediation? • Number of arbitrators • Language to be used • Specify the issues submitted for determination • Governing substantive law • Place of arbitration, whose law controls procedure, remedies, enforcement

23. Issues List (cont’d) • Process for interim relief? • Consider authorizing arbitrator: • to control discovery • to exclude evidence if irrelevant or redundant • Confidentiality Issues • Recite expectation that process will conclude in X months, and award delivered within Y days thereafter • Naked or reasoned award • May attorney’s fees, costs be awarded?

24. JAMS Standard Commercial Arbitration Clause: • Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in (insert the desired place of arbitration), before (one) (three) arbitrator(s). At the option of the first to commence an arbitration, the arbitration shall be administered either by JAMS pursuant to its (Comprehensive Arbitration Rules and Procedures) (Streamlined Arbitration Rules and Procedures), or by (name an alternate provider) pursuant to its (identify the rules that will govern). Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction.

25. American Arbitration Association (“AAA”) Basic Clause • Any controversy or claim arising out of or relating to this contract, or any breach thereof, shall be settled by arbitration in [place] in accordance with the [commercial, patent] arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

26. International Chamber of Commerce Clause: • All disputes rising in connection with the present contract shall be finally settled under the rules of conciliation and arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said rules.

27. Mediation First, AAA Clause: • If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure. If they do not reach such solution within a period of 60 days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration administered by the American Arbitration Association in accordance with the provisions of its Commercial Arbitration Rules.

28. Mediation First, JAMS “Step” Clause: • The parties agree that any and all disputes, claims or controversies arising out of or relating to this Agreement shall be submitted to JAMS, or its successor, for mediation, and if the matter is not resolved through mediation, then it shall be submitted to JAMS, or its successor, for final and binding arbitration pursuant to the arbitration clause set forth above. Either party may commence mediation by providing to JAMS and the other party a written request for mediation, setting forth the subject of the dispute and the relief requested. The parties will cooperate with JAMS and with one another in selecting a mediator from JAMS panel of neutrals, and in scheduling the mediation proceedings. The parties covenant that they will participate in the mediation in good faith, and that they will share equally in its costs. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator or any JAMS employees, are confidential,

29. Mediation First, JAMS “Step” Clause (cont’d): privileged and inadmissible for any purpose, including impeachment, in any arbitration or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation. Either party may initiate arbitration with respect to the matters submitted to mediation by filing a written demand for arbitration at any time following the initial mediation session or 45 days after the date of filing the written request for mediation, whichever occurs first. The mediation may continue after the commencement of arbitration if the parties so desire. Unless otherwise agreed by the parties, the mediator shall be disqualified from serving as arbitrator in the case. The provisions of this Clause may be enforced by any Court of competent jurisdiction, and the party seeking enforcement shall be entitled to an award of all costs, fees and expenses, including attorneys' fees, to be paid by the party against whom enforcement is ordered.

30. One Arbitrator May Cost Less Than Three • One capable and attentive arbitrator can work his/her way to an arbitral award at less expense than three • Parties may be reluctant to entrust their case to a single arbitrator • Under AAA commercial rules, where the amount in controversy exceeds $1 million, either party may insist upon three arbitrators instead of one. The AAA is likely to grant that request in its discretion. AAA, Commercial Arbitration Rules, R-15.

31. Baseball Arbitration • Each party submits an award amount. • After hearing, arbitrator must pick one of them; cannot compromise.

32. High – Low Arbitration • Highest and lowest amounts that arbitrator may award are agreed (or submitted) in advance. • Arbitrator must issue award at or within the high-low limits

33. Discovery Limits • Number of interrogatories, document requests, depositions, requests to admit • Confine to specific issues • Limit to period of X months • Bifurcate: Liability first, damages only if liability is found • Early claim construction (patent) • Explicit authorization for arbitrator control • Authorize arbitrator to impose sanctions

34. Useful Arbitration Rules Websites • AAA: www.adr.org/ • JAMS: www.jamsadr.org • Intl Chamber of Commerce: http://www.jus.uio.no/lm/icc.arbitration.rules.1998/ • WIPO Arbitration and Mediation Center: http://www.wipo.int/amc/en/arbitration/index.html • London Court of International Arbitration: http://www.lcia-arbitration.com/

