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There are currently 1.6 million inventions covered by valid U.S. patents. Obtaining those patents cost anywhere from $5,000 to $20,000 (or even higher), depending on factors such as the complexity of the innovation and the attorney’s hourly rate. Yet after choosing to spend all that money, owners do not always enforce the resulting patents against infringement. Why not? According to a biennial report by the American Intellectual Property Law Association, the “typical costs” of a patent infringement case in 2005 were $2 million “inclusive,” meaning inclusive of all fees and costs through judgment. Cases with more than $25 million at risk (in lost profits or royalties) typically ran up costs of $4.5 million. Even cases where less than $1 million was at risk had typical costs of $650,000. Not all patent owners can afford these costs. Even those that can may not find the expense warranted where neither the likely income potential of the particular patent or the potential damages resulting from the suspected infringement are high. As a result, there is a substantial unserved market of owners of U.S. patents who choose to forgo their rights where they anticipate losses from particular acts of infringement to be below, at, or slightly above the $1 million range. This article is for those cost-conscious owners: There are other ways to defend patents. 1. Consider insurance coverage. Most businesses are aware that they can buy liability insurance to cover the costs of defending against patent infringement suits. What they may not know is that they can also buy insurance to cover the costs of bringing infringement suits. Known as patent enforcement or abatement coverage, this insurance typically covers the litigation costs of enforcing the patent, any associated re-examination and reissue costs, and the costs of defending against invalidity (but not antitrust) counterclaims. Coverage is reduced somewhat by the insured’s co-payment of a percentage of the costs. In addition, the insurer may share in any proceeds of the litigation up to a preset ceiling — for example, up to 125 percent of the money the insurer spends on the case. Allocating risk between the insured and the insurer makes patent enforcement economically efficient. Of course, this option requires planning ahead because coverage ordinarily must pre-date the identification of infringers. 2. Consider arbitration. Arbitration is not available only to parties linked in a pre-existing relationship such as a licensing deal. Where discussions between a patent owner and an alleged infringer reach an impasse, they too may choose alternative dispute resolution — most commonly, formal arbitration or discussions led by an experienced settlement facilitator. In my experience, as long as the parties want to make it happen, the right facilitator or arbitrator — someone who is well prepared and knows patent law — can resolve in one or two days of meetings what would otherwise take one or two years of litigation. Ideally, the parties will agree upfront to try arbitration. Sometimes, however, one or both need to experience a little economic pain before they can accept the benefits of ADR. ( See No. 4.) 3. Consider an ITC proceeding. The U.S. International Trade Commission acts to protect U.S. industry from unfair foreign encroachment, whether by policing the “dumping” of below-cost goods on U.S. markets or by preventing intellectual property infringement and other unfair trade practices by companies importing or selling imported goods. The relevant statute, Section 337 of the Tariff Act of 1930, gives the ITC the power to exclude infringing imports from entering the country and to enjoin infringing products that are already here from being sold. One key advantage of Section 337 proceedings is that they are fast. The ITC may issue both a decision on infringement and an injunction within 14 months of the filing of the complaint. Discovery typically is completed by the fifth or sixth month after filing, in part because the time set for responding to discovery requests is a mere 10 days or less. An evidentiary hearing is usually held in the sixth or seventh month following filing. Proceedings before the ITC are not only quicker than those in most federal courts; they can be more efficient as well. Along with the plaintiff and the alleged infringer, the commission’s Office of Unfair Import Investigations also participates in the case as an independent party representing the public interest. When the office agrees with the plaintiff, its voice lends weight to the complaint. In addition, the specialized knowledge and experience of ITC administrative law judges and commissioners has traditionally led to a higher affirmance rate for ITC patent decisions on appeal (at the U.S. Court of Appeals for the Federal Circuit) than for U.S. district court decisions on patent cases. The fact of this statistic could even dissuade some parties from appealing, thus resulting in earlier resolutions. Indeed, the only apparent drawback to proceeding at the ITC rather than in the district court is that the ITC has no jurisdiction to award damages, only injunctive relief and fines. And, of course, the case must involve a challenge to an imported product; the commission has no jurisdiction over purely domestic commerce. 