X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Patent damage awards can be staggering — an award in 1992 approached $1 billion. One reason is that patentees are not limited to the profits infringers gain by selling infringing products; instead, patentees can win the profits that they themselves lose. Damages may be further increased for “price erosion” caused by the infringing product’s presence in the market, and for lost “convoyed” sales, i.e., products or services that the patent holder typically sells with its patented product. At the very least, patentees are entitled to a “reasonable royalty.” Whatever the compensatory damages, if the infringer is found to have “willfully” infringed, a court may increase the damages by up to three times and award attorneys’ fees. Also, victorious patentees usually receive a permanent injunction against an infringer. In short, in patent litigation, the stakes can be astronomical. TO SEARCH OR NOT TO SEARCH A careful comparison of the patent claims to the product or activities in question — before filing suit — is an absolute necessity. Indeed, patentees who fail to investigate the infringement issue may be required to pay the attorney fees and costs of the accused infringer. Some lawyers also advocate a thorough prior art search before commencing litigation, to confirm the validity of the patent. There are, however, some reasons to at least consider skipping this step. First, it’s not required — patents are presumed valid. Second, the PTO, and perhaps the lawyer who prosecuted the patent, has already searched the prior art, and more searching may at best supplement — and often duplicate — what has already been done, with still no guarantee that all potentially invalidating prior art will be uncovered. Third, patentees loathe spending their own money to find the very best prior art, only to then turn it over to adversaries. Although a patentee’s search criteria can usually be protected from discovery under the work product doctrine, uncovered prior art may have to be produced. Whether and to what extent a prior art review is necessary before commencing litigation is, in the end, a matter of judgment and involves various factors. THINK BEFORE YOU THREATEN When a patent issues, most patentees trumpet to the world how wonderful it is and insist that competitors immediately halt their infringement. In some cases, this can be a serious mistake.Threats prior to litigation have significant legal consequences: They create subject matter jurisdiction for a federal court, allowing the threatened party to file a pre-emptive strike in the form of a declaratory judgment suit. (A declaratory suit reverses the typical roles of the parties, making the accused infringer the plaintiff and the patent holder the defendant.) Subject only to personal jurisdiction and venue requirements, the accused infringer can initiate the declaratory action in almost any federal court. For example, suppose you’re an individual living in Bangor, Maine, and you believe a major Texas company is infringing your patent. You send the Texas company a threatening cease-and-desist letter, prompting it to investigate you. The Texas company’s attorneys discover that you have sold products in Texas, and that you have the requisite “minimum contacts” there — enough to satisfy personal jurisdiction requirements (which can be minimal indeed). Because you have threatened the Texas company, any federal court has subject matter jurisdiction, and, therefore, the Texas company can and does sue you for declaratory judgment in Houston (where it coincidentally employs thousands of workers and routinely makes hefty contributions to local charitable organizations). Now, instead of airing your patent infringement complaint in front of your hometown jury in Bangor, you find yourself in the role of the outsider, in front of a Texas jury, where the accused infringer is well-known and a prominent member of the community.One approach short of threatening a perceived infringer is simply to give “notice” of the patent, taking care not to directly allege infringement. For example, sending a letter to the potential infringer enclosing a copy of the patent and offering to discuss a possible license, without more, will generally not allow a potential infringer to file a declaratory judgment action. If the infringer does not respond, or is unwilling to cooperate, then the patent holder is in no worse a situation than if the letter had not been sent. At that point, the patent holder may simply file a complaint for patent infringement in the appropriate forum of its choice. SETTLE OR SUE? Some companies refuse to settle absent complete, or near-complete, capitulation by the alleged infringer. There is logic to this approach. By consistently taking a hard-line approach, the patent holder sends a strong message to would-be infringers, who will take a long, hard look before entering a market where a company diligently and aggressively enforces its patent rights. For companies opting to take a less aggressive stance, settlement is an option that should always be considered. Patent litigation can be extremely expensive, and although a victory could win back those expenses and much more, there is no guarantee of success. If a patent holder insists on stopping infringement activities through a permanent injunction, settling a patent dispute becomes tougher because it’s no longer simply a question of money. Often, however, the parties are able to compromise by using cross-license agreements, joint ventures or even business mergers as strategies to arrive at an amicable (and less costly) resolution of the dispute. There are times, however, when settlement isn’t possible and litigation is necessary. Although the cost of patent litigation can be substantial, there are options for patent owners who cannot afford such expenses. One relatively new option is insurance coverage for patent owners. Such policies will pay a specified percentage of litigation expenses (up to a maximum) in exchange for a certain reimbursement ratio that will be paid only if the case is successful. CHOOSING A COURT Settlement seems impossible, so you proceed to federal court. In some cases, the