Conference on Mediation

March 29, 1996, Geneva, Switzerland

 

Getting the Other Side to the Table
by William A. Finkelstein,
Vice-President and Intellectual Property Counsel,
PepsiCo, Inc.
(Purchase, United States of America)


I. INTRODUCTION

It has become increasingly apparent that litigation is frequently a slow, excessively expensive, time-consuming, burdensome and generally inefficient way of resolving commercial disputes involving trademark rights and other unfair competition issues. Moreover, the outcome is uncertain, jeopardizing crucial investment plans and placing valuable corporate assets at risk.

It is generally accepted that almost all cases are settled but the question is: when? Unfortunately, the answer is often after years of open-ended and costly pleadings, discovery, motions, hearings and even trial. The litigants, by then bloody and weary combatants, finally resort to an alternative process, i.e., settlement, but the damage has been done- to marketing and investment plans, to budgets and the bottom line, to valuable relationships, and to time and effort diverted from important business pursuits.

In a survey in the United States conducted by a well-known consulting firm, most of those attorneys, both law firm and corporate practitioners, that had tried alternative dispute resolution, particularly mediation, were quite satisfied with the process and the results. In fact, among those who used alternative dispute resolution extensively, there was a greater tendency to express a desire to use mediation again in preference to other forms of alternative dispute resolution, and to respond that they would continue to use it whenever feasible. The problem, of course, is getting practitioners to try it the first time. The respondents overwhelmingly listed the unwillingness of the other party as the primary reason why they don’t use alternative dispute resolution more often. Let us examine the ways to overcome this unwillingness.

 

II. THE ADVANTAGES OF ALTERNATIVE DISPUTE RESOLUTION

The most telling obstacle to pursuing alternative dispute resolution may simply be inexperience- the fear of any process with which one is unfamiliar. Therefore the first step in selling alternative dispute resolution to the other side is education: reviewing the primary advantages of alternative dispute resolution over litigation and examining how they apply to the case at hand. The following are the significant benefits to a mediated resolution.

1. Promptness of Resolution. The congestion and inefficiency of many court systems, e.g., that of the United States, is well-known but even in those jurisdictions with up-to-date dockets, mediation will always be quicker. Moreover, instead of dealing with judges with little knowledge of, or interest in, trademark cases, parties in an mediation proceeding are assured of the undivided attention of a neutral who is focused on having a continuous process and a prompt disposition. While mediation can dispose of a years-long litigation in a matter of weeks, there is little doubt that the earlier the parties get together, the better. When a dispute has just begun, the parties are usually more flexible and often willing to consider various proposals to resolve the matter. Typically, as litigation progresses, the parties become entrenched in their positions and are less open, at least until the courthouse steps are reached. By then, of course, most of the damage has occurred.

2. Certainty of Resolution. Frequently, important business plans and objectives, such as the launch or roll-out of a new product or ad campaign, can be jeopardized by the cloud of an outstanding claim. Early and prompt dispute resolution can eliminate this risk. In consensual alternative dispute resolution such as mediation, the parties only get or give what they agree to - a settlement cannot be dictated to the parties in a mediation - but at least they know what the result of their compromise will be. There are many ways to settle trademark or unfair competition disputes by relatively minor modifications - the addition of a house mark, the deletion of some goods from a registration, the clarification or limitation of a channel of trade, a slight change of wording in ad copy - which can satisfy both parties. A judicial decision on the merits is frequently an all-or-nothing resolution and is always the proverbial roll of the dice, even if a party feels it has the best facts, law and counsel. Added to this risk is the unpredictability of jury decisions and awards in countries such as the USA.

3. Creative Business-Driven Solutions to Legal Problems. In a non-adjudicative process such as mediation, the parties have the ability to fashion win-win resolutions reflecting business objectives and priorities rather than relying on a court which may decide based upon more technical or narrow issues. For example, in assessing the likelihood of confusion between trademarks for the purposes of consents to registration, the appellate courts have often chastised lower tribunals for substituting their judgment for those of the businesses in the marketplace. Moreover, once mediation has opened up the lines of communication, parties can and often do go beyond the particular dispute at issue to resolve broader concerns.

