In the “old days,” solely technology innovation organizations needed to be worried about patent litigation. Patent lawsuits had been fights between competitors—often manufacturers—over legal rights to their recent technology along with the income created by those technologies. Ah, the good old days. Nowadays, each and every organization that makes use of technology might become victim to a patent infringement lawsuit. Living in our technology-driven world, that implies every organization is at risk. Recently, particular kinds of non-practicing entities ( often called “patent trolls” ) have declared infringement accusations against just about any business that utilizes an Internet site or a bar-code scanner.
What exactly should you do should an NPE claims an infringement declaration against your firm? There is absolutely no easy response. Depending on the strength of the allegation, the reasonableness of the NPE, your risk threshold, along with your capacity to shift—or at the least spread—your possible threats and expenses. This article will tackle some of the factors you might want to think about all of which will offer some “best practice” recommendations.
1 . Assess the Allegation
Determine what goods or actions are allegedly being infringed and exactly what the NPE is asking for. When you do, it is possible to figure out the following:
( a ) Must another person take or share your legal responsibility? If you happen to be a retail store, your vendor might owe you an indemnity responsibility. When the answer is not clear, the vendor still might be able to work out some expense sharing arrangement instead of challenging its client on an indemnity claim.
( b ) How much is the NPE asking for? Certain NPEs claim tens or perhaps many hundreds of infringement lawsuits with relatively modest requirements. Most of these NPEs value their claim to ensure that it will be less expensive to compensate instead of to challenge. In certain situations, it might be less costly to buy a license rather than to examine the patent concerns. The most affordable answer might be to compensate the NPE. For certain organizations, this method saves dollars merely in the short-run. You should think about whether you are welcoming potential allegations by “rolling over” without any resistance.
( c ) Are your possible risks considerable? The response will alter your cost/ benefit calculations. When the stakes are substantial, you might want to spend more funds and assets into your defense. The tougher you appear, the more potential you will find a defense that increases your negotiating power or positions you for a litigation win. When the suit is just an annoyance, therefore you don’t wish to challenge it on principle, your defense expenses will soon exceed your risks. Subsequently, you will need an efficient and innovative defense strategy. Optimally, the lawyer expenses along with your compensation expense are lower than the NPE’s original claim. Your edge in these types of nuisance cases is the fact that you have minimal to lose as well as the NPE has minimal to gain. Put simply; the NPE might have more motivation to reconcile than you do. Realizing this truth will help you influence a much better agreement.
( d ) Do you possess a basic ( inexpensive ) defense? Battling a patent infringement case on its strengths can be extremely costly or may be needless. Search for different, non-technical defenses that may wipe out the claim or offer negotiating power. These types of arguments consist of patent fatigue, license ( an upstream user’s license might take care of your usage of the technology ), insufficient rights ( i.e., in case the NPE has not obtained adequate legal rights under the patent to sue ), and so on. Damage restriction “defenses” additionally offer influence by minimizing the claim price. As an example, a patent marking issue or a laches problem can significantly decrease the possible damage and deflate the NPE’s optimism for a huge payout. Verify the patent’s litigation background for a fast and low-cost solution to determine possible defenses. In some instances, an additional defendant might have completed your job for you ( e.g., won a decision that is valid for you too ). Similarly, if you recognize a disadvantage in the patent that other folks have overlooked, you could put yourself up as the defendant that the NPE would prefer not to challenge.
( e ) Are you able to fight the patent out of district court litigation? Should you have a stable invalidity situation, contemplate fighting the patent in the U .S. Patent and Trademark Office ( PTO ). Along with reexamination, new processes such as inter-parties review ( IPR ) and post-grant review ( PGR ) might be beneficial options for contesting the NPE’s patent. The PTO operations include dangers and advantages, yet they might permit you to place a district court lawsuit on pause, which can let you save—or at the minimum, postpone—litigation defense expenses.
( f ) Are you able to stay away from the technology? If you can live without the allegedly infringing technology, you could reduce your possible damages and acquire negotiating influence. NPEs usually negotiate lump sum payment, fully-paid up licenses that lengthen until the patent ends. When you can live without the accused products, you will have absolutely nothing to worry from an injunction ( still it is hard for an NPE to gain an injunction anyhow). Then, you can lower the NPE’s “standard rate” for the reason that you are concerned only in a restricted “license” paying past usage. If your past usage is nominal, but you are still prepared to cancel the accused technology, the NPE could quit pursuing you entirely.
