How Private Investigators Help Patent Litigators

Patent litigation often turns on obscure and long-buried facts, and some private investigative firms are developing expertise that can help patent counsel – on both the defendant and plaintiff sides – find information to support and even shape litigation strategy.

Below are five examples of common problems that patent counsel often face in contemplating, bringing or defending lawsuits, and how investigative firms can help. Think of the cases described below as hypothetical – but we believe they capture how the fact-gathering in actual patent litigation cases can unfold, and how fact-gathering specialists are actually being used.

1: Can I Get My Hands on an Infringing Product?

Oftentimes, counsel discover that they need to discreetly obtain samples of potentially infringing products that are not easily available to the public.

In one case, counsel for a manufacturer needs to obtain a multi-million dollar telescope so engineers can figure out whether one of its microchip components infringed on their company’s long-held patent. The telescope is not available on the open market and is used by only a handful of space observatories worldwide.

Through searches of trade journals and interviews with knowledgeable people at a local laboratory, investigators identify and contact several U.S.-based universities that own the telescopes. One university that has a spare one that it isn’t using agrees to rent the telescope for a couple weeks on behalf of the client for pennies on the dollar of the cost to purchase it. The manufacturer’s name doesn’t come up in any of these conversations.

2: Is My Competitor Planning to Sell a Potentially Infringing Product?

A company hears a rumor that its competitor, OT Ltd., a public company in England, is planning to continue selling the current version of an optical transmitter in the United States that potentially infringes its U.S. patent. The company wants to know whether the rumor is true, and if so, it wants to order a transmitter for use as evidence in a possible injunction or lawsuit.

Investigators review records filed with the London Stock Exchange, as well as archived web pages of OT’s website, to learn about OT’s financial health. They also identify several OT distributors in the U.S. and Australia. Through discreet interviews with these distributors and vendors, the investigators are connected to OT’s U.S. sales agent, who informs them that OT plans to quit selling the current version of the optical transmitter in a couple of months and subsequently release a new version.

3: Who is This Plaintiff?

Often in patent cases, defendants have little knowledge about the suing party other than the limited information contained in the complaint and the patent application. Investigators are frequently consulted by deep-pocket patent defendants who need to figure out how seriously to take a lawsuit. In this case, a defendant has never heard of the individual named plaintiff and wants more information about prior employers, professional history and experience in relevant fields.

Investigators find a number of dissolved companies associated with the person. They place “.com” after the names of each of the entities, and find no active web pages. However, they find archived web pages for one entity that includes information about the plaintiff’s professional experience going back more than two decades and a list of patents previously filed in that company’s name that did not mention the plaintiff; the defendant had not been aware of these patents. The findings demonstrate that the individual has a long history with the technology at issue – intelligence the defendant uses to strategize its response to the lawsuit.

4: How Much is this Case Worth?

Plaintiffs involved in patent litigation routinely need to determine their legal adversary’s financial strength, and often this information is not readily available in public financial records. In this case, a company needs to gather information about a legal adversary’s financial strength, including about its VC backers and other key investors. This is shortly before a settlement conference that can determine whether the company needs to quickly file a second lawsuit against the adversary’s parent company. The company hears a rumor that the adversary has inflated its numbers on recent financial statements, and wants to know whether there is any truth behind it.

Talking to sources in the commercial real-estate industry, investigators determine the square footage, rent and approximate number of employees at the adversary company’s main office. They develop historical data showing that the office space and number of employees has been declining significantly over the last few years. Investigators find that the company’s Tokyo office, heavily promoted on its website, is housed in temporary office space and is essentially a mail drop, and that the company has not even filed the required corporate documents to operate in the country. They also learn from sources in the private-equity industry that one of the adversary’s principal investors cancelled negotiations for the next round of financing. Details like these show the company that its adversary might not have the funds it claims, and help the company shape its litigation strategy.

Patent litigators also regularly ask investigators to find opponents’ assets and revenue streams. In one case, a law firm wins a patent-infringement case and obtains a judgment against a U.S.-based company’s Taiwanese parent firm. The Taiwan parent does not appear to have done any business in the U.S., or own any real estate here. A former employee of the U.S. company, however, tells investigators that the infringing subsidiary has some sort of presence in Dallas, even though it doesn’t do business there. Investigators search for business and personal property taxes filed in Dallas County, and find that the parent pays taxes on millions of dollars of inventory in a warehouse there.

5: Can We Try This in a Favorable Courthouse?

Certain jurisdictions have gained reputations as plaintiff-friendly litigation havens, subsequently attracting numerous patent cases. Defendants attempting to move cases to more neutral forums often consult investigators who can provide information that allows them to file for a change of venue. In one case, a corporation is defending itself in the Eastern District of Texas, even though it has no office, employees or inventory in the state. The plaintiff, an individual inventor, claims he primarily lives in Texas, but the defendant suspects otherwise.

Investigators are able to prove that the plaintiff has owned property in rural Idaho for the last 20 years, and has a plane – registered in Idaho – that he twice flew to Texas approximately three months before he filed the lawsuit. The plaintiff started renting an apartment in Texas around the same time. Otherwise, the plaintiff has no presence in Texas and lives in Idaho full-time, investigators show. The corporation uses this information to request a change of venue to Idaho.

These examples, which barely scratch the surface of work investigators do in patent disputes, demonstrate that gathering, analyzing and utilizing hard-to-find information can make the difference between winning and losing a dispute. This is especially true in patent litigation, where the smallest of details can prove – or disprove – an entire case.