August 15, 2017

The Multiple Roles and Types of Experts

Weston Anson

 

An important first step for the litigation team is to understand what kinds of experts are available and what type of expertise is needed. Will there be one type of expert or two? Will there be consulting experts in addition to testifying experts? Special knowledge IP experts in addition to damages experts? These are the early questions the litigation team must ask. How broad or specialized should the role of the experts be? When should their role in the litigation start? In my view, this is part of the very earliest strategic decisions in any litigation. I believe that the experts should be deeply involved and work at a high level of detail with the litigators, which enables the experts to benefit the legal team from the moment of retention. I will also briefly discuss the differences between consulting experts and testifying experts and the roles of those experts in different cases.

Experts can be valuable sources of knowledge and assistance to lawyers in all phases of any case. My firm deals in specific knowledge expertise in multiple areas of business valuation, intellectual property and intangible assets, including the following:

  • trademarks
  • patents
  • copyrights
  • trade secrets
  • software
  • rights of publicity
  • information technology
  • databases and customer information
  • contractual obligations
  • licenses
  • communications rights
  • Internet assets
  • social media
  • all intangible assets

Although many of the above are intangible assets, these areas of specific knowledge fall under the general heading of intellectual property.

In addition, well-rounded IP experts also work as financial and economic damages experts. Experience in financial analysis, financial damages, and economic valuation is often part of the skill set needed. I will discuss financial analysis expertise in later stages of the book.

Finally, in today’s world it is the rare expert that works solely as an individual. More common is that a true expert has his or her own support team of analysts, researchers, survey experts, and support staff that assist in the process of helping the lead expert completely understand the issues and that provide thorough analysis leading to the expert’s final opinion.

 

Consulting vs. Testifying Experts

Broadly speaking, there are essentially two different types of experts: the consulting expert, who primarily engages in research and support for the litigation team, and the testifying expert, who prepares reports submitted to the court and testifies before the court. Often, the same person performs these two roles.

The job of the testifying expert is, of course, to objectively articulate his or her client’s position. However, the job is also ultimately to assist the trier of fact—whether it is the judge, jury, or arbitration body—in reaching a proper decision on the issues being faced. In other words, the testifying expert is there to assist the court by articulating a position and opinions based on fact. That expert has a duty to the court to expound his or her own opinion essentially independent of influence from the client.

The consulting expert’s primary role is to act as an advocate and advisor for the litigators while engaging in research and analysis. The consulting expert can be used to comment on the strengths and weaknesses of both parties’ respective positions and to probe many alternative theories and damages analyses. They can be used as a resource to test different theories of the case, to research alternative ideas, and to reject those that are least favorable. They can also advise the lawyer team on different lines of inquiry while still retaining confidentiality.

These consulting experts are specialists, of course, and have particular knowledge in their area of specialty, whether it is intellectual property, construction default, medical malpractice, or other areas. In general, the consulting expert is a person who is going to work to help the lawyers develop and advance a particular argument or strategy or tactical approach on behalf of their clients. The consulting expert, then, is someone who is going to help the lawyers and the client promote their best interests in the case. They are, in sum, advisors and advocates who probe all the strengths and weaknesses of the case on a consulting basis for the litigation team.

Consulting experts do not testify. Because a consulting expert will not appear in court, he or she need not worry about being faced with a Daubert challenge, or meeting the qualifications set down in Daubert and Frye and other expert standards used by a particular court. The consulting expert is there to research, test, survey, and advise the litigation team. Among the tasks that the consulting expert can provide the litigation team are the following:

