What To Do If You Are Sued for Patent Infringement
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: June 2, 2011 @ 8:27 pm
Unfortunately for small businesses and start-up companies, some patent owners are becoming far more litigious. Once upon a time small businesses might be able to fly under the radar screen even if they were infringing because the cost associated with going after such folks was prohibitive. But welcome to the brave new world of the patent troll, where certain nefarious bad-acting patent owners seek to enforce dubious patent rights against those who are engaged in a business vaguely related, but who are almost certainly not infringing. These bad actors, who seek to extract licensing payments with threatening letters or lawsuits if necessary, know that because it can be expensive to fight most will simply fold and pay what amounts to extortion. See Extortion Patent Style.
Despite the gathering storm, some businesses would prefer to pretend that patent infringement is not a problem for them and they won’t be sued. The graph below shows that since 1980 the number of patent lawsuits filed has only gone up, with a record number (3,301) being filed in 2010. Add the frequency of the “dime a dozen” threatening letters sent by those seeking to extract licensing payments to the number of lawsuits filed and you can readily see that patent infringement litigation, and the associated threats thereof, are a growth industry.
It is only a matter of time before technology based businesses, regardless of size, will find themselves facing a patent infringement issue. As with most things in life, there is are many things you can do that are wrong, incorrect and/or harmful, with a small handful of appropriate things you really need to do. When you get that first threatening letter, or you get sued without warning, you need to know the follow.
True or False — I should contact the lawyer sending the letter or representing the party suing me because if I can only talk to them I’m sure I can convince them I am not infringing.
FALSE! You have been sued or targeted with a threatening letter for a reason. Typically that reason is be extract money from you, or perhaps to get you to stop doing what you are doing. If you have been targeted by a patent troll the reality that you are not infringing is of absolutely no consequence. Patent trolls sue small businesses to extract payments knowing that the overwhelming majority of patent infringement lawsuits will settle. In fact, upwards of 96% of patent infringement lawsuits settle, many without a Judge ever reviewing any of the merits of any argument. So the fact that you are right and would prevail is not going to get them to back off.
It is a huge mistake to contact the attorney who represents the party coming after you. You may say certain things that compromise your negotiating position, you could give them crucial information about your business that they can use against you, or you might demonstrate that you are scared to death and willing to do whatever it takes to get the case to go away. None of these things are good.
True or False — I can just ignore the matter because it will go away if I don’t respond.
FALSE. Looking the other way or burying your head in the sand are not effective strategies to deal with what may or may not be a meritorious patent infringement lawsuit. Certainly if the lawsuit or dispute is meritorious you have to take it seriously otherwise your business may be in jeopardy. If the lawsuit or dispute is frivolous you still have to take it seriously because that almost certainly means you are a target of a patent troll who is not going to go away.
When you are sued there is a limited amount of time within which to act, and you absolutely need to act with due speed to address the matter. In fact, you have days to act, not months. Yes, you might be able to get an extension of time to act, but you cannot assume that you can deal with the case when you get around to it.
If you have yet to be sued and instead are being threatened there are some ways to take the offensive and attack, should you be interested in taking an aggressive approach to fighting back. Some of what is available to turn up the heat on the party threatening ceases to be available, or is far less useful, once a lawsuit has actually been filed. So definitely take those threatening letters seriously and become informed of your options.
True or False — I should contact a patent attorney to discuss the threatening letter or federal complaint to understand what my options are and what I should be doing.
TRUE. There are a few things that you never want to really need in life. You probably never want to be in a position to really need a dentist for an emergency procedure, but that doesn’t mean you ignore that excruciating pain in your tooth. Likewise, you never really want to need a lawyer, but sometimes you find yourself in a position where you absolutely need the assistance of someone who has been in the trenches and can navigate the rocky waters on your behalf.
Having been sued several times in my life, having filed lawsuits on behalf of clients and having defended clients who have been sued, I know first hand the thoughts and feelings that go through the head of someone thrust into a legal dispute. It can be all consuming, particularly when it comes by surprise, which is almost always. The ordeal can be all consuming even if you have seen it coming a mile away, because even when you see the dispute developing there is nothing like the finality of it coming to a head and your adversary turning to the courts.
A patent attorney can take the mystery out of what can be a truly mysterious and foreboding process. A patent attorney can also take up the fight, represent you and allow you to the greatest extent possible to continue to focus on business rather than being distracted.
True or False — When I get sued by a patent troll there is little that can be done, I might as well give in, pay and move on.
FALSE. Ultimately you might wind up deciding to pay to make the dispute go away, but make no mistake, there are ALWAYS things that can be done to facilitate a resolution. Even if you care going to give in and pay you want to make sure that this happens in a way that doesn’t paint a bulls-eye on your back identifying you to all other patent owners as someone who caves and pays rather than fights. If you are an easy target then expect to get shot, metaphorically speaking of course. So you need to consider not only this case, but what of others down the road.
Early on in my legal career I learned that sometimes you need to turn up the heat on the opponent in order to achieve a favorable resolution. With those who are patent trolls they have little to lose, but they certainly want to keep that patent they are so fond of trying to enforce against you, so you really need to consider trying to strike a blow at the heart of that patent and render it useless. You also need to consider an array of counter-claims that you might be able to bring against the bad acting patent owner who is simply trying to interfere with your business operations enough to get you to pay on a specious claim.
Turning the tables on the patent troll can be an effective strategy, and one that is unfortunately not employed very often. Of course, you probably want to avoid fighting an all-out war, but if both parties fear a long drawn-out battle, there is incentive to come to a resolution. In order to be a party at the peace talk table, however, you need to have leverage of some kind, otherwise you are not a party to talks as much as you are having terms dictated.
True or False — I’ve been sued and the patent troll is also suing some big companies for the same patent. I can just sit back and let the big companies fight the case, because they have far more to lose. They will fight hard so I don’t really have to.
FALSE. Your interest is not necessarily the same as another defendant, so relying on other parties to fight your battle is risky. In fact, large corporations sometimes cave to patent trolls, finding it easier to pay than to litigate, which might not be in your best interest. Still other times large corporations will fight and fight hard, going deep into a case before even considering settlement, perhaps even taking the case all the way to trial. The same way that caving might not be in your best interest, fighting an all out battle to the bitter end might not be in your best interests either.
There is little generalized legal advice that any attorney can give that applies to everyone who might find themselves in the same or similar situation. The advice you need, and will get if you hire an attorney, will be tailored to your unique circumstances. The facts that are legally relevant to your situation are but one piece of what needs to be considered. Your business reality is unique, and clearly far different than the larger or smaller companies that might also be sued in the same case.
Relying on others to do the heavy lifting, which I have heard as a strategy of some who are sued, is an enormous risk. Would you feel comfortable putting the future of your business in the hands of a large competitor? Likely not, so why would you tie your litigation fate to that large competitor?- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.