4. Substantial Costs Savings. Early settlement can reduce litigation expense most significantly, including eliminating the need for expensive surveys which have become a fact of life in trademark cases in those jurisdictions permitting them. Moreover, the objective is to achieve a resolution prior to substantial investment in a new product or advertising campaign, thereby reducing extra business expense since the impact of changes agreed to as part of a settlement will be minimized. This would be especially true in the early stages of development of a new mark, package design or advertising campaign. Finally, the potentially devastating impact of an adverse judicial decision mandating, for example, the change of a consumer goods brand name or the modification of the get-up of packaging after extensive investment, use and development of goodwill, can be avoided.

5. Access to an Expert Neutral. Judges, and certainly juries, rarely have experience in trademark and unfair competition matters. Many feel that it is preferable to use neutrals who are highly experienced practitioners in the field. This makes it much easier and quicker to choose a neutral. Moreover, it enables counsel and the parties to be able to save valuable learning curve time during the mediation process, and to be able to focus on the key business issues confronting them. The expert neutral can help sift through the facts and business points to connect these with the applicable law. Furthermore, he or she can provide an expert evaluation if requested, thereby helping the parties to realistically assess their case. Most importantly, experienced neutrals are highly knowledgeable in the myriad ways of resolving disputes involving trademark and unfair competition issues.

6. Flexibility and Control by the Parties. The parties and their counsel are free to choose an alternative dispute resolution procedure which they agree is most suitable to their situation, time frame and more intangible factors such as their corporate or individual personalities. Moreover, the parties and their counsel then have the ability to tailor and refine the particular procedure chosen so that it fits their needs and preferences. This includes not only mechanical and evidentiary aspects of the process but substantive as well, including narrowing the law and the issues to be dealt with. For example, an early exchange of information focused on just a trademark’s adoption and first use and registration can defuse an incipient dispute over priority. The parties can even develop hybrid variations such as mediation coupled with arbitration of some specific key issues so as to keep the process moving forward.

7. Impact on Management of the Business. While mediation requires some concentrated time and attention from management, the amount expended will pale in comparison to the intrusion of full-blown litigation into the real business activities of the parties. Trademark and false advertising cases, for example, are usually quite fact-intensive, resulting in voluminous evidence and, in those countries that allow it, extensive discovery of numerous files and many long depositions of key management, diverting valuable time and energy from more important pursuits. Litigation is draining not only to management and in-house counsel, who surely have better things to do, but its potential adverse consequences may be reportable to shareholders, potential acquirers of a company, or financing institutions, none of whom will look kindly on a contingent liability or pending challenge to valuable trademark assets.

8. Privacy and Confidentiality. Mediation can allow for privacy in resolving a dispute, thus avoiding a public record and judgment and thereby minimizing the potential impact on other or future disputes. For example, this could be relevant in the advertising area where a company may not want to get the reputation of making claims with weak substantiation or in trademark cases, to avoid a public pattern leading to genericness. Further, mediation can smooth over possible hard feelings by getting both parties to air their grievances in a private forum. Quite importantly, the appropriate mediation agreement can minimize disclosure of embarrassing or sensitive confidential business information. This can often be the crucial stimulus for settlement.

9. Preservation of Business Relationships. This is clearly relevant in those situations where mediation arises from an outstanding contractual relationship. For example, parties to a license or franchise relationship have a mutual and interdependent need for the success and viability of the other party continuing long after any litigation. To weaken or destroy that in bitter litigation is foolhardy. Also, it often turns out that large companies who are competitors in one business segment have important business relationships in other areas of their businesses. A well-run mediation could open up the lines of communication between the parties so they can see how to balance these relationships and perceive the need to reconcile their differences over a dispute that, relatively speaking, may be minor. Mediation at the early stages of a controversy will avoid escalation of a dispute and help keep the real issues at the focal point of the discussions. Typically, as expenses grow and as the parties are subjected to litigation issues and the adverse comments which appear in legal pleadings and in court, the relationship between the parties can deteriorate.

 

III. RESISTANCE TO USING MEDIATION - GENERAL CONSIDERATIONS

When first considering and discussing the possibilities of settlement, it is quite important to be realistic and to attempt to understand the source of the other side’s reluctance. Mediation (or any form of alternative dispute resolution) may not be appropriate in all cases and it is important not to try to force mediation into situations where it does not belong. Indeed, there are some cases that just cannot be settled. The most common genuine reasons to pursue a matter to a final adjudication are the need by one party to establish legal precedent and/or deter similar activities by third parties. Moreover, in the trademark arena situations requiring swift interlocutory injunctive relief, cases of outright piracy and counterfeiting, or instances where title to a mark is being challenged, are unlikely subjects for mediation.