• Education. First and foremost is to educate the litigators on the special issues of the case. One must remember that lawyers often do not have the specialized knowledge typically at issue in the specific field that may be the core of the case that they are trying. When a lawyer is considering whether to pursue a major case in IP infringement—or construction defaults or medical malpractice, for that matter—or whether to launch a major litigation against a manufacturer of defective equipment, for example, they don’t usually have all the specialized knowledge necessary to make a decision as to how a case may best be presented from a business or specialized knowledge point of view. The lawyer, after all, may not be an IP licensing specialist or a medical specialist or a construction defect specialist. Therefore, the consulting expert is there to educate the attorneys and help them understand the alternatives available, both in terms of the business issues of the specific case as well as the alternative business or damages calculations that might be available. In an IP damages action, for example, the consulting expert can help the lawyer understand whether reasonable royalties are going to be easily established, whether disgorgement of profits is going to be a manageable solution, or whether alternative damages calculations make more sense.

• Evaluating the underlying business issues. Lawyers can use consulting experts to evaluate a specific case to determine whether the basic underlying business issues have merit. For example, a client may claim that there has been consumer confusion caused by an infringing trademark, and a consulting expert can test the marketplace via random sampling, a survey, or other methodology to see if he or she can discover any actual confusion. This sort of advance evaluation of the business issues in a case can be invaluable to the lawyer.

• Testing and experimentation. As mentioned in the example above, the consulting expert can actually run tests in the field to see if the client’s claims are well founded. In another example, the consulting expert in a patent infringement case could take the supposedly infringing product and test it to see if it in fact functions in precisely the same way. This would help the lawyers establish in advance whether the patent infringement claim might hold up in court.

• Assisting in discovery and case development. As noted at the very beginning of this section, discovery is critically important to the process, and the consulting expert can play an important role in that process by advising the lawyers on where discovery might be most effective. For example, the consultants might construct a list of questions or requests for different types of information that would be most useful to a testifying expert in constructing a damages claim, or for another aspect of the case. Similarly, they might point out to the lawyers other items of research that could be useful in developing the case.

• Identifying expert witnesses. The consulting expert can be particularly useful in helping the legal team to identify those experts that would be most effective as a testifying expert. The testifying expert may come from within the consulting expert’s own firm, which ensures great continuity and ease of transition. Or the consulting expert may know of experts around the country that are an ideal fit for the case at hand. In any situation, talking to the consulting expert about other expert witnesses is a critically important step.

These are some of the key duties of a consulting expert. On many occasions a consulting expert can become the testifying expert. Because this is so, lawyers engaging a consulting expert must be cautious from the beginning that they maintain privilege and monitor communications with the consulting expert if they have any intention of possibly using the consulting expert in the future as a testifying expert.

 

Testifying Experts: Special Knowledge vs. Damages

The most important distinction in the different roles of expert witnesses in litigation is that between the expert with specific knowledge in a discipline and the expert with financial and valuation and damages skills. A general description is helpful. In the first instance, the specific knowledge expert comes to the court with a background in a special area, such as intellectual property, medical or surgical techniques and malpractice, construction defects, etc. On the other hand, the valuation and damages expert comes to the court with general knowledge of complex business and financial issues and analysis. Oftentimes these financial or valuation and damages experts have not been trained in a particular special knowledge area. It is rare that the typical financial or valuation and damages expert has more than a general sense of the specific knowledge issues of the case . . . and a blessing when they do.

Valuation and damages experts today tend to fall into two camps: the so-called commodity valuation and damages experts, and the specialty valuation and damages experts. In all cases, a valuation and damages expert will have some basic training, whether an MBA in finance, a CFA, or some other recognized financial training. The commodity side of this group of experts will have a general sense of how to use mechanical theories of valuation such that they are able in a gross sense to value a piece of real estate, a business, a medical device, or—at least in theory—a piece of intellectual property. On the other hand, the specialty valuation and damages expert will have a similar financial background but in addition will have training specific to IP valuation.

In my case, I have undergraduate training in finance and accounting, and I hold an MBA in international finance from Harvard. I also have twenty-five years of experience in managing IP portfolios and IP licensing programs. I hold the official designation of Certified Licensing Professional as well as being a Certified Instructor in IP Valuation and Damages. All this is a way of saying that in order to find an IP-specific valuation and damages expert, one must look for an individual that not only has financial as well as valuation and damages training, but also has the industry-specific specialist knowledge necessary to be able to apply financial rigor and standards to an IP damages analysis.