4. If litigating in court, consider filing in a “rocket docket” jurisdiction. The U.S. District Court for the Eastern District of Virginia was the first federal trial court to promote a “rocket docket” for patent cases. Patent owners flocked to that court, happy to receive speedy resolution of claims for injunctive relief and money damages. They were also happy to cut down on a lot of litigation waste. A rocket docket typically does not allow much time to take depositions of peripheral witnesses or to bring every discovery squabble before a magistrate judge. But success eventually caught up with the Eastern District of Virginia: With the increased volume of filings, judges could not clear their docket at the same initial pace. The U.S. district court in Marshall, Texas — which is part of the Eastern District of Texas — picked up the slack and became widely known as a friendly ear for patent owners. (And more recently, as that court too has been overwhelmed, nearby federal trial judges have started to pick up more patent cases.) To the north, the U.S. District Court for the Western District of Wisconsin (in Madison) has also become a destination deemed friendly to patent owners. The advantages to a patent owner of bringing suit in a rocket docket jurisdiction continue to be substantial. The patent owner, along with its lawyer, can and should take the time before filing a complaint to investigate and organize its case and develop a clear strategy. Then, once the case is filed, the accused infringer will be spending its time in a perpetual state of hasty catch-up. Such pressure can and does lead to early settlements. 5. If litigating, invest time in preparing case strategy. Planning by the plaintiff and its counsel should start before a case is even filed. What should be part of those initial strategy sessions? First comes a realistic damage assessment. Also, the plaintiff and its counsel must ask whether the plaintiff can financially support the litigation through a lengthy trial. They should explore early settlement strategies. No reasonable opportunity for quick resolution should ever be missed due to lack of preparation. Second is the development of the “story.” This is the sympathetic narrative that will be honed as the case proceeds to explain, justify, and/or tie together all the pieces of evidence that support relief. A clear story helps to define discovery needs early on. A powerful story can help motivate the other side to reach an early resolution. Third is the decision whether to file motions for preliminary injunction or an expedited pretrial schedule (in the event the case is not already in a rocket docket). Time pressure can be a plaintiff’s best leverage. Finally, developing an early plan is not the same thing as locking in a plan. Case strategy is dynamic and must be revisited as new facts, claims, and defenses are revealed. 6. Take advantage of opportunities to address settlement. Settlement strategies should never be far from one’s mind. Losing focus on why the plaintiff is litigating — whether to obtain financial damages, an injunction, or a reasonable license — is what causes runaway legal fees. No one goes into litigation with the sole goal of proving that the opponent is a greedy pig with no redeeming qualities and opposing counsel is a slimy liar. Everyone knows that not every e-mail skirmish should be fought with vigor and citations. Yet patent litigation frequently ends up being little more than this. To keep focus on the endgame, the parties should always be open to the merits of settlement, especially at these times: • After the complaint is filed but before the defendant invests any time in the case.

• During an early case evaluation or mediation, which is available automatically in some judicial districts before discovery begins. If such a procedure is not automatic, counsel should consider requesting a meeting with a settlement judge. • Following resolution of a motion for preliminary injunction. • Before the parties retain experts. • After discovery closes. • After a Markman ruling to construe the patent claims. • Before summary judgment motions and briefs are written. • Following resolution of summary judgment motions. • Before trial preparation begins in earnest. • Before the trial begins. • While the jury is deliberating. • After the notice of appeal is filed. Both sides benefit financially when counsel are civil and try to compromise where possible. Scorched-earth tactics are not conducive to the efficient resolution of disputes. The concern, of course, is that one side will choose civility while its adversary wages litigation war and thus drives up costs anyway. However, well-timed settlement overtures, even if not immediately effective, tend to modulate inflammatory rhetoric and brinkmanship on both sides. Parties and counsel are reminded that the fight is not forever, that the case will eventually conclude, and that someday the parties may want to work with each other. In the meantime, it is possible — with a little planning — to enforce patents in an efficient and cost-effective manner. Stopping infringement does not always mean breaking the bank.


Barbara Mandell is a partner in the Bloomfield Hills, Mich., office of Dykema Gossett, where she specializes in intellectual property litigation.

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