Other reasons for reluctance often advanced, however, are reflective of the lack of understanding or knowledge about mediation which can only be solved by education and experience. One common misconception is that the parties are not prepared to settle until they begin to feel the pain of litigation, especially where one of the parties believes it is particularly aggrieved by the actions of the other. Another is that it is difficult to get two parties with a wide disparity in resources or corporate personality to come together. Often both parties, not wanting to make the first move, claim that it is the other that is being recalcitrant.

Proponents of litigation often tout that it is the only way to find out about what the other side is actually doing which, in fact-intensive trademark cases, can be crucial. It is generally true that the earlier that mediation occurs, the less knowledge each party has about the opposing party’s case and, often, about its own case. Therefore, parties often don’t feel comfortable in proposing or considering settlement early in the case, especially if it will include a monetary payment, because they are unable to calculate a fair value of the settlement. Likewise, if a party feels it needs to find a "smoking gun" or other evidence to prove its case, it will be difficult to convince it to participate in an early alternative dispute resolution process. Moreover, aggressive litigators warn against mediation as giving the other side a free opportunity to find out key tactical information that could be harmful to the case.

While these are ostensibly valid points, it should be noted that first, the possibility of a limited exchange of information exists on an expedited time frame. Focused exchange practices can elicit the pertinent information to overcome these hesitations. Secondly, a well-run mediation held in confidence can often develop the sharing of pertinent information between the parties sufficient to foster settlement.

It is certainly true, as with most settlement situations, that each party has to make difficult decisions, usually in the nature of compromise and balancing many factors. Early mediation accelerates the need for these tough decisions but at the same time broadens the knowledge base and the range of possibility of settlement sufficient to overcome inherent reservations. Knowledge by parties and their counsel of the positive advantages of mediation set forth above and the sharing of that knowledge with the other parties and counsel to a dispute is the best way to encourage participation in an alternative dispute resolution process.

 

IV. OVERCOMING RESISTANCE TO USING MEDIATION - THE APPROACH

The threshold factor determining approach tactics is the nature of the relationship between the parties. If the parties have an ongoing contractual or other business relationship and a provision has been included in the contract providing for the use of mediation to govern disputes arising from the contract, this eliminates the necessity of persuasion in getting the parties to the table. This does not guarantee, however, that parties will feel kindly disposed toward consensual resolution and many of the points discussed herein would still be applicable to convincing either or both of the parties that an early resolution of the dispute is appropriate.

If the contract is silent, the approach is best handled by initial discussions between principals or other executives of the parties who have an on-going relationship and recognize the need to preserve it. If the dispute involves certain individuals in each organization, however, it is best to raise the approach (and subsequent negotiations and/or participation in a mediation) to a higher level of executive, above the fray, so to speak. Usually, these higher level people have a broader perspective on the business relationship and are also more sensitive to the potential cost considerations and burdens associated with litigation. (This is assuming that the ‘combatants’ are not the CEO’s themselves!) Inside corporate counsel can also be effective for the approach since they can aspire to a more balanced position and often may have relationships with their opposite numbers in the other organization through association contacts, bar groups and the like.

In most instances of trademark and unfair competition disputes, the parties are unrelated and in fact are competitors or at least have adverse interests. Consideration should be given to who should approach whom. Who of the other party is most likely to be receptive to early settlement and mediation? Who has had prior alternative dispute resolution experience? Who appears to be the principal decision maker on the issue? Unfortunately, unless one CEO can be persuaded to contact the other, most executives are reluctant to talk to the ‘enemy’. Thus it usually winds up that attorneys for one side have to approach the other attorneys. Again, in-house counsel are most often better for this but in many instances, a small sized party may not have such a person. In those cases where only one side has inside counsel it is recommended that he or she make the approach to the outside counsel for the other side, using a theme such as: "My litigator tells me we have a great case and I agree but we have a general policy to explore alternative dispute resolution..."

A neutral organization may play a useful role in persuading parties of the advantages of mediation. An interesting approach is to have a neutral, trained mediator invite the other side to the mediation table. This neutral may not eventually be the one you use (primarily because the other party will always be inherently suspect of his or her bias in being the first contact on behalf the first party) but the neutral’s skills of persuasion and ability to explain the process and answer the tough questions should be quite helpful.

