Thursday, October 06, 2005

In Defense of the True New Economy.

A boom in expert-witness firms

By John Markoff The New York Times

SUNDAY, OCTOBER 2, 2005

SUNNYVALE, California: Lawsuits over who can profit from ideas and innovation are increasingly a foundation of the technology industry. As a result, competition once played out in the marketplace is now routinely carried on in the courtroom.

That has touched off a quiet race among companies to assemble teams of expert witnesses - the technical experts and technology-savvy economists who will help sway judge and jury on the intensely complex merits of a patent case.

A thriving industry in expert witnesses - who are paid as much as $1,000 an hour - has become part of the fabric of the global patent system and the increasingly contentious legal combat that surrounds it.

"There is a very small circle of world-class technology economists, and both sides know who they are," said Thomas McCoy, the lead lawyer for Advanced Micro Devices, which is preparing for a legal battle with Intel over chip patents.

That small circle has been eclipsed by an explosion of small and large expert-witness firms. They range from giants like LECG and Exponent, global companies with expertise in a vast array of fields, to litigation-support businesses like Chatham Group, based in Los Altos, California, and operated by Jerry Klein.

In recent years, the handful of large U.S. expert-witness firms has made "handshake" agreements to act in partnership with companies that are accumulating portfolios of patents with the intent of collecting revenue from them, said Jack Russo, a specialist on intellectual property in Palo Alto, California. He said this was similar to the informal networks that have been set up by insurance companies that require expert testimony in lawsuits.

Klein is a pioneer of the business. With a database of more than 1,000 experts, he has been operating as a kind of expert-witness "arms dealer" for more than 17 years. He finds experts, trains them in performing before a judge and jury and assembles teams of experts to perform the behind-the-scenes technical chores needed to prepare for an intellectual property lawsuit.

While Klein takes pride in being able to provide in-depth technical legal consulting, he often must deal with lawyers who are looking for a character straight out of central casting, he said: "The classic profile I get asked for is a gray-bearded 56-year-old Stanford professor who has written the leading textbook on some arcane technology area."

In reality, however, few experts actually end up in the courtroom. Instead, most of the work is the kind of tedious and painstaking analysis that a software consultant like Mark Seiden might perform in the early stages of a lawsuit, well before it goes to a judge.

Not long ago, Seiden, who is a partner at MSB Associates in San Mateo, California, was asked to look at a piece of software that was the centerpiece of a copyright fight involving three companies.

He began by writing his own software tools to help him compare thousands of lines of code to look for copyright infringement.

After several weeks, his software found a smoking gun - an unusual misspelling hidden deep within the infringing program.

Although he has worked as an expert "witness" for several decades, Seiden has never appeared before a jury.

That is just as well, he said: "Being on the stand is a very high-pressure, unpleasant thing. And most of the cases settle before going to court."

In Europe, expert witnesses are as much in demand as in the United States, and at comparable daily rates, according to Mark Solon, who runs Bond Solon, a British expert-witness training group.

Jan Brinkhof, a former Dutch patent judge, said that judges on the Continent sometimes appointed the experts themselves, although finding those with the required knowledge is not always easy.

Impartiality is a growing concern. In September, the Civil Justice Council, a body that advises senior members of the British judiciary, began recommending that experts in civil trials be prepared to give the same evidence no matter which side is paying them. The guidelines also reinforce rules allowing judges to impose fines on experts who mislead the court.
In the United States, one of the driving forces in the expert-witness industry was a 1993 ruling by the Supreme Court establishing standards intended to limit the practice of "junk science" in federal courts. Junk science is faulty scientific analysis used to advance a specific viewpoint.

That ruling created a process in which courts now routinely have an early role in hearing expert testimony related to claims. In many cases, the courts hold preliminary hearings and may reject a portion of a lawsuit, based on expert testimony, before it goes to trial.

Pending patent legislation now under discussion in the U.S. Congress could move much of the litigation into an arbitration system, which is more compressed and reduces the role of expert witnesses, some lawyers said.

Klein said that such a change could unravel a system that has done a good job of protecting the innovation at the heart of Silicon Valley.

"The system has flaws," he said. "But it's the best system in the world."

James Kanter contributed to this article from Paris.

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