35. SETTLEMENT/LICENSE AGREEMENT • THIS AGREEMENT PROVIDES FOR DIFFERENT MECHANISMS TO RESOLVE DIFFERENT DISPUTES: • MEDIATION FIRST FOR ALL DISPUTES • ARBITRATION FOR DISPUTES REGARDING THE AGREEMENT ITSELF • ARBITRATION FOR DISPUTES REGARDING PATENT COVERAGE OF LICENSEE’S PRODUCTS • LITIGATION FOR DISPUTES REGARDING INVALIDITY/ENFORCEABILITY OF LICENSED PATENTS Freddie K Park Vice President, Intellectual Property

36. 10.9 Dispute Resolution for Other thanPatent Coverage Disputes (a) Mediation • In the event of any disagreement between LICENSOR and LICENSEE arising out of the provisions of this Agreement (including a disagreement about its existence, validity, enforceability, interpretation or the coverage of a LICENSOR patent), which, after written notice from one party to the other, LICENSOR and LICENSEE are unable to resolve amicably within a thirty (30) day period of time, an officer level representative from each company shall meet in person in New York City, or other mutually agreed upon location, within forty-five (45) days after written notice to discuss resolution of the dispute. Freddie K Park Vice President, Intellectual Property

37. (b)Arbitration • Any controversy or claim not successfully mediated in accordance with Section 10.9(a) and arising out of, in connection with or relating to the interpretation, performance or breach of this Agreement or of any document or agreement delivered under this Agreement, including any claim or controversy based on contract, tort or statute, but excluding any claim or controversy concerning the validity, and/or enforceability of intellectual property rights under the laws of any nation (which shall be governed by Section 10.9(d) below), shall be settled by arbitration. Any controversy concerning whether a dispute is an arbitrable dispute shall be determined by the arbitrator. The parties intend that this agreement to arbitrate be valid, specifically enforceable and irrevocable. Such arbitration shall be conducted in either the City of New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”), if arbitration is requested by LICENSEE, or the city of Brussels, Belgium, according to the same rules, if requested by Licensor, as modified below: Freddie K Park Vice President, Intellectual Property

38. (ii) Neither party shall communicate separately (ex parte) with the arbitrator. (iii) Judgment upon the arbitrator’s award may be entered in any court having jurisdiction thereof and, where applicable, shall be in accordance with the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (i) Disputes shall be heard and determined by a single neutral arbitrator, who may be selected from the list of agreed upon arbitrators set forth in Exhibit H, or if the parties are unable to agree, shall be selected in accordance with the Commercial Arbitration Rules of the AAA, and disputes shall proceed under such rules, as supplemented by the Supplementary Procedures for International Commercial Arbitration, and shall be conducted in English in Brussels, if requested by LICENSOR, or in New York, if requested by LICENSEE. Freddie K Park Vice President, Intellectual Property

39. (iv) At the conclusion of the arbitration proceedings, the arbitrator shall render an award in writing and shall specify the factual and legal basis for the award. The award shall be final, binding and non-appealable. • (v) The arbitrator shall not be authorized or entitled to include as part of any award any special, exemplary, punitive or consequential damages, regardless of the nature or form of the claim that has been submitted to arbitration. • (vi) All patent coverage disputes, not mediated successfully according to Article 10.9(a), shall be submitted according to the procedures of Exhibit F. Freddie K Park Vice President, Intellectual Property

40. (c) Costs of Arbitration • The prevailing party shall be awarded all cost and fees. “Costs and fees” means all reasonable pre-award expenses of the arbitration, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees and reasonable attorneys’ fees and expenses. Notwithstanding the foregoing, the arbitrator may make such different award of costs and fees as the arbitrator may determine is required under the indemnification provisions of this Agreement. Freddie K Park Vice President, Intellectual Property

41. THIS PROVISION PROVIDES FOR LITIGATION TO RESOLVE DISPUTES RE THE VALIDITY AND/OR ENFORCEABILITY OF THE LICENSED PATENTS • (d) Venue in Intellectual Property Disputes • With respect to any dispute concerning the validity and/or enforceability of the intellectual property rights shall be resolved in the U.S. Federal District Courts. This provision, however, shall not preclude the parties from an informal one day mediation of patent coverage issues as contemplated by Article 10.9(a). Freddie K Park Vice President, Intellectual Property

42. 10.10 Governing Law • This Agreement shall be construed, and the legal relations between the parties hereto shall be determined, in accordance with the laws of the State of California, without reference to conflicts of laws principles. • 10.11 Venue and Jury Waiver • In any litigation relating to or arising out of this agreement, the parties agree not to contest jurisdiction or venue if the action is filed in the federal or state courts of the Northern District of California. The parties also agree that in any litigation relating to or arising out of this agreement in which they shall be adverse parties they shall waive the right to trial by jury. Freddie K Park Vice President, Intellectual Property

