Is Your Settlement Agreement Durable? Leaving Terms Open for Future Agreement

Though the recent Ninth Circuit opinion of Nutraceuticals v. Mucos Pharma (.pdf) is notable for setting the standard for preliminary injunctive product recall relief in a trademark infringement action, IP ADR's interest is stimulated by the settlement agreement that purportedly resolved the parties' dispute but failed to head-off this expensive and protracted litigation (after the preliminary injuncitve relief hearings; the appeal; and, the return of the case to the trial court, what further litigation damage do the parties have the stomach and budget to sustain?)  With apologies to Strunk & White & my 8th grade English teacher who first assigned The Elements of Style for the hopelessly run-on sentence above.

So we weigh in on the Settlement Agreement that failed to settle the parties' dispute, which ominously provided that

[w]ithin 30 days after the Effective Date, MUCOS and Marlyn shall use their good faith efforts to enter into a formal distributorship agreement containing the following terms and such other terms as may be mutually agreed to or are customary in the industry.” No such formal agreement was ever executed.

Though the impossible to define "good faith" provision saves this clause from being an illusory "agreement to agree," the parties - already having been at odds - cannot both have anticipated that a "formal distributorship agreement" would follow.

What are the parties to do when they are ready to settle their past disputes but not yet ready to craft the agreement that will govern their future relations?  Here are a few suggestions from someone who helps IP attorneys close deals the principals are not quite yet prepared to cast in stone:

  • give the parties more than thirty days to conclude a deal that likely requires lengthy negotiations and strategic planning on both sides
  • create consequences (or at a minimum, options) in the event the parties "good faith efforts" fail to produce an agreement such as the grant or withdrawal of benefits likely traded to get the deal done in the first place
  • include in the settlement agreement a detailed list of provisions both parties are required to negotiate in "good faith."  Such a list:
    • should anticipate those deal points upon which the parties would have to agree (or concede) so that unexpected demands would not scuttle the planned negotiation prematurely; and,
    • provides a structure for the parties to follow in the weeks followingthe conclusion of the Settlement Agreement that keeps paranoia about the other side's intent to over-reach or engage in bad faith somewhat at bay.
  • Consider whether a neutral third party should be included either in negotiating the future relationship, either as a facilitator of agreement or as a neutral decision-maker on terms the parties are willing to submit to that individual

There are dozens more ways future agreements premised upon "good faith" obligations to negotiate can be enhanced.  The parties to the dispute are always in the best position to brainstorm what those provisions might be.  Based twenty-five years of legal practice and five of neutral practice, I give any skeletal "good faith" negotiation provision a 10% chance of success.  My pessimism is, of course, based on the fact that all I ever see is conflict - never the happily successful agreement crafted by a first-rate transactional lawyer so I'll ask my friend Ken Adams -- he of Adams Drafting -- to chime in here if he has the time and inclination.

Oh Canada! Will It Abandon Attempt to "Losso a Locomotive with Cobwebs"?

(image from the Digital Standards Organization)

Thanks to Law is Cool (An Extraordinary About Face on Copyright Reform) we learn that Canadian Ministers Finally Embrace Canada's Digital Future.  Below, an excerpt from the LawBytes column of TheStar.com.

[Industry Minister] Clement went first, noting how much has changed in the year since Bill C-61, the much-criticized copyright bill, was introduced. He said it was ``at least a somewhat different'' public policy environment and committed to a broad copyright consultation this summer. Canada last consulted on copyright in 2001, so the promise of open consultation alone represents an important shift in approach.

[Canadian Heritage Minister] Moore was even more forceful with remarks . . .  emphasiz[ing] the power of new technologies, saying that standing in the way of digital developments is akin to "trying to lasso a locomotive with cobwebs."

Moore continued, acknowledging "the old way of doing things is over. These things are all now one. And it's great. And it's never been better. And we need to be enthusiastic and embrace these things."

Read on here.

One Day You're a 140-Character Text Box and the Next Day You're a Defendant

This Time, Tony La Russa Settles With Twitter for Real Print

St. Louis Cardinals manager Tony La Russa has officially dismissed his lawsuit over a fake profile on Twitter as part of a settlement in which the social media website did not have to pay him anything.

A settlement of the case -– the first to be filed by a celebrity against Twitter –- was first reported in early June, with La Russa saying Twitter had agreed to pay his legal fees and make a donation to his Animal Rescue Foundation (ARF).

Twitter responded with a statement in which it said, “Twitter has not settled, nor do we plan to settle or pay” and described the suit as “an unnecessary waste of judicial resources bordering on frivolous.”

From On.Point - continue reading here.

