Arbitral Award of Perpetual License Upheld by Fifth Circuit

Posted on by Richard Birke
Richard Birke

Richard Birke

Once in a while it seems the people who design live-action war-based video games get into real-world non-virtual disputes of their own. When “Timegate” promised to “Southpeak” that it would design a videogame named “Section 8,” the parties agreed to split profits.

Things went badly and Southpeak alleged that Timegate used Southpeak’s money to do a number of things that didn’t involve the development of Section 8, and that Timegate failed to live up to its promise to devote its own money and resources toward the game’s development.

The matter went to arbitration and the arbitrator awarded Southpeak more than $7 million and a perpetual license to use everything Timegate had developed for the Section 8 project.

A district court judge thought the arbitrator overstepped his authority when he granted a perpetual license and the award was vacated.

On further appeal, the U.S. Court of Appeal for the Fifth Circuit reversed the district court and reinstated the award. The Court wrote, “[t]he entire Agreement can accurately be summed up as the creation of a mutually beneficial business relationship between two parties with distinct expertise: a video game developer and a video game publisher. The parties were to work jointly to create, market and popularize a video game whose success would yield financial benefits to be distributed between the two parties in accordance with their respective contributions to the joint effort as required by the contract…..The perpetual license furthers these general aims of the Agreement.”

In conclusion, the Court noted that “the Section 8 perpetual license is rationally rooted in the Agreement’s essence. Timegate committed an extraordinary breach of the Agreement, and an equally extraordinary realignment of the parties’ original rights is necessary to preserve the essence of the Agreement.”

Judicial References: A remedy for more efficient dispute resolution

Posted on by Hon. Ann Kough (Ret.)
Hon. Ann Kough (Ret.)

Hon. Ann Kough (Ret.)

Hon. Ann Kough (Ret.) served in the Los Angeles County Superior Court as a complex litigation judge and earned a reputation for fairness and efficiency in handling the most difficult and contentious cases. Since joining JAMS, Judge Kough has arbitrated a wide range of disputes that span a broad spectrum of legal issues across several industries. She can be reached at akough@jamsadr.com.

With cash-strapped court systems across the country making cuts that result in ever-growing dockets, achieving efficient dispute resolution through litigation is becoming more challenging. In California, one remedy could be the use of judicial references. This involves appointing a neutral to serve the same role as a sitting judge.

The authority for judicial references comes both from the California Constitution, Article VI, section 21, which provides for the appointment of temporary judges, and CCP sections 638 and 639, which provide for the appointment of a referee to hear all or less than all issues in the case. Under Article VI, section 21, with the stipulation of the parties, the court may order the matter to be tried by a temporary judge. Under CCP section 638, the parties may agree to the appointment of a referee to either 1) hear and determine any or all of the issues in the action and render a statement of decision, or 2) ascertain a fact necessary to enable the court to determine an action. This agreement may either be pre-dispute, as a clause in a written contract, or post-dispute. The scope of the neutral’s work may be as wide or as narrow as the parties would like, and may be expanded at any point in the case. A court has the authority to appoint a neutral to 1) handle discovery disputes, 2) hear and determine accounting issues, or 3) determine questions of fact the trial court deems necessary.

The advantages of a judicial reference are many: parties choose their own decision-maker, get reliable and convenient trial/motion dates, receive all of the attention their matter needs and retain full procedural rights, including appellate rights, as if in court. Counsel may select a temporary judge/referee with subject matter expertise and can schedule motions and hearings at their, and their clients’, convenience.  A judicial reference can also save money.  Although the initial cost is more than court filing fees, in the long run parties save money because neutrals can tailor case management to minimize the expense of discovery, identify threshold issues, which may resolve or streamline the matter and devote full days to trial if the matter must be tried.

As access to the courts for civil matters is drastically curtailed, counsel should consider the use of judicial references.

Three things to know about mediating licensing disputes

Posted on by Zela "Zee" G. Claiborne, Esq.
Zela "Zee" G. Claiborne, Esq.

Zela “Zee” G. Claiborne, Esq.

