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Business

Patent Litigation: The Sport of Kings

Sure, there are staggering legal fees and the risk of a company imploding. But a leading litigator says that patent lawsuits are not as bad as you think.

Patent litigation is a growth industry. According to the American Intellectual Property Law Association, in cases where between $1 million and $25 million is at risk, a patent owner should expect to spend more than $2 million to litigate a patent through trial and appeal. Where more than $25 million is at risk, costs climb above $4 million. All this, to litigate a patent that an attorney likely wrote in a week or two, and that the U.S. Patent and Trademark Office probably spent less than 20 hours examining.

But the specter of such costly outlays of time and money has not seemed to stem the tide. During the twelve-month period ending September 9, 2003, U.S. patent owners filed 2,788 patent infringement lawsuits, a 13 percent increase over the same period five years earlier. Similarly, in 2003 the United States issued 187,487 patents, a 22 percent increase over 1999. Patent litigation has become the sport of kings.

With all this patenting and patent litigation going on, you would expect businesspeople to have become more comfortable with patents and their enforcement. But you would be wrong. It seems that few challenges strike deeper fear in the heart of businesspeople today than the prospect of patent litigation. Patent owners fear staggering legal fees, and the risk that their key patents could be found invalid. Accused infringers fear, that their key products could be found infringing, shuting them down. Both sides fear that all-consuming litigation will distract executives from their core business missions.

But patent litigation often is not as bad you think. Most cases resolve far short of trial, either through settlement or pretrial court rulings, or summary judgment. In addition, it is rare for a court to order an accused infringer to stop selling the accused product during the litigation, a step known as preliminary injunctive relief. As a result, the market rumbling that often erupts from the filing of a patent infringement complaint typically dies down shortly thereafter, as the patent litigation lumbers along-often for years. During that time, customers relax, business proceeds, and lawyers litigate. Life goes on.

So, what does patent litigation involve? Let’s walk through the process, step by step.

After the patent owner files the complaint, the accused infringer has 20 days to answer. The parties often agree to extend this by a month or longer, especially if an early settlement seems possible. Unless there is a settlement, the parties’ lawyers confer over the following weeks, to try to agree on a litigation schedule. The parties then begin to exchange information, such as the identification of witnesses and relevant documents.

Next comes the process known as fact discovery, which takes place over the following nine months or so. Except for a trial, this is the most expensive part of the litigation. It also is the most distracting for the parties, as company documents get collected, copied, and exchanged, and company witnesses get deposed. During fact discovery, the parties serve and respond to written requests, including questions (“interrogatories”) that must be answered in writing, and requests for the production of documents and objects, such as prototypes of the patented invention and samples of the allegedly infringing products.

Fact discovery is followed by expert discovery. During this process, which typically lasts two to three months, witnesses who are permitted to give opinion testimony on complicated technical or legal issues, must prepare and provide to the other side written reports detailing their background, their opinions, and their bases for those opinions. Typically, expert discovery begins with each side producing expert reports on issues upon which it bears the burden of proof; e.g., infringement for the patent owner, and patent invalidity for the accused infringer. In response, the parties exchange expert reports rebutting one another’s initial expert reports, and take testimony from one another’s experts.

Ever since the U.S. Supreme Court confirmed in 1996 that patent claim construction is a legal issue, not a factual one, an increasing percentage of patent cases have been resolved on summary judgment-that is, a ruling that one party is entitled to judgment as a matter of law. Summary judgments are appropriate in cases where there are no substantial disputes of fact. In these cases, the court’s legal determination of what the patent claims mean-which most courts resolve through briefing and a hearing-resolves the infringement issue. Questions concerning patent validity, especially those relating to novelty, often resolve in this manner, as well. Most patent infringement litigants, therefore, focus tremendous effort on winning summary judgment, in the hope of avoiding the risk and cost of trial.

But if no summary judgment is forthcoming, the parties proceed to trial. A typical patent-infringement trial typically lasts one to four weeks; with more complex cases taking even longer. This process involves the parties preparing pretrial briefs, witness lists, evidentiary motions, jury instructions, and other legal papers. Strategies for trial presentations need to be refined, witnesses need to be prepared, and cross-examination needs to be mapped out-all in tremendous detail. It is expensive and time-consuming for lawyers and businesspeople alike.

As anxiety-provoking is it can be to be sued for patent infringement, or to decide to file a patent infringement law suit, the process plays out over a long period of time, and affords ample opportunity for thoughtful deliberation. There seldom is the need to panic. Bear in mind a few basic principles and you will be in a better position in the long run to deal with patent infringement litigation.

First, prosecute your patents thoroughly and diligently. Take it upon yourself to identify relevant prior art (that is, earlier technology) before you file your patent application and while you are prosecuting it. Nobody will challenge the patentability of your invention more vigorously than an accused infringer, but you can strengthen your patents by identifying and disclosing to the Patent Office the best prior art available. For example, a patent covering an innovative computer networking system that the Patent Office issues after carefully considering all of the relevant prior art will be much stronger than a patent describing some Internet variation of a well-known business method.

Second, learn as much about your competition and its products as you can. Draft your patents to cover not only your own technology but, if possible, your competitors’ technology as well. Remember that patents are intended to protect new and innovative ideas, not just the specific implementation of those ideas that your own engineers and scientists have thought of.

Third, take reasonable steps to identify sooner rather than later competitors’ patents that might be relevant to your product development. If you find out about relevant patents, take them seriously. Design-arounds that might be easy to make early in a product’s development cycle become much harder to accommodate once the product is on the market. Should you unfortunately find yourself a patent infringement defendant, you will be better off if you are dealing with a patent that you knew about-and anticipated properly-than one that has taken you by surprise.

If you are enjoying substantial success in a technology-based business, patent litigation could be an inevitable part of your future-either as a patent owner protecting hard-earned market share against infringers, or as an accused infringer challenging an established market leader.  In both cases, many critical battles can be won before they are fought-by anticipating and preparing for the conflict. Once the battle begins, keep a cool head, focus on business issues, not personal ones, and execute on the plans you have laid in advance.

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