28 Feb 2013 ... David A. Lax & James K. Sebenius, 3-D. Negotiation: Powerful Tools to Change
the. Game in Your Most Important Deals (2006) . . . . . . .8.
No. 12-416 IN THE
Supreme Court of the United States FEDERAL TRADE COMMISSION, Petitioner, v. ACTAVIS, INC., et al., Respondents. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF A PPEALS FOR THE ELEVENTH CIRCUIT BRIEF OF MEDIATION AND NEGOTIATION PROFESSIONALS AS AMICI CURIAE IN SUPPORT OF RESPONDENTS LEE K. VAN VOORHIS BAKER & MCKENZIE LLP 815 Connecticut Avenue, N.W. Washington, DC 20006 (202) 452-7000
THOMAS A. DOYLE Counsel of Record MICHAEL A. POLLARD ERIN M. MAUS DONNA J. WILLIAMS BAKER & MCKENZIE LLP 300 East Randolph Street Suite 5000 Chicago, Illinois 60601 (312) 861-8866 Thomas.Doyle@ bakermckenzie.com
Counsel for Amici Curiae February 28, 2013 246149
A (800) 274-3321 • (800) 359-6859
i TABLE OF CONTENTS Page TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . i TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . ii IDENTITY AND INTEREST OF AMICI CURIAE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . .4 ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 I.
A N T I T RUS T T R E AT M EN T OF PATENT SETTLEMENTS SHOULD BE CONSISTENT WITH LONGSTANDING JUDICIAL POLICIES AND STRUCTURES THAT ENCOURAGE SETTLEMENTS. . . . . . . .5
II.
RESTRICTING PATENT NEGOTIATIONS TO A SINGLE VARIABLE WILL REDUCE THE NU M BER A ND QUA LIT Y OF SETTLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .6
A. Negotiating Theory Generally Recommends Increasing the Number of Interests Discussed To Reach Settlement . . . . . . . . . . . . . .6 B. Integrative Negotiation Is Particularly Appropriate For Patent Cases. . . . . . . . . . . . . . . .8 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
ii TABLE OF CITED AUTHORITIES Page CASES Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . .10 Duffy Tool & Stamping, L.L.C. v. NLRB, 233 F.3d 995 (7th Cir. 2000) . . . . . . . . . . . . . . . . . . . 7, 11 In re Hoskins, 102 F.3d 311 (7th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . .5 McDermott, Inc. v. AmClyde, 511 U.S. 202 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Nevada v. United States, 463 U.S. 110 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 OTHER AUTHORITIES Vivian Berger et al., Summary Judgment Benchmarks for Settling Employment Discrimination Lawsuits, 23 Hofstra Lab. & Emp. L.J. 45 (2005). . . . . . . . . . . . . . . . . . . . . . . . . . .9 Roger Fisher, William Ury & Bruce Patton, Getting to Yes (3d ed. 2011) . . . . . . . . . . . . . . . . . . .6, 11
iii Cited Authorities Page Rafael Hortala-Vallve et al., An Experimental Comparison Between Free Negotiation and a Multi-issue Point Mechanism (Dep’t of Gov’t, London Sch. of Econ. and Pol. Sci., Monograph, 2010), available at http://www.coll.mpg.de/ Download/llorente/negotiation.pdf . . . . . . . . . . . . . . . .8 David A. Lax & James K. Sebenius, 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals (2006) . . . . . . .8 George Loewenstein et al., Self-serving Assessments of Fairness and Pretrial Bargaining, J. Legal Stud. 135 (1993) . . . . . . . . . . . . .9 Robert H. Mnookin, Scott R. Peppet & Andrew S. Tulumello, Beyond Winning: Negotiating to Create Value in Deals and Disputes (2000) . . . . . . . .8 Michael L. Moffitt, Disputes as Opportunities to Create Value, in The Handbook of Dispute Resolution (Michael L. Moffitt & Robert C. Bordone, eds., 2005) . . . . . . . . . . . . . . . . .7 Michael L. Moffitt, Pleadings in the Age of Settlement, 80 Ind. L. J. 727 (2005) . . . . . . . . . . . . . . .6 Howard Raiffa et al., Negotiation Analysis: The Science and Art of Collaborative Decision Making (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6, 7
1 IDENTITY AND INTEREST OF AMICI CURIAE1 All parties consent to the fi ling of this brief. The Mediation and Negotiation Professionals Amici are mediation professionals or professors with extensive experience in mediation and negotiation, and some have written extensively on these subjects. Their principal interest in this case is in the preservation and advancement of sound mediation and negotiation principles in the dispute resolution process. Amici fi le this brief because they believe that the approach to settlement advanced by the FTC will undermine the policy favoring settlements by reducing the tools mediators and negotiators have to resolve disputes. The inflexible rule proposed by the FTC tends to discourage settlements, impair their integrity, and reduce mutual settlement value. Reversal of the decision of the Eleventh Circuit will have a chilling effect on achieving effective and value-enhancing resolution of their disputes. Amicus Robert C. Bordone is the Thaddeus R. Beal Clinical Professor of Law at Harvard Law School and the founding Director of the Harvard Negotiation & Mediation Clinical Program. His research interests include the design and implementation of dispute resolution systems, 1. Pursuant to Supreme Court Rule 37.6, counsel for amici represents that no counsel for a party authored this brief in whole or in part and that none of the parties or their counsel nor any other person or entity other than amici, its members, or its counsel, made a monetary contribution intended to fund the preparation or submission of this brief. Pursuant to Rule 37.3(a), counsel for amici represents that all parties have consented to the fi ling of the brief. Letters reflecting their consent are on fi le with the Clerk.
