Early Neutral Evaluation (ENE) is a dispute resolution method that involves a neutral having subject matter expertise evaluate at the outset of a lawsuit the respective parties’ positions and evidence. The purpose of ENE is to give each party a reality check on the likely outcome of the lawsuit. This, in turn, provides the parties an opportunity to re-evaluate their respective positions on the amount of time and money they are willing to invest in the lawsuit. ENE is not mediation and is not arbitration. In mediation, the process of achieving the interests of all parties may be emphasized – with a focus on achieving a settlement. The mediator may have process expertise, as opposed to subject matter expertise. In ENE, subject matter expertise is emphasized. In arbitration, direct testimony and cross-examination may be taken. Based on the evidence, an award is made. In ENE, information is gathered, perhaps in the form of presentations from experts. But the information may not be presented to the other parties. In ENE, the applicable law is applied against the gathered information. But no award is made in ENE.

1. EARLY NEUTRAL EVALUATION (ENE) FOR PATENT
INFRINGEMENT DISPUTES
By Michael A. Shimokaji
www.SpectrumDisputeResolution.com
Early Neutral Evaluation (ENE) is a dispute resolution method that
involves a neutral having subject matter expertise evaluate at the outset of a
lawsuit the respective parties’ positions and evidence. The purpose of ENE
is to give each party a reality check on the likely outcome of the lawsuit. This,
in turn, provides the parties an opportunity to re-evaluate their respective
positions on the amount of time and money they are willing to invest in the
lawsuit.
ENE is not mediation and is not arbitration. In mediation, the process
of achieving the interests of all parties may be emphasized – with a focus on
achieving a settlement. The mediator may have process expertise, as opposed
to subject matter expertise. In ENE, subject matter expertise is emphasized.
In arbitration, direct testimony and cross-examination may be taken.
Based on the evidence, an award is made. In ENE, information is gathered,
perhaps in the form of presentations from experts. But the information may
not be presented to the other parties. In ENE, the applicable law is applied
against the gathered information. But no award is made in ENE.
The US District Court for the Northern District of California adopted
ENE in the 1980s. It is now part of the Local Rules. According to the Northern
District:
ENE aims to position the case for early resolution by settlement,
dispositive motion or trial. It may serve as a cost-effective substitute for
formal discovery and pretrial motions. Although settlement is not the
major goal of ENE, the process can lead to settlement.
The ENE process is described as follows:
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2. The evaluator, an experienced attorney with expertise in the case's
subject matter, hosts an informal meeting of clients and counsel at
which the following occurs:
1. each side — through counsel, clients or witnesses -- presents the
evidence and arguments supporting its case (without regard to the
rules of evidence and without direct or cross-examination of
witnesses).
2. the evaluator identifies areas of agreement, clarifies and focuses the
issues and encourages the parties to enter procedural and substantive
stipulations.
3. the evaluator writes an evaluation in private that includes:
o an estimate, where feasible, of the likelihood of liability and
the dollar range of damages;
o an assessment of the relative strengths and weaknesses of
each party's case; and
o the reasoning that supports these assessments.
4. the evaluator offers to present the evaluation to the parties, who may
then ask either to hear the evaluation (which must be presented if
any party requests it), or postpone hearing the evaluation to:
o engage in settlement discussions facilitated by the evaluator,
often in separate meetings with each side, or
o conduct focused discovery or make additional disclosures.
5. if settlement discussions do not occur or do not resolve the case, the
evaluator may:
o help the parties devise a plan for sharing additional
information and/or conducting the key discovery that will
expeditiously equip them to enter meaningful settlement
discussions or position the case for resolution by motion or
trial,
o help the parties realistically assess litigation costs, and/or
o determine whether some form of follow up to the session
would contribute to case development or settlement.
The Northern District has identified case characteristics that can make
ENE particularly useful:

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counsel or the parties are far apart on their view of the law and/or
value of the case

3. 
the case involves technical or specialized subject matter — and it is
important to have a neutral with expertise in that subject
The above ENE characteristics are prevalent in patent infringement
cases. The “technical” characteristic particularly holds true in patent litigation
– both in subject matter and applicable law.
In patent infringement litigation, two challenges often exist. One is
understanding the technology involved in the patents and allegedly infringing
devices. Two is understanding the law, which is generally not of the type that
tends to “make common sense” – like contract and tort.
For a significant percentage of arbitrators and mediators (and perhaps
even most), having to understand software technology or biotechnology
would be a significant challenge. Having to understand the claims of a
software patent or biotechnology patent might be close to impossible.
For those reasons, the Northern District vets a potential ENE evaluator
not only based on patent expertise, but patent expertise in specific
technologies.
What this suggests is that patent infringement lawsuits can be especially
appropriate for ENE. What is also suggested is that selecting an ENE
evaluator should take into account factors that are different from selecting a
mediator or arbitrator – namely, the factor of subject matter expertise.
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