Zela “Zee” G. Claiborne is an arbitrator and mediator with JAMS in San Francisco. She can be reached at zclaiborne@jamsadr.com.

The number of IP disputes resolved in mediation has continued to increase as attorneys make efforts to find speedy resolutions and cut litigation time and cost for their clients. Only a small percentage of costly patent infringement cases actually go to trial; approximately 90 percent of them are settled.

Business people and their counsel recognize that mediation is a cost-effective, low-risk process with a remarkably high success rate when conducted by an experienced mediator. In mediation, parties avoid the risk of trial and remain in control of the resolution. Mediation is a good way to preserve business relationships. In order to have the best opportunity for settlement, counsel should consider the following three points:

1. Bring the right people to the mediation. That might sound like common sense, but it is surprising how many mediations fail because the decision-makers are not present. Mediation is a dynamic process that cannot be adequately summarized on the phone or after the fact to an absent decision maker.

2. In advance of mediation, consider some possible business solutions that might be acceptable to your client and to the opposition. Look at various options, giving thought to how the dispute looks to the other side and analyzing what their needs might be. Considering only a specific dollar range is a mistake. Your client’s views may shift after the mediator points out weaknesses of your client’s position.  You may learn something new to cause rethinking of the settlement position. The benefits could be great because many licensing disputes involve an ongoing business relationship. Options could include something other than money.

3. Finally, do not leave the mediation without preparing a short list of the deal points agreed upon.  The end of the mediation is not the time to draft a lengthy final settlement agreement with all the appropriate legal provisions. Decide who will prepare the first draft and when it will be sent to the other side for review. All client representatives should sign the short-form document so there is a legally binding agreement.

Mediation is an opportunity to resolve an IP dispute by reaching a settlement that makes more business sense than a litigated outcome. Use your professional skill to assist your client in making the most of the mediation opportunity.

The Present and Future of ADR

Posted on by Chris Poole

At the recent ABA Dispute Resolution Section conference in Chicago a panel that included myself, Debbie Masucci, past president of the DR section; India Johnson, CEO of AAA; and Dale Matschullat of Schiff Hardin, discussed “The present and Future of ADR.” The primary topics included the financial crisis in the courts, international ADR, online dispute resolution and diversity in ADR.

The budget cuts to the court system have perhaps been felt more severely in California. In March, California Chief Justice Tani Cantil-Sakauye lamented in a speech to the state legislature, “our judicial branch budget has been cut greater and deeper than any other court in the United States.” The roughly $1 billion in reductions have led to closure of a large percentage of civil courtrooms. The impact on ADR, however is less clear. The panel generally felt that the desire for swift justice would increase the demand for mediation and arbitration, but that hasn’t always been the case.

On the international front, there is a similarly mixed message. Changes like the 2007 Mediation Directive passed by the European Union have had little impact on the demand for ADR in Europe. In other parts of the world, arbitration has seen slow but steady growth, while mediation has yet to become a significant part of the ADR process.  Brazil was cited by the panel as a prime example of a rapidly expanding economy with an active and growing litigation market, but a lack of interest in commercial mediation.

Online dispute resolution (ODR) has become a hot topic in ADR. A number of ADR providers are exploring piloting online offerings. Although the panel was clear on the inevitable growth in ODR, interest and momentum is more apparent in smaller commercial disputes where human facilitators are often not involved.  The panel also felt that the use of ODR in more complex disputes will become more common as technologies and offerings improve.

The panel concluded with a robust discussion of diversity in ADR, highlighted by a recognition that the ADR industry reflects the same challenges as most law firms where women and minorities represent a small percentage of equity partners. JAMS, for example, recruits its neutrals primarily from the judiciary, but also from the senior ranks of law firms where the vast majority of partners are white males.  ADR providers have focused diversity programs in place, but are struggling to achieve as much progress on the demand side of the equation, where women and minority neutrals are not chosen proportionately to their population in those organizations.

We found it difficult to draw any single conclusion about the future of ADR. However, the message of slow, steady growth stood out as well as the need for ADR organizations to innovate in terms of efficiency, cost effectiveness and flexibility to adapt to changes driven by a more sophisticated clientele and an anemic domestic economy.