2 the development of a problem-solving curriculum in law schools, and ADR ethics. Professor Bordone is the coauthor of two books and has published numerous articles in leading dispute resolution journals. Amicus Kenneth Cloke is Director of the Center for Dispute Resolution and a mediator, arbitrator, attorney, coach, consultant, and trainer, specializing in resolving complex multi-party confl icts. He is an Adjunct Professor at Pepperdine University School of Law, Southern Methodist University, University of Amsterdam ADR Institute, Saybrook University, and Massey University (New Zealand). He is founder and first President of Mediators Beyond Borders and has worked in dispute resolution in over 20 countries. He is author of ten books on mediation and confl ict resolution. Amicus Emily F. Epstein specializes in teaching negotiation, facilitation, mediation, and communication skills. As the founder of Oakbay Consulting, she has worked nationally and internationally with a wide range of public and private sectors, including technology, fi nancial services, biotech, law, education, insurance, health services, construction, and real estate. Ms. Epstein is currently a lecturer of law at the University of California at Berkeley School of Law, and she is a former associate faculty member at Harvard Law School’s Program on Negotiation and adjunct faculty member at the Georgetown University Law Center. Amicus Janet Martinez is Senior Lecturer and Director of the Gould Negotiation and Mediation Program at Stanford Law School where she teaches negotiation,
3 advanced negotiation, dispute systems design, and ADR law and policy. Dr. Martinez practiced law, lastly as Senior Counsel for McKesson Corporation. She was Senior Consultant for the Consensus Building Institute in Cambridge, Massachusetts, and conducts negotiation training and advising with LaxSebenius Negotiation Group, as well as with law fi rms in North America and abroad. Amicus Michael Moffitt is the Philip H. Knight Dean and Professor of Law at the University of Oregon School of Law. He was previously the Associate Dean for Academic Affairs and the Associate Director of the Appropriate Dispute Resolution Center at the University of Oregon, where he taught negotiation, dispute resolution, and civil procedure. Before joining the Oregon Law faculty, he spent several years as a consultant with Conflict Management Group, was a Lecturer on Law at Harvard Law School, and served as the Clinical Supervisor of the Harvard Mediation Program. Amicus Daniel L. Shapiro, Ph.D. is an Assistant Professor of Psychology at Harvard Medical School/ McLean Hospital, is an affi liated faculty member with the Program on Negotiation at Harvard Law School, Associate Director of the Harvard Negotiation Project, and directs the Harvard International Negotiation Program. He has been on the faculty of the Sloan School of Management, Massachusetts Institute of Technology. Dr. Shapiro has been an advisor to the International Criminal Court and contributed to numerous scholarly and popular publications. He was selected as a Burke Global Health Fellow, and has received numerous awards, including the
4 American Psychological Association’s Early Career Award and the California Mediator’s Association’s “Peacemaker of the Year” award. This brief represents the views of the amici and does not necessarily reflect the views of their employers or any other group or organization with which they may be affiliated. Institutions are listed for identification purposes only. SUMMARY OF THE ARGUMENT The FTC’s approach to patent disputes would reduce the number of successful settlements and destroy value available to both patent holders and generic manufacturers. By presuming illegality when patent settlements exchange multiple forms of consideration, the FTC would require parties to adopt a zero-sum, distributive method of negotiating on the single variable of the patent’s remaining period of exclusivity. Amici, who mediate disputes, research and write about confl ict management, and teach negotiations skills, submit this brief to inform the Court that modern negotiation theory and practice consider this approach to be artificially limited and inappropriate for complex disputes like the one currently before the Court.
5 ARGUMENT I.
A N T I T RU S T T R E AT M E N T OF PAT E N T SETTLEMENTS SHOULD BE CONSISTENT WITH LONGSTANDING JUDICIAL POLICIES A N D ST RUC T U RE S T H AT ENCOU R AGE SETTLEMENTS.