Tactics of the Adept Practitioner in Modern IP Mediation

I'm sharing today a power point presentation that was the basis of an ALI-ABA IP Mediation seminar conducted by me and David Donoghue of Holland + Knight.  The course outline with bios is here.  The course itself can be found here.  This presentation is modified from one I presented with the Hon. John Leo Wagner of Judicate West at an ABA conference.  Many thanks to Judge Wagner for his insights, many of which are captured here.

Texas Jury Buys Tivo's Bull?

IP Trial Strategy: Buying Tivo's Bull

Zusha Elinson
The Recorder
June 26, 2009

 

As the make-or-break patent trial between Tivo Inc. and EchoStar Corp. got under way in Marshall, Texas, Tivo's top brass had an idea: Let's buy a cow.

It was late March in 2006, and that meant it was time for Farm City Week in the home of America's most popular venue for patent litigation. Featuring the Harrison County Cattlemen's Ball and the 4-H Cake Show, the main event at Farm City Week is the livestock auction, where prize-winning steers, heifers, lambs, goats, broiler chickens and rabbits are sold by dedicated young farmers.

Samuel Baxter, perhaps the best-known lawyer in the Eastern District of Texas, was representing Tivo, along with Irell & Manella's Morgan Chu, the big-time, bow-tie-loving patent litigator. Baxter recalls now how execs at Tivo, an Alviso, Calif., company that makes set-top digital video recorders, told him, "Wouldn't it be great if we could go to the auction and buy a cow because the people have been so nice to us here."

The McKool Smith lawyer did that and more. Baxter bid on the Grand Champion Steer -- the most prized farm animal at the auction -- and bought it for what at the time was a record-breaking sum of around $10,000. The lucky steer-raiser was a high-school senior from Hallsville, who, like all the students selling animals, got to keep the money for herself to use for college. They named it Tivo.

Perhaps lacking sufficient grazing land in Alviso, Tivo offered to give its namesake back to his original owner, Baxter says, but she couldn't take their bull because she was headed off to college. "We turn 'em into steaks and burgers," he says.

Cynics might view it as a rich, out-of-town company trying to influence the jury pool in a small city of 25,000, where the grand champion is big news. But Baxter says it was just a symbolic gesture of kindness on the part of his client. "I thought it was great that the Tivo people were so nice and wanted to help out in the community like that," he says.

Two weeks later, on April 13, the Marshall jury found EchoStar (now known as DISH Network) guilty of infringing Tivo's "time warp" patent, used in technology that lets viewers record, fast-forward and rewind TV shows. And it awarded Tivo $74 million in damages.

Continue reading here.  I'm wondering what Anne Reed of Deliberations has to say about this.

Make Progress, Not War: IP in the 21st Century

What can be done to . . . . to stop the international “IP war”?

Read the full-on analysis of the problem to appreciate this excerpt of the solution at Duncan Bucknell's IP Think Tank here. (or download a .pdf here)

The lengthy article by by Dr. Roya Ghafele, Lecturer, University of Oxford is more than worth your time.  I'm hoping that Duncan's posting -- and ours -- will begin a new conversation in the IP blogosphere about our continuing struggle to come to terms with the tensions created by the new global connected culture and the old law of intellectual property.  Below, an excerpt of some proposals for resolution.

Both, business and civil society have an “incentive” to move from a stage of war to a constructive, solution driven approach. For business the increasingly negative publicity that IP is giving it, may actually translate into serious bottom line profit losses due to loss of reputation and image. For civil society again, the stage of continuous critique can not be maintained either. At some point in time donors do want to see solutions and constructive output. Thus, there are good chances to move from a “win” to a “win-win” situation.

So far, IP has been largely looked upon from a legal perspective, which comes as no surprise since current educational systems worldwide only train lawyers in IP. Economists, political scientists, sociologists, historians or even engineers know most of the times very little about intellectual property.  A pity, since it is exactly this multidisciplinary perspective that is needed to turn IP into a tool for economic, social and cultural prosperity and leverage it as a means for wealth and welfare creation.

A different perspective on IP, one that looks at it as a strategic asset more than a legal framework gives way to new managerial perspectives on intellectual property.  While so far, the readjustment of the IP system has primarily been looked upon through the perspective of compulsory licensing (again a very legal approach to IP management), few have taken a more pragmatic approach and asked what types of management choices may work towards obtaining inclusion and an equitable distribution of research and development findings within the existing intellectual property framework.

Public interest IP management seeks to offer strategic choices on how to reconcile the existing contradiction between the exercise of exclusive rights and the universal right to equitable access. Innovation functions as a public private partnership; according to current research by Ashley Stevens at Boston University the vast majority of FDA (Food and Drug Administration) approved pharmaceuticals were developed with public sector support. While the public sector is asked to thoroughly negotiate agreements in the public interest, business can explore opportunities to leverage IP for the wider public interest. 