 

A Broad Range of Specific Knowledge Experts

While I focus primarily on issues relating to intellectual property and intangible assets, my experiences do, however, have application to all forms of special knowledge litigation. Therefore, I think it is useful to take a moment to look at the range of specific knowledge expertise that is available to the legal community. When a litigation team is ready to begin their planning, they can look to an extremely broad range of specialists to help them in the pursuit of subject-specific expertise. One list of specialists is available from ALM Experts, but there are a number of other expert witness services that make similar lists publicly available. Some are offered through a subscription service, whereas others will provide names of experts on a case-by-case basis. Some of these groups include the Round Table Group, SEAK, Expert Witness Network, and The Tasa Group.

These services can be helpful to litigators who have been frustrated in their search for subject-specific expert witnesses. On the flip side, however, these expert witness services can be expensive to the litigator. Also, the search services oftentimes cast their net so widely as to make it difficult for the litigator to weed through all the alternatives, separating the wheat from the chaff that the expert witness service provides to them.

 

Combining Special Knowledge and Damages Experts

Unlike other areas of specialization, there are some unique differences with intellectual property. The very nature of intellectual property makes it an area of specialization that calls for distinct skills—both unique skills in understanding IP management issues and unique skills in understanding the value or worth of intellectual property. As a consequence, specialist IP expert skills are needed and overlap with valuation and damages skills required in most cases. This is coupled with the fact that there is a relative scarcity of true IP experts. Plus, in-depth knowledge of IP management practices is relatively scarce among experts.

As mentioned above, testifying experts generally fall into two categories: industry or special knowledge experts, and financial and valuation and damages experts. Though lawyers oftentimes will seek to pair a valuation and damages expert with a special knowledge or technical expert, this may be a bad choice in the case of intellectual property. Naturally, the choice of the technical or special knowledge expert is an important matter. The expert is going to present testimony that provides an exceptional opportunity to bring to the court core themes and ideas that can make or break a case for the litigators. In addition, the expert’s testimony and report is a useful way for introducing new evidence and new themes into a case.

However, the most important consideration when selecting a valuation and damages expert is whether the expert is qualified to provide the required type of IP damages testimony, given the nature of the case. In the case of intellectual property, too often the damages expert does not have the credibility in the area of intellectual property to make his or her damages conclusions believable or defensible.

As the valuation and establishment of damages to intellectual property and intangible assets has become more and more prevalent in an increasing number of cases, the “commodity damages expert” has become less and less relevant in today’s world. Increasingly, it is recognized that bodies such as the International Accounting Standards Board and the Financial Accounting Standards Board do not have IP training to adequately equip the commodity or generalist valuation analyst for measuring damages to intellectual property.

As a result, litigators are increasingly using a single expert with specific valuation training to provide both the specialist expert witness testimony on the IP issues, as well as the valuation and damages analysis of the intellectual property—in other words, using one expert to cover both sides of the equation.

Weston Anson

Weston Anson is Chairman of CONSOR, an intellectual asset consulting firm specializing in trademark, patent, and copyright licensing, valuation, and expert testimony. The firm is headquartered in La Jolla, California, and has offices in New York and London. Mr. Anson served for ten years as an officer and board member of the Licensing Industry Merchandisers’ Association and is a lifetime member of the Board of Advisors. He currently serves as an active member of the International Licensing Executives Society board of delegates. He waschairman of the Global Valuation Standards Committee for the LESI, which worked on establishing IP Valuation standards in cross-border IP transactions. These standards were adopted in 2012 at the Global Technology Forum, which includes World IP bodies such as World Intellectual Property Organization, World Trade Organization, and the Association of University Technology Managers.