Litigation of any kind, including the simplest tort dispute, creates cost, uncertainty, and a “bilateral monopoly” problem in which each party can only settle with the other party, and no single settlement is necessarily the most appropriate or efficient. In re Hoskins, 102 F.3d 311 (7th Cir. 1996). To encourage dispute resolution and to reduce court congestion, this Court has favored private settlements (E.g., McDermott, Inc. v. AmClyde, 511 U.S. 202, 215 (1994)) and enforced rules that foster the repose of litigation (E.g., Nevada v. United States, 463 U.S. 110, 129 (1983)). Lower courts have adopted a variety of structures and policies to encourage or require mediation at various points in most cases, in the hope of causing private settlements. The Eleventh Circuit’s rule properly precludes settlements that include anticompetitive effects beyond the patent’s inherent exclusionary potential. Pet. App. 28a. The FTC’s proposed approach would go beyond that rule and limit the parties to negotiating and exchanging only one form of consideration in their settlement contracts --agreed shortening of the patent’s remaining period of exclusivity. The FTC’s rule of presumptive illegality would be contrary to the Court’s longstanding approach to encouraging settlements because it is contrary to modern negotiating theory about how to best accomplish dispute resolution.
6 II. RESTRICTING PATENT NEGOTIATIONS TO A SINGLE VARIABLE WILL REDUCE THE NUMBER AND QUALITY OF SETTLEMENTS. A.
Negotiating Theory Generally Recommends Increasing the Number of Interests Discussed To Reach Settlement.
The FTC’s approach would restrict patent disputants to discussing only the duration of the remaining period of patent exclusivity. Reducing the negotiation to that single variable necessitates zero-sum, distributive bargaining in which a gain for one party translates to a loss for the other. Over four decades of negotiation research and literature have rejected distributive bargaining as inadequate for complex disputes. Negotiators and mediators often purposefully widen rather than narrow the variables in play, to increase the likelihood of finding a settlement and increasing total value. See generally Roger Fisher, William Ury & Bruce Patton, Getting to Yes 56 (3d ed. 2011) (hereinafter “Getting to Yes”). “[T]he more alternative courses of action considered by decision makers, the better the payoff to that decision is likely to be.” Howard Raiffa et al., Negotiation Analysis: The Science and Art of Collaborative Decision Making 402 (2002). More solutions, and more value, can be produced by integrative (or “problem-solving”) negotiation. Michael L. Moffitt, Pleadings in the Age of Settlement, 80 Ind. L. J. 727, 737-746 (2005). Judges regularly witness what the dispute resolution literature predicts. “A negotiation is more likely to be successful when there are several issues to be resolved
7 (“integrative bargaining”) rather than just one, because it is easier in the former case to strike a deal that will make both parties feel they are getting more from peace than from war.” Duffy Tool & Stamping, L.L.C. v. NLRB, 233 F.3d 995, 998 (7th Cir. 2000) (citing Raiffa, The Art and Science of Negotiation 97-103, 131-32). Duffy offered the example of a labor negotiation: if that negotiation is prohibited from going beyond wages, it reduces the probability of agreement and the total potential value of such an agreement. Adding other issues, such as a dues checkoff issue or a no-strike clause, changes the negotiation from a zero-sum game and opens avenues for trade toward a value maximizing settlement. Duffy, 233 F.3d at 998. The best way to maximize value is to exploit shared and differing interests. Shared interests are interests that both sides have in common, such as reducing transaction costs or implementation problems. If the parties are not artificially constrained, they can agree to pursue them together. Differing interests may matter greatly to one side and little to the other, enabling the parties to make highvalue, low-cost trades. Such interests include differences in priorities, differences in timeframes, differences in prediction, differences in risk tolerance, and differences in capabilities. Moffitt, Disputes as Opportunities to Create Value, in The Handbook of Dispute Resolution 173, 176 (Moffitt & Robert C. Bordone, eds., 2005). While the idea of creating value through differences is “counterintuitive to many negotiators,” dispute resolution scholars have explained that the “truth is that differences are often more useful than similarities in helping parties reach a deal. Differences set the stage for possible gains