Finally, the worse and the best situation is when a court has mandated some type of mediation. On the one hand, there is a great natural resistance to being coerced to do anything, especially when it is non-binding, and thus the attitude of a party can be skewed from the onset. Plus, the quality of court-appointed neutrals can vary and it is often just a case of going through the motions. On the other hand, if done properly, it can be an excellent first opportunity to get the other side to sit down without having to ask them, thereby avoiding the impression that you might have a weak case. The best approach is to at least get the other side to the position of: "we’ve got to do this so why don’t we make the best of it?" In fact, in those courts that may allow the parties, upon their request, to select their own neutral (rather than some over-worked magistrate with no trademark experience), it could be quite beneficial to pick an expert neutral.

 

V. OVERCOMING RESISTANCE TO USING MEDIATION - SELLING THE OTHER SIDE

In ‘selling’ consensual, non-adjudicative alternative dispute resolution such as mediation, the proposing party should carefully explain the advantages of mediation for both sides. The proposer should emphasize the following points:

  • The procedure is voluntary, non-binding and confidential
  • The parties retain control over the outcome
  • A party may withdraw at any time after the first session
  • The mediator must be acceptable to all parties
  • The ground rules must be acceptable to all parties
  • Time limits may be established
  • The cost of the procedure is likely to be modest
  • Experience shows that the chances of success are very high, but little is lost and something will be gained through better mutual understanding, even if the procedure should not be successful
  • By its nature the case is well suited to mediation
  • The proposer will negotiate in good faith and trusts the other party to do likewise

Take the time to explain the differences between mediation and arbitration - there is a great deal of semantical misconception and confusion about the different forms of alternative dispute resolution - many unknowing litigating attorneys automatically assume everything is like arbitration. Emphasize the remarkably enhanced benefits over standard two-party negotiations as a result of the participation of a mediator, including the creation of an atmosphere of better communication and the ability to get the parties to change perceptions.

 

VI. OVERCOMING RESISTANCE TO USING MEDIATION - THE "WEAKNESS ISSUE

Perhaps the most difficult barrier to entering into mediation is overcoming the perception by the other side (or even your own client) that doing so is a sign of weakness. To the contrary, settlement demonstrates good business sense. What’s wrong with saving money and achieving a certain outcome? Companies that would never permit wasteful, diversionary expenses on their assembly line or by their salesforce, or conduct ineffective advertising or promotional activities seem to ignore their standards when it comes to litigation. Litigation of disputes should be subjected to the same criteria as any other business activity- either they serve a useful business purpose or they should be quickly disposed of.

Moreover, rather than demonstrate weakness, a willingness to mediate exhibits great confidence in one’s case because it will be exposed to the scrutiny of a neutral party (who probably will be an expert in the field) and there will be candid discussions about its strengths and weaknesses in front of the client. In fact, if anyone can be charged with "weakness" it is the attorney who is reluctant to be so scrutinized. Furthermore, once mediation commences, the "weak case" assertion disappears as the evidence clarifies the issues and the merits of each party’s case becomes clear.

An extremely helpful method in overcoming hesitancy due to the concern about weakness is using the fact that a party or its counsel may be committed to a policy to use alternative dispute resolution to resolve certain disputes in certain appropriate situations. Such a policy may be an internal corporate or law firm one or it could be a more public one such as the "CPR Corporate Policy Statement". (There is a mirror image one for law firms too.) This so-called ‘pledge’ does not compel alternative dispute resolution but commits the party to explore the use of such resolution techniques unless the dispute is not suitable, e.g., interlocutory relief is necessary to preserve rights or prevent infringement. In fact, even if only the initiating party has subscribed to such a pledge, the policy should be invoked and emphasized when the proposal for mediation is made so that the other side understands that this approach is not out of the ordinary.

 

VII. OVERCOMING RESISTANCE TO USING MEDIATION - THE GLADIATOR BARRIER

It’s much too easy to blame entirely the lawyers for litigation; we have to start with the parties, i.e., the clients, and their need to get more involved with their cases and to take control of them. Those with inside counsel should be in a better position to do this but in some instances by virtue of being inside, perspective is lost in an attempt to be part of the team and carry out management’s wishes. In general, too often clients abdicate responsibility and merely instruct their counsel to "do what’s necessary". Too often clients are too blinded by emotion to honestly appraise the attributes of their case. Too often clients don’t feel they know enough about the law to question their eminent litigating counsel.