2 . Figure out Resolution Timing
Timing is crucial. “Conventional wisdom” asserts you don’t desire to be the first to reconcile or the last. The first to reconcile might be presented a “sweetheart” package, however, in reality, might wind up paying out more. When the NPE has affirmed its suit against a sizable group, many attorneys such as Freeborn Peters are going to be looking for flaws in the petition. When somebody discovers an Achilles heel, the NPE might decrease its request, or it might get itself the loss of a summary judgment motion. People who settle “too soon” lose that advantage. Alternatively, many astute NPEs will increase the request whenever somebody shoots at the patent and misses. Individuals who wait around for someone else to wipe out the patent might pay an expense for the opportunity of standing on the sidelines. Being the last “infringer” remaining might find oneself litigating by itself against the NPE. In a nutshell, you encounter risk at any move you make. You must understand how much risk you will be prepared to accept. If you believe that the suit is flimsy, and you can take the danger of an increasing claim, then stand your base. When the guarantee is essential to you, or your exposure risk is too much for you, reconcile earlier.
3 . Cost Management Methods
( a ) Are you able to share expenses along with other accused infringers? A lot of NPEs sue several people at the same court. Frequently, law firms offer to represent several defendants to stretch standard costs across the parties. This plan will work well when: ( a ) you have confidence in the law firm like Freeborn Peters, ( b ) you will discover no probable clashes ( e.g., . , should the accused goods operate in basically the identical way for all defendants in the grouping ) , and ( c ) you don’t care about relinquishing some level of management over your defense . Conversely, you could get your representation and make deals with other defendants to share court expenses for certain activities, like expert studies, file examination, dispositive motions, and so on. In case you are part of a large defense grouping, you could conserve plenty of cash that way. However, big defense groupings offer inefficiencies of their very own. Weekly conference calls for many hours with twenty-five attorneys can be very expensive not to mention frequently unproductive ( usually, certain active members bring value yet often individuals with the bare minimum talk the most ).
( b ) Could you secure a different payment deal from your external representation? Different payments can help you manage expenses. Moreover, there are numerous choices. Still, you need to understand, at least approximately, the price of the claim. To do this, you assess your possible exposure against your chance of victory and the NPE’s request. The claim price provides you with an idea for in which you have to limit your defense expenditures. With that limit at heart, you could work out various alternative payment deals with external representation, for starters:
• Flat fee
Whether for the total defense or on a project-by-project schedule ( e.g., $X for preliminary pleadings, $Y for fact discovery, and the like . )
• Expenses stretched over time to prevent massive spikes
• Reverse contingency ( X fee for accomplishing deal of Y or greater )
• Hourly fee deal with results reward kicker
• Soft caps
Hourly rates which are reduced as costs reach predefined cap limits. ( E .g . , X% lower price for charges that surpass the limit by 10% and Y% discounted for expenses that exceed the limit by 20%, etc . )
( c ) Are you able to obtain patent litigation insurance coverage? Your company’s general liability coverage most likely will not insure patent infringement. Individual insurance providers offer protection for patent infringement liability, legal expenses, or both of them. Since patent litigation may create massive liability, these insurance policies more often than not have high premiums, high deductibles, as well as low caps. The low caps make these types of policies undesirable for high-stakes claims. And for nuisance claims, these types of policies might not offer great value due to the relatively high deductible. However for certain organizations, these policies strike a sweet spot and might provide a quality hedge against a substantial percentage of their standard NPE litigation risk exposure.
( d ) Are you able to reap the benefits of an alternative cost-spreading venture? In reaction to the increase of NPE litigation, companies purchase “high threat” patents “defensively” for their users. They pinpoint high-threat patents and buy them to remove them from circulation and stop them from slipping into the clutches of some organization which will use them against the group’s subscribers. These groups never operate evenly for all business sectors. They often do best in industries in which big players will likely subscribe to membership and where high-risk patents are better to recognize. However if you work in one of these business sectors, you must think about the advantages that these companies can propose.
To understand patent trolls and how to defend against them, please visit Freeborn Peters.