8 through trade, and it is through trade that value is most commonly created.” Robert H. Mnookin, Scott R. Peppet & Andrew S. Tulumello, Beyond Winning: Negotiating to Create Value in Deals and Disputes 14 (2000). Multidimensional negotiation allows the parties to “exploit the gains of trade inherent in their different valuation of the issues.” Rafael Hortala-Vallve et al., An Experimental Comparison Between Free Negotiation and a Multi-issue Point Mechanism 2 (Dep’t of Gov’t, London Sch. of Econ. and Pol. Sci., Monograph, 2010), available at http://www. coll.mpg.de/Download/llorente/negotiation.pdf. By purposefully widening the negotiation to seek exchanges “that are relatively easy for one party to give and valuable for the other party to get” and by joining “core issues with complementary issues,” trading is better facilitated. David A. Lax & James K. Sebenius, 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals 42 (2006) (hereinafter “3-D Negotiation”). “It’s the differences of interests that create joint gains.” Id. (emphasis added). B. Integ rative Negotiation Is Par ticularly Appropriate For Patent Cases. This integrative negotiating approach is especially valuable in patent litigation, which offers innumerable opportunities for good negotiators to follow prevalent negotiating advice to “[s]eek other value-creating differences.” 3-D Negotiation at 42. Such trades need not extend beyond the Eleventh Circuit’s recognition of the exclusionary potential of the original patent. This case included agreements to provide backup manufacturing capacity and to promote the product to primary care
9 physicians and urologists. See Second Amended Complaint (“Complaint”) ¶¶ 66, 74, 77, J.A. 46, 48, 49. Dozens of variables and interests are likely to be available to negotiators over the lengthy duration of most patent cases. The values placed on those interests by the parties will differ, despite the belief by the FTC and its amici that limiting negotiations to the exclusivity period will somehow cause the parties to better approximate the real strength, merit, or likely “success” of the patent. 2 In reality, parties’ perceptions of patent merit and litigation “success” are likely to differ at any point during a patent case, are likely to change over the course of the litigation, and are only one of the many interests and different valuations that can drive multidimensional settlements. The parties’ differing risk preferences, liquidity preferences, litigation tolerance, and other interests can be powerful influences in finding a trade that justifies settlement. Studies show that parties generally overstate their prospects for success, 3 and that even a judicial declaration of patent “merit” or litigation success 2. See Brief for 118 Law, Economics, and Business Professors and the American Antitrust Institute in Support of Petitioner at 12. (“An agreement concerning the generic entry date, without any cash payment, will normally reflect the odds of the parties’ success in patent litigation…”). 3. George Loewenstein et al., Self-serving Assessments of Fairness and Pretrial Bargaining, J. Legal Stud. 135, 140-141 (1993) (studies and empirical evidence of self-serving bias and overestimates of a party’s chances of success); Vivian Berger et al., Summary Judgment Benchmarks for Settling Employment Discrimination Lawsuits, 23 Hofstra Lab. & Emp. L.J. 45, 46 (2005) (noting that at the outset of talks, parties’ estimates of their probabilities of victory “may be as great as 150%”).
10 is likely to be reversed almost half the time.4 Limiting negotiations to zero-sum adjustments of the exclusivity period would ignore the opportunity for trading that is presented by the parties having so many different interests and such different perceptions of their values. From “small” settlement contract details about how to enforce the settlement (choice of venue, choice of law, use of arbitration), to seemingly “larger” issues about marketing services, backup capacity, or confidentiality, the very act of artificially labeling these considerations as “large” or “small” ignores the negotiating lesson that trade is facilitated precisely by allowing parties to give these issues different levels of importance, to trade their perceived values in ways that facilitate settlements, and to express their trades in multiple currencies of exchange or forms of consideration. CONCLUSION Integrative negotiation is especially appropriate for patent cases because of their complexity and uncertainty. This uncertainty creates an ideal environment for effective integrative negotiation. In the context of a judicial system that otherwise encourages settlements, otherwise values the repose provided by such settlements, and inherently relies upon consensual negotiation to reduce dockets and create mutual value, the FTC’s proposed zerosum construct should be rejected, in favor of allowing 4. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1476 and fn. 16 (Fed. Cir. 1998) (roughly half of all patent appeals decided by the Federal Circuit were wholly or partially reversed, and almost forty percent of claim constructions in a thirty-month period were reversed).
11 multi-dimensional negotiation and settlements that express contract consideration in multiple currencies. Modern negotiating theory and practice confi rm that single variable negotiation will be less likely to produce settlement, and less likely to produce maximum settlement value, than if the parties are allowed to trade multiple variables to advance their differently valued interests. Getting to Yes at 56; Duffy, 233 F.3d at 998. For any and all of the foregoing reasons, this Court should affi rm the ruling of the Eleventh Circuit and the District Court’s judgment. Respectfully submitted, LEE K. VAN VOORHIS BAKER & MCKENZIE LLP 815 Connecticut Avenue, N.W. Washington, DC 20006 (202) 452-7000
THOMAS A. DOYLE Counsel of Record MICHAEL A. POLLARD ERIN M. MAUS DONNA J. WILLIAMS BAKER & MCKENZIE LLP 300 East Randolph Street Suite 5000 Chicago, Illinois 60601 (312) 861-8866 Thomas.Doyle@ bakermckenzie.com
Counsel for Amici Curiae February 28, 2013