Public interest IP management comprises different approaches to ownership and access of IP and makes use of market and non-market incentives. It includes defensive publication, the pre-emptive creation of a public domain (including waiving of IP rights) and a deliberate deployment of legal exclusions. The application of the right to exclude can further be used to safeguard the open quality of a shared innovative domain. 

A good example is “humanitarian licensing” where IP is being licensed to market participants on the condition of several tied in arrangements.  In this case the licensor tends to reserve the right to license the technology also out to developing country producers or allow for parallel trading. It is further common practice to assure in licensing agreements “public interest” clauses that aim not only to assure commercial, but also public welfare gains. In practice, “humanitarian licensing” works if regulatory frameworks are in place clarifying ownership over IP developed in the public domain as well as sufficient practice in managing IP. 

A comprehensive, strategic IP approach furthermore represents the public interest as early as the selection phase of a research topic and plays a decisive role in the interaction between the public and the private sector. An ex-ante IP strategy is different from an ex-post intervention. The latter are only public interest remedies treating IP as a commodity, where negotiation is only possible over price. 

Read on here.

I'm most interested in what Dennis Crouch at Patently O, Jackie Hutter at the IP Asset Maximizer Blog, David Donoghue at Chicago IP Litigation Blog and Jeremy Phillips at IP Kat have to say on this topic.

What does it all mean?

Thanks to Geoff Sharp for posting this video at Mediator Blah Blah after a lawyer told him he "didn't believe in email.

 

What does it all mean?  It means that our ability to adapt, to think critically, and to innovate is critical to our survival as an economic power on the planet.

What does it mean to you?

Yes You ARE Making Irrational Decisions: What to Do About It

From National Public Radio with thanks to Don Philbin, mediator and arbitrator in San Antonio, Texas for posting it to the Commercial and Industry Arbitration and Mediation Group on LinkedIn.

People Make Irrational Choices

Kahneman was surprised by the pure visceral power of his own certainty. He eventually coined a phrase for it: "illusion of validity."

It's a problem that afflicts us all, says Kahneman, who won the 2002 Nobel Prize in economics for his work on this subject. From stockbrokers to baseball scouts, people have a huge amount of confidence in their own judgment, even in the face of evidence that their judgment is wrong.

But that mistake is just one of many cognitive errors identified by Kahneman and his frequent collaborator, psychologist Amos Tversky. For more than a decade, the two worked together cataloging the ways the human mind systematically misjudges the world around it.

For instance, Kahneman and Tversky identified "anchoring bias." It turns out that whenever you are exposed to a number, you are influenced by that number whether you intend to be influenced or not.

This is why, for example, the minimum payments suggested on your credit card bill tend to be low. That number frames your expectation, so you pay less of the bill than you might otherwise, your interest continues to grow, and your credit card company makes more money than if you had not had your expectations influenced by the low number.

Through their research, Kahneman and Tversky identified dozens of these biases and errors in judgment, which together painted a certain picture of the human animal. Human beings, it turns out, don't always make good decisions, and frequently the choices they do make aren't in their best interest.

Continue reading (or listen to the broadcast) here.

Want to avoid the cognitive errors that result in sub-optimal negotiated resolutions?  Check out my power point presentations on cognitive biases here.

Beat the Recession with Negotiation Training Now!

Unsurprising Speculation on Bratz Litigation Resolution: Licensing Agreement in the Works

 

Doll Dispute Edges Toward a Deal from the Los Angeles Daily Journal (for subscribers only; excerpt below)

RIVERSIDE - The Bratz doll copyright fight appears to be edging closer to a settlement, with lawyers for two dueling toy manufacturers reviewing a mediator's proposal with their clients in attempts to resolve their differences.

 

By Jason W. Armstrong
Daily Journal Staff Writer

The jurist overseeing the case, U.S. District Judge Stephen G. Larson, said in a case filing late Tuesday that "progress was made" at a court-ordered settlement conference Monday. He didn't go into specifics.

Last month, the court-appointed mediator, Pierre-Richard Prosper, told the judge in a hearing that while he felt the parties still had a lot of work to do to reach a settlement, they were "closer than ever" to resolving the five-year-old case, in which Mattel is fighting for control of rival MGA Entertainment's popular Bratz line. Larson then postponed discovery for a second phase of the trial to give the lawyers a chance to discuss a possible settlement with Prosper.

Although the lawyers aren't discussing the settlement talks, some intellectual property experts have speculated that resolution options for the case could include a licensing agreement in which MGA would continue making the dolls and pay Mattel a chunk of the proceeds.

The case is Bryant v. Mattel, CV04-9049 (C.D. Cal, filed 2004).