Yet it is the clients who not only pay the bills but have the most to lose, in time and effort diverted from important business pursuits, in the destruction of business relationships, and ultimately perhaps in the loss of a valuable trademark right, or the need to make substantial changes, or even to pay significant damages. Clients are thus the ones who have to make the decision to resolve many of their legal disputes promptly and without full-blown litigation.

However, many, if not most, clients need the help of their legal advisors, their ‘counsellors’, to guide them toward the appropriate resolution of their legal disputes. The problem is, unfortunately, that some lawyers, in the zeal of advocacy, often overlook cooperative approaches to dispute resolution. The more experienced the litigator, the greater the difficulty to suggest a course of action that goes against the very skills and tactical attitude that he or she has developed to a high level over the years. Moreover, raising the idea of settlement with a upset client is a delicate task for someone who has been hired to be the gladiator. Thus without a doubt lawyers can aggravate a client’s pugilistic instincts, especially in trademark and unfair competition disputes where the rights involved are always among the most closely guarded and valuable business assets: the expression "one who takes my name takes my reputation" is not a conciliatory axiom.

On the other hand, a lawyer owes a professional duty to the client to provide objective advice in the client’s best interest. The lawyer is in the best position to provide problem-solving guidance, which could and should include settlement possibilities. An attorney should dispassionately review the strengths, weaknesses and potential risks of the case and then make recommendations as to its resolution, which could include litigation as well as timely settlement overtures. This should include an analysis balancing the potential costs of the litigation versus early mediation.

It is a fact that some attorneys will be affected, even perhaps subliminally, by the short-sighted approach that early settlement will substantially reduce their fees. If this seems to be a factor in the unwillingness of counsel for the other side to consider mediation, one must either devise some way to bypass the roadblock by getting his or her client involved or persuade the attorney that it is in his or her best interest to make the client happy, to say nothing of his or her professional obligation to best serve the client. Creating satisfied clients through the use of mediation is certainly one of the best ways to retain and attract clients and thereby increase law firm income in the long run.

As the frustrations with the litigation process grows, clients will increasingly expect their lawyers to consider alternatives to litigation such as mediation. It is up to the clients to demand that their litigators develop alternative dispute resolution expertise and then consider these techniques at the appropriate times in the appropriate situations as part of overall litigation strategy. In the interim, true counsellors should be educating their clients and the lawyers for the other side as to the benefits for all parties.

 

VIII. OVERCOMING RESISTANCE TO USING MEDIATION - OTHER TACTICAL SUGGESTIONS

Success in dispelling the other side’s unwillingness will depend in large measure on the persuasiveness of the proposer. Care should be taken to be tactful (both before and during the mediation) so as to allow for face-saving by the litigator for the other side who may have convinced his client that they have a great case and that their best strategy is all-out warfare.

If the persons to be induced to use mediation are not familiar with the process, it may be quite helpful to provide them with a copy of reading material about alternative dispute resolution and/or to provide them with the names of neutrals or neutral organizations they can contact on their own for information or to get questions answered.

When the other side’s unwillingness to participate continues but appears to be wavering, the following offers may tip the balance. Agree to pay the cost for the initial mediation session or perhaps some of the ancillary costs (meeting space, travel expenses, etc.) Consent to the selection of the mediator by the other side within a range of criteria and/or from an agreed-upon neutral service provider. When the other side will not agree to mediate the entire dispute, isolate a key issue, especially a factual dispute, for partial attempted resolution. Indeed, pick one that you feel has a good chance of resolution so it can act as an educational experience for the other side and which could then be the catalyst for using mediation for the rest of the case. Agree that if the mediation is not successful, you will submit to other forms of alternative dispute resolution on particular issues or that you will not raise defenses such as laches if the other side moves for interlocutory relief.

The key to both winning a litigation and, interestingly enough, settling the matter is to identify not only the strengths and weaknesses of both parties’ cases but the interests of both parties. Many attorneys mistakenly believe that because the parties are disputing an issue or issues, they have the same interest in it. The crucial point is to identify and appeal to the opponent’s interests as part of a negotiated settlement while taking into account that your interests may be different. Also, let the other side understand that mediation can address interests that litigation and arbitration (which only deal with legal issues) will not, especially non-monetary interests.

Do not be reluctant to re-emphasize the most important factors:

  • the delays, costs and burdens of litigation
  • the uncertainty of the outcome of litigation
  • almost all cases will eventually settle
  • mediations result in settlement most of the time

 

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