requirements of personal jurisdiction or venue may dictate your choice of court. But in many instances jurisdiction and venue are proper in a number of different federal district courts, leading to the question: Where to sue? In some cases, such as the example of the Bangor patent owner, the choice may seem obvious. Bangor likely would be more convenient for the patent holder and any of his or her witnesses; the patent holder would get a “hometown” jury; and the patent holder will likely have more familiarity with the area, allowing for more informed decisions about how to present the case to the jury. But there may be more to this decision than simply suing in one’s backyard. Differences among the potential jury pools should also be considered. That is, different districts have different populations, and statistically, juries in some districts may be more likely to find for patent holders or award higher damages. Indeed, an entire industry of jury consultants has evolved to analyze and advise attorneys about the supposed propensities of jurors from different regions and of various socioeconomic backgrounds. Conventional wisdom has long held that working-class juries are more likely to find in favor of plaintiffs, while white-collar jurors — executives and professionals — are more likely to hold for defendants. But the highly technical nature of some patent litigation can make it desirable to have a more technically experienced jury pool. Moreover, some federal districts hear a high number of patent cases, and the judges in those districts are likely to be more familiar with the complexities of patent litigation. Yet another factor to consider are the rules and procedures in the available forums. Some federal district courts have adopted local rules that require consideration. For example, the Northern District of California has local rules governing pretrial practice in patent cases, while the Eastern District of Virginia has developed a so-called “Rocket Docket,” a fast-track system for bringing cases of all kinds to trial. Such speedy resolution is typically beneficial to patent holders, but requires careful advance planning to keep up with the rapid pace of the litigation. Finally, geographical concerns shouldn’t dictate choice of counsel. A lawyer can practice in any federal court in the country. Because patent law and litigation is such a specialized area of the law, and because patent infringement cases are heard exclusively in federal court, patent litigators will take their skills wherever they are needed. JUDGE OR JURY? Once the patent holder has chosen a forum, the next question is whether to ask for a jury trial. Either party has the constitutional right to a jury trial in nearly every patent case, so a trial before a federal judge is only possible if both parties choose not to request a jury. While the demand for a jury is not required upfront, it must be filed shortly after the initiation of the lawsuit, so the choice should be made early in the planning process. At least one study has found that, in general, juries are more likely than judges to uphold the validity of a patent, which strongly suggests that patent holders can expect to gain a genuine advantage by demanding trial by jury. Other considerations related to the choice between a judge and a jury are similar to the choice of venue — which is more likely to find for the patent holder and award high damages? Contrary to conventional wisdom, studies have found that in certain cases, the average monetary awards handed down by judges are slightly higher than those made by juries. Again, however, the specifics in a given district may vary, and the advice of experienced patent litigators and jury consultants can be invaluable. THE BEST DEFENSE Clearly, there are advantages inherent in suing as the patent holder, such as the right of first choice of where to bring suit (assuming no threat is made to the alleged infringer) and the presumption of validity that attaches to a U.S. patent. But life isn’t all peaches and cream for the patent holder — danger is lurking in many places, and an unwary patent holder can easily be caught off-guard. The good news for an alleged infringer is the sheer number of possible defenses to an allegation of patent infringement. For example, even if an infringer’s product falls within the scope of a patent’s claims, there can be no infringement of an invalid or unenforceable patent. There are many ways to invalidate patent claims or render the entire patent unenforceable. Prior art is one clear option. If the claims of the patent are described in the prior art — either explicitly, or in enough detail that a person of ordinary skill in the art would think the invention obvious — then those claims are invalid. But beyond prior art, a patent can be rendered invalid or unenforceable if:
� The inventor failed to disclose the “best mode” known for carrying out the invention; if the claims are not “enabled” so that a person of ordinary skill in the art could practice the invention. � The patent specification does not adequately show that the inventor was in full possession of the claimed invention. � The claims are not sufficiently clear and definite. � The patent holder is guilty of laches or estoppel; or � The patent holder is guilty of “inequitable conduct” during prosecution of the patent before the PTO.

And this is just a sampling of the plethora of defenses that may be available to the accused infringer. A patent holder or inventor who doesn’t foresee the many potential pitfalls easily can be taken by surprise at a deposition or trial. Solid preparation and foresight, however, can avoid unnecessary mistakes. By planning ahead and understanding when, where, and how to enforce patent rights, the patent holder can maximize its advantages — and the value of its patent portfolio. Scott D. Simpson is a partner, and the head of the Mechanical Technologies Group, in the New York office of Pennie & Edmonds, where he specializes in patent litigation and counseling. Steven D. Chin, a senior associate in the New York office of Pennie & Edmonds, focuses on IP litigation and counseling.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.