NVIDIA, the ITC, and Litigation Lessons from the Trenches

Rob Enderle
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Eight Critical Factors for Business Success

NVIDIA has announced that the International Trade Commission (ITC) has ruled in its favor in one of the opening battles in its patent dispute with Qualcomm and Samsung. I’m familiar with the legal team the company is using and it is strong, which offsets somewhat NVIDIA’s lack of litigation experience. Samsung and Qualcomm are in court much more often, and this means their executives are more likely far more experienced in dealing with the related distractions. In litigation, the old saying that “it doesn’t matter whether you win or lose, but how you play the game” is more appropriately said “whether you win or lose has a lot to do with how you play the game.”

Since many of you will have to face litigation, either personal or professional, in your future, let’s chat about litigation this week.

False Reality in the Courtroom

The courtroom is not about finding truth or justice; it is about creating a story that supports what you want done that is more compelling than the opposition’s. This story is presented to a judge and/or jury who likely don’t want to hear it. Over the years, I’ve spent a lot of time in courtrooms. First as I prepared for what I thought was going to be a career in law, then repeatedly as a jury foreman, strategist, expert witness, defendant or plaintiff.

One thing is clear: In court, the truth often doesn’t matter. What always matters is what the deciding parties believe. Some people are so bad at telling a story that they look like they are lying even when telling the truth, or they put the court to sleep. Others are so good at lying that the court can’t tell the difference. What you have to understand is that regardless of right or wrong, if you aren’t believable, you’ll likely lose.

That’s why, in big trials, experts and other witnesses have a rehearsal. They need to look believable in the face of the opposing legal team’s attempts to discredit them. Expert witnesses often earn their money this way because if they are discredited they won’t be asked back to do this work ever again. When it comes to being honest and believable on the stand, strive for both, but the latter aspect is the most important.


Deciding to Litigate

Litigation is an expensive, painful process, and it can take years to resolve. One particularly nasty lawsuit I was involved with took over 13 years to resolve; by the end, many of the parties were no longer alive and everyone was far less wealthy. Looking back, everyone would have been far better off had they just walked away, but these things can gain a life of their own and all parties can become unreasonable in their search for what they think is “justice.”

Three things must be considered before litigating. One is whether there is another path to resolving the dispute. Often, if the parties sit down with a mediator, they can come to some kind of settlement that they might have gotten to far more expensively in court (part of the court process is to encourage some kind of negotiated settlement anyway).

Second, can you justify the costs? Often, you can’t recover costs if you win and typical civil legal action costs between $50K and $200K, depending on its complexity and the clarity of the issue. If the amount you are attempting to recover is in this range, it may be more economical to walk away.

Third, are there bigger implications to consider? For instance, sometimes litigating aggressively can prevent others from skipping out of obligations. Litigation can also damage relationships, both family and business, that may be more important than even the most optimistic personal outcome. You need to take into account all of the costs and benefits before you decide to take the big plunge.

Litigation

Arbitration

It used to be thought that arbitration was a fast path to a decision with far lower costs and aggravation. Over the years, this has evolved into a process similar to court but where the chance of an unusually large judgment is all but eliminated. You still have discovery, depositions, testimony and the equivalent of court charges; you just don’t get the option of a jury. Large companies favor arbitration with customers because it lowers the chance of an astronomical judgment, and the related bad publicity, that might otherwise result.

I used to think another advantage of arbitration was that you could choose a subject matter expert as the arbitrator but, as I painfully found out, it is better to have a legal expert because you can bring subject matter experts in as witnesses. If the arbitrator doesn’t understand the law, that tends to work in favor of the side that is acting illegally. This also suggests that firms that prefer arbitration may intend, or believe their folks intend, to breach the agreement. Often, we get so excited about doing a deal that we don’t consider that the other side has no intention of living under it. An arbitration clause should serve as a heads-up that their intentions may not be pure.

Legal Team

Choosing the legal team is tricky and most people get this wrong. While generalist lawyers can provide very valid general advice, you’ll probably want a specialist in litigation. People often go to an attorney they know and ask them to take on a case, but you’d be better served to instead ask to have someone independent, like a legal academic, first look at your case and recommend the kind of specialist you’ll need.

This was a painful lesson for me; after being involved in one case for years, I finally had an academic look at it, only to find I wasn’t going after the right people or using the right court. And I found that even though it was an arbitration, I needed a litigator. Now I was misled, but the other side will always work to stack the deck in their favor and only by standing back and asking someone with no skin in the game, who has the appropriate background, will you get to the strategy that should have the lowest cost and the greatest probability of a win.

Perhaps the best example of this was when Mark Hurd was fired from HP. You may recall that this resulted from his firing of a woman to whom he’d allegedly made improper advances. That woman, Jodie Fisher, hired Gloria Allred, who specializes in issues like this. She never had to go to court, she got a huge settlement, and Hurd got fired. You get the right people, you’ll get a better outcome. Ironically, Meg Whitman (now CEO at HP) also discovered just how powerful Allred could be. Perhaps Ellen Pao’s outcome against Kleiner Perkins would have been different had she chosen Allred as well.

Wrapping Up: It Often Starts with a Contract

One of the rules that the attorney I worked with regularly shared with me back when I was doing contracts for IBM has always stuck with me: The strongest contracts are ones between parties where the contract isn’t necessary. In effect, the parties would do what is in the contract even if it didn’t exist. The weakest are contracts that force either or both sides to do something they don’t want to do. You can put in clauses to recover legal expenses and big penalties in that latter case, but you’d likely be better off just finding another firm or person to contract with who doesn’t feel taken advantage of.

Microsoft/Sun, Apple/Samsung, Sony/Samsung (no litigation I can recall), Apple/HP (also no litigation) -- all of these deals ended badly because there was no way they were ever going to end well. It wasn’t the contract, it was the nature of the relationships. Or put another way, contracts don’t fix behavior, they just provide some protection against it. You likely shouldn’t do business with certain people and firms; avoiding them is a far more successful, and far less costly path, than suing them will ever be.

One final thought, also expensively learned, is that the more emotion you drive into this process, the more expensive it will be. It may be fun to piss off the other side and for them to piss you off, but the only folks who will end that process with a smile are the attorneys.

Something to noodle on this week.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+



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