Like the namesake for this blog, goats (despite the Internet’s recent affection for them) can be stubborn, less than attractive animals. And along with the horns, beards, and googly eyes, they can pack a mean punch if you cross them the wrong way. The same can be said for patent litigation.
Business owners may want to hide under a rock when it comes to patent trolls, but the truth is, if your business is involved in any way with technology (whether manufacturing, using, or selling), you may find yourself involved in patent litigation. For those businesses unfamiliar with patent litigation, this process can be unfamiliar and jarring.
Facing the reality of this type of litigation, no matter how ugly, will ultimately help businesses assess the financial outlook for a case, prepare their internal experts, and have a better, more realistic understanding about what they should — and shouldn’t — expect from a litigation.
Patent litigation is expensive
Any business being sued for patent infringement or considering bringing a claim for patent infringement should understand that patent infringement is very expensive. It is not unusual for parties involved in patent litigation to spend multiple millions of dollars raising or defending against claims of patent infringement. This expense is caused by several factors.
First, patent infringement must always be brought in federal courts. Federal litigation is more expensive than state litigation or administrative proceedings because it usually entails more complicated discovery issues, which in turn raise costs.
Second, many jurisdictions have local patent rules to govern patent litigation proceedings that mandate that each party undertake certain activities throughout the litigation process. This makes it virtually impossible for any party to such cases to avoid undertaking significant activity during litigation — making it very hard to not incur significant expense.
Third, patent litigation involves highly technical disputes. Such technical disputes almost invariably require hiring technical expert witnesses to assist the Court, jurors, and the legal teams themselves with understanding and using the technology at issue. Experts usually carry significant expert witness fees.
Further adding to the expensive nature of patent litigation is the fact that these litigations are rarely conducted without significant other legal activity. It is now customary for parties accused of patent infringement to attack the validity of the patents asserted against them in proceedings brought before the United States Patent and Trademark Office. It is also not unusual for patent infringement claims brought by competitors to result in reciprocal suits. Suits often result in waves of litigations and administrative proceedings that quickly accumulate significant legal expenses.
Patent litigation is lengthy
Another reason patent litigation is expensive is that it is rarely resolved quickly. Situations where one competitor is clearly infringing the technology of another are rare — the expense of patent litigation requires those with weak claims to capitulate or settle before those cases ever see a courthouse. Instead, the majority of cases involve situations where arguments can be made whether or not the defendant is practicing the patented technology. In those cases, a single nuanced, technical difference between two ways of practicing a technology can spell the difference between success and failure.
It can be very difficult for a judge to determine whether one company’s highly technical way of practicing technology is covered by the claims of a patent describing another highly technical way of practicing that technology without there being some disputed issue of fact. This uncertainty makes early summary judgment unlikely. Parties can almost always posit some technical argument to avoid a summary judgment ruling until further discovery can be conducted on the issue. This prevents both patent infringement plaintiffs and defendants from quickly escaping the patent litigation. Generally speaking, once suit is filed, both parties are likely looking at more than a year of legal fees and costs associated with the litigation before any sort of resolution can be reached.
Patent litigation can be invasive
Like every litigation, patent litigation requires discovery. This discovery process involves the collection, review, and production of key documents. It also involves interviews with and depositions of key engineering, research and development, sales, and marketing personnel. But with patent litigation, the involvement of these personnel is likely to be involved and can be disruptive to a fast paced technology company.
With some types of litigation, the facts of the case can be deduced entirely from the documents. In these cases, the client usually pulls together all the documents relevant to the dispute and produces them to its counsel, who reviews the papers and uses them to formulate arguments and defenses. But patent litigation can be very different.
First of all, again, the technology involved is often cutting edge. Such technology can be difficult to understand even for an attorney with an advanced science degree in that particular field. One way to solve this problem is to use your expert to help decipher and understand the documents and technology at issue. But that can be an extremely time consuming and expensive way to proceed. This is especially true when the client already has expertise in the technology through its own employees. Thus, patent litigation teams often lean on the expertise of the client’s employees to decipher, translate, and interpret technical information involved in the case and shape the arguments and defenses raised in light of that information.
Second, relying solely on documents can be difficult in patent cases where those documents often fail to accurately capture all of the relevant activity related to the creation and development of technology. They can also lack information about all of the problems or issues that might have been associated with the technology. Which is why corroborated witness information is often more valuable in patent litigation. Collecting this information, however, can be more taxing on employees and parties to the litigation than producing documents alone. Collecting corroborated witness information requires involving key employees throughout the litigation process. From responding to discovery requests, identifying potential discovery from the other party, translating and understanding key documents, and shaping case strategy, company employees often play a critical role in patent litigation. These employees become valuable and trusted members of the litigation team and are relied upon throughout the process, but this often pulls them away from key work responsibilities.
Patent litigation can be unsatisfying
Patent infringement litigation often begins with outrage at a competitor’s use of patented technology. The goal is to shut down that competitor’s business, or at a minimum its use of the infringing technology. But as patent litigation progresses, each party’s position inevitably becomes less certain.
The claims of the patent, clear and concise when read alone, suddenly become uncertain or problematic when read in light of inventor testimony or early engineering documents. Prior art which appears to show that the patent at issue is invalid becomes less helpful when excluded from the case for evidentiary or procedural issues. Party positions soften with time. The risk of loss, for both parties, suddenly becomes more and more real. And when paired with the huge expenses that come with patent litigation, suddenly the possibility of amicable settlement looks more and more inviting. The result, in many cases, is a settlement that makes good business sense but leaves both parties with less than they hoped to achieve. This can be disappointing, especially after shouldering the expense of the litigation process.
Patent litigation can be extremely valuable
With all of these problems, one may ask why anyone chooses to participate in patent litigation at all. Despite perceived drawbacks, parties still choose to litigate patent infringement matters because the rewards of such litigation can be substantial and extremely powerful. With a successful patent litigation, it is possible to literally remove a party’s competition from the marketplace. Where infringement is shown, it may be possible to obtain an injunction preventing infringers from practicing that technology for the duration of the patent. If the patent covers key technology necessary for practicing in the market, such an injunction may push all competitors from the marketplace. The economic rewards reaped from such a situation can be enormous.
Even where it is not possible to push competitors completely from the field with an injunction, the possibility of large damages awards and ongoing royalties may achieve the same end through different means. Obtaining injunctions in patent litigation is not automatic (and certainly is less likely post-Ebay). Even so, patent litigation often involves “bet the company” situations. Given the high cost and risk of bringing patent litigation suits, companies are loathe to run the patent litigation gauntlet unless the reward for doing so is substantial. In such circumstances, even where an injunction is not obtained, if the damages number or royalty amount is significant enough, it may push a competitor out of business or, at a minimum, out of the disputed marketplace. It also may send a message to others thinking of entering the space that doing so will come at a steep price. Such a weapon can be significant in the marketplace.
Jason Schwent is a partner in Thompson Coburn’s Intellectual Property group. He is the editorial director of the Patent Billy Goat. You can find Jason on Google+, Twitter, and reach him at (314) 552-6291 or firstname.lastname@example.org.