An executive whose company is hit with an intellectual property suit or who believes another company is infringing on his company's IP rights needs legal advice. While some companies employ in-house attorneys who can respond to and supervise IP litigation, execs at other companies may find themselves charged with hiring and overseeing an outside IP lawyer. Knowing how an intellectual property case proceeds to trial — and why it likely will never make it that far — empowers execs to manage their outside counsel to achieve the best results while keeping the litigation budget under control.
The first thing execs should know is that intellectual property cases are expensive to litigate, which is why the majority settle before trial. An exec faced with managing IP litigation must insist that outside counsel get any IP dispute ready to settle as early and economically as possible. From the beginning of an IP controversy, execs need to ensure their lawyers strike the appropriate balance between controlling costs and litigating aggressively.
When looking for an IP lawyer, consider smaller firms, including boutique IP firms, in addition to large firms with an IP section. Ideally, the lead attorney the exec chooses will have litigation experience and IP experience. However, a general litigator can try an IP case if he has co-counsel with good IP experience as a second chair.
After hiring a lawyer, execs can use the following checklist to make sure the lawyers work toward a fast, cost-efficient settlement. This checklist reveals areas where many companies spend a lot of money that does not help resolve the suit quickly.
If execs know what to look for, they can steer their lawyers toward a more cost-effective path. While an exec who has to manage IP litigation will not be involved in the day-to-day decisions in litigation, she can make clear to outside counsel what battles the business considers worthwhile. Here are areas to discuss in-depth with the lawyer.
1. Do not fight about venue : If the exec's company is the plaintiff, it gets to choose where to file the suit, called venue. Lawyers should file the suit in a place where venue clearly can be maintained. If the exec's company is defending the suit, lawyers may want to file a motion to change venue. Execs should resist that temptation unless the lawyers think the motion appears to be a slam dunk. Arguing over venue wastes time and money.
2. Do not fight over discovery : Parties generally spend the majority of their litigation budget on discovery. The secret to keeping costs down is to minimize this figure. If the opposing side has a good argument as to why it is entitled to the documents it seeks in discovery, the exec's business should err on the side of over-production. Only be conservative in production when the requested material may be privileged, otherwise the company's lawyers should produce it and not spend a lot of money fighting discovery requests.
3. Make requested discovery narrow and to the point : When lawyers request discovery, they should only request the information needed to prove the case. They should avoid broad, general discovery requests. With electronic discovery, if a business' lawyers make overbroad requests, the opposing side can produce tons of discovery electronically with the push of a few buttons. Then it becomes difficult and expensive to separate the wheat from the chaff. The secret is for lawyers to request only the wheat, not the chaff.
4. Approve motions to compel only when necessary : Lawyers should use motions to compel discovery sparingly. Making focused discovery requests that only ask for items necessary to prove the case should lead to relevant responses from the other side, However, if the opposing side does not comply with the discovery requests, an exec's lawyers should send a polite letter requesting production. Lawyers on both sides should confer with each other in good faith to try to resolve the dispute without involving the court, if possible. Courtesy can go a long way when trying to get the other side to comply with discovery requests. If the dispute cannot be resolved without further arguments proceed with a motion to compel.
5. Take key depositions immediately : Lawyers in an IP case should depose the other side's corporate representative as soon as possible, preferably right after the first production of documents. This will tie the opposing side down to a story. Also, there may be some additional key depositions in patent cases that lawyers should take immediately, such as those of the inventor, decision-maker or person allegedly involved in the infringement. Even if the other side has not yet produced the documents, lawyers should take these depositions early in the case. The depositions may reveal that documents exist that have not been produced.
6. Avoid marginal discovery : Lawyers always can take additional depositions, serve more requests for production and issue more subpoenas. They only should do so, however, if these tactics have a high probability of revealing information that helps resolve the suit successfully. Knowing when to stop marginal discovery is the main factor in controlling litigation costs, and execs should emphasize this fact to lawyers representing their companies.
7. Designate expert witnesses early : Many times parties involved in IP suits have no idea what the weaknesses in their cases are until they see the reports of the expert witnesses. Therefore, if the case does not settle after the first round of discovery, lawyers should proceed immediately to getting expert reports on infringement and damages prepared and produced to the other side. At that point, the other side can realistically evaluate their case.
8. Consider alternative dispute resolution : Many times in litigation, an exec may not get a realistic assessment of his company's case; often, the only view he receives is his attorney's. In the same way that an expert report can help execs for the opposing party see the potential downside of their case, alternative dispute resolution can be a useful reality check. Consider using ADR methods such as mediation, with a mediator experienced in IP cases. During mediation, all parties hear the shortcomings of their cases directly, without the filter of a lawyer's point of view. Mediation also gathers the parties in one place, which can prompt compromise and settlement.
9. Keep the door open for settlement : There are logical points during an IP controversy where the case can settle: before a plaintiff files suit (often in a place convenient for them, but not for the exec's company), immediately after the plaintiff files suit, or after the first round of discovery and depositions has occurred. The objective is to get through this last phase as rapidly and cost-effectively as possible so the parties can reach a favorable settlement. The sooner a case settles, the less it will cost.
If an exec has emphasized these rules to his lawyer but the case has not settled, then it's time to try the case. That will involve putting on witnesses, introducing deposition testimony from the opposing side, putting on expert witnesses and introducing the relevant documents with these witnesses. Lawyers will have accumulated enough evidence to try the case either in front of the judge or the jury. Chances of going to trial are much smaller than settling, however, and the preceding checklist should help execs keep their lawyers on track with that goal.
The Best Results
• Execs whose businesses are involved in intellectual property suits must ensure their lawyers prepare a case to settle as quickly and with the least expense possible.
• Knowing what stages in litigation use up significant resources and minimizing money spent there can save a business a lot of money.
• Choosing not to fight about venue and discovery, as well as taking key depositions and designating expert witnesses early, can cut costs dramatically.
• Mediation can reveal the weaknesses in each side's case, making parties more amenable to settlement.
Ted D. Lee is the founding partner in Gunn, Lee & Cave in San Antonio and has more than 35 years of experience litigating intellectual property cases. Miguel Villarreal Jr. is an associate with the firm.