43. THIS IS THE ARBITRATION PROVISION RE: PATENT COVERAGE DISPUTES WHICH SETS OUT A VERY DETAILED ARBITRATION PROCESS AND INCLUDES A LIST OF PRE-SELECTED ARBITRATORS • 1.10 Licensed Product The term "Licensed Product" shall mean any system or component thereof that is covered by at least one Claim of any one of the REDACTED Patents set forth in Exhibit A, or is used in a method covered by any Claim of at least one of the REDACTED Patents set forth in Exhibit A. • If a dispute arises as to patent coverage, REDACTED shall be required to identify in writing, with particularity, such Claims it contends cover the REDACTED products. Such patent coverage issues will be resolved according to the procedures set forth in Exhibit F. Freddie K Park Vice President, Intellectual Property

44. EXHIBIT FALTERNATIVE DISPUTE RESOLUTION • The parties recognize that from time to time a patent coverage dispute may arise relating to either party’s rights or obligations under this Agreement. The parties agree that patent coverage disputes shall be resolved by the Alternative Dispute Resolution (“ADR”) provisions set forth in this Exhibit, the result of which shall be final and binding upon the parties. Arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”) as modified herein. Freddie K Park Vice President, Intellectual Property

45. To begin the ADR process, a party first must send written notice of the patent coverage dispute to the other party for attempted resolution by good faith negotiations between their respective designees within thirty (30) days after such notice is received (all references to “days” in this ADR provision are to calendar days). If the matter has not been resolved within thirty (30) days of the notice of dispute, or if the parties fail to meet via at least video conference within such thirty (30) days, as indicated in Article 13.1 or if not resolved after the officer level mediation within forty-five (45) days, either party may initiate an ADR proceeding as provided herein. The parties shall have the right to be represented by counsel in such a proceeding. Freddie K Park Vice President, Intellectual Property

46. 1. To begin an ADR proceeding, a party shall provide written notice to the other party of the coverage issue(s) to be resolved by ADR. Within fourteen (14) days after its receipt of such notice, the other party may, by written notice to the party initiating the ADR, add additional coverage issue(s) to be resolved within the same ADR. • 2. Within twenty-one (21) days following receipt of the original ADR notice, each of the parties shall select a neutral patent attorney from the Exhibit H list of previously agreed upon patent attorneys arbitrators to prepare a written decision, which shall contain a succinct, 1-page finding(s) of fact and conclusion(s) of law to support its decision. Freddie K Park Vice President, Intellectual Property

47. 3. A joint notice letter will be sent to each independent attorney so neither attorney will know which party selected which attorney. Both parties are precluded from communicating this information to either neutral attorney.Nothing in this Agreement shall exclude the parties from agreeing to use only one attorney to resolve the coverage dispute(s). Freddie K Park Vice President, Intellectual Property

48. Within five (5) days after selection of the neutrals, each party shall submit the following to the other party and the neutral attorneys: • (a) a copy of all exhibits on which such party intends to rely in any written presentation to the neutrals; • (b) a proposed ruling on each patent to be resolved. The proposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one (1) page per issue. • (c) a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed fifty (50) pages. This page limitation shall apply regardless of the number of issues raised in the ADR proceeding. Freddie K Park Vice President, Intellectual Property

49. 4. The decision of each neutral shall be rendered within sixty (60) days of notification of selection and shall be transmitted in writing to the notice designee for each party. If both attorneys agree on the designated issue(s), the decision(s) shall be final or, if based upon the decisions, the parties do not agree on a resolution, binding upon and non-appealable by the parties. If the attorneys do not agree, in their written opinions, both attorneys shall, within fourteen (14) days, select a third attorney from Exhibit H who shall be provided with copies of both decision(s) and shall within forty-five (45) days of selection, render a decision, which decision shall be final and binding upon the parties. Freddie K Park Vice President, Intellectual Property

50. 5. Not later than twenty (20) days after selection, the third attorney may conduct a conference call with one attorney and/or one client representative for each party after receiving both written decisions. The third attorney shall proceed to reach a decision which shall be final and binding and non-appealable. If deemed necessary, the third attorney shall conduct a hearing to take place at a mutually convenient location decided by him/her. The hearing shall take place in New York City. Alternatively, if both parties agree, the hearing shall be conducted via video conference. Freddie K Park Vice President, Intellectual Property