Patent Law 102:
Litigation

Patent litigation is approached warily at best

by Peggy Aycinena

David Miclean heads up the Silicon Valley law offices of Fish & Richardson P.C., one of the busiest offices of one of the largest intellectual property law firms in the U.S.

Miclean’s areas of expertise are diverse and include trade secrets litigation, trademark & copyright litigation, and patent litigation, among others.

Following on my conversation last year with Steve Beyer regarding Patent Prosecution - [see archive section for Patent Law 101] - it was very interesting to have a chance to discuss the Patent Litigation side of the Patent Law equation with David Miclean.

The following is a summary of our conversation that took place on May 25th.

Q: When is litigation a good business strategy?

Miclean:

"When you can’t resolve a patent dispute on economic terms with the other side, and you can’t afford to let them continue infringing your patent. If you can get the infringing party to stop manufacturing and selling their device at the outset of litigation you have a huge advantage as a patentee."

"For instance, through the ITC [International Trade Commission], you can get an exclusion order precluding importation into the US of an infringing device, or a preliminary injunction in a litigation in the courts. One of the options I suggest to clients is to get that preliminary injunction at the outset, although it may be difficult to obtain."

"But if you can get an injunction, that certainly can affect the outcome of the eventual litigation process. The infringer, if stopped with a preliminary injunction before trial, can often be forced into an earlier resolution because you’ve regained the business leverage over the situation and may re-establish lost market share. You can also get a permanent injunction after trial, if you’ve proven infringement."

"The courts can essentially say to your competitor, you must stop manufacturing this device immediately. A jury may even award a reasonable royalty or lost profits for infringement which could amount to a very large award of money to a business."

Q: How do you advise a potential client with regards to pursuing a patent litigation case?

Miclean:

"Clients need to know that going forward with litigating a patent can be a very time consuming and expensive venture - one that will impact the time and energies of top management and other employees throughout the company. That’s the principal downside of pursuing an infringement action."

"The upside is, if you’re trying to enter a market or protect an existing market, and if others are using your patent-protected IP to drive down the market and reduce your market share, then you have to do something to protect your product from unfair competition. If your company is facing an infringer who’s driving margins so low they’re making licensing of the technology an impossibility, sometimes your company may have no choice."

"Frequently, by way of a patent litigation, the client is able to obtain a licensing agreement that will create a revenue stream, recover lost profits or royalties and/or stop illegal competition [and restore the company’s position in the market]. If you can develop a licensing stream for your portfolio or your patented technology via that strategy, that could be the optimal arrangement and a large asset of your company."

"It strengthens a patent when there are a lot of people out there licensing it. However, a company - particularly a technology company - sometimes faces a matter of life or death for that business and must pursue litigation to remain a viable company or to protect its valuable IP assets."

Q: So give me ballpark figure, if you can, as to what it really costs to litigate a patent infringement suit.

Miclean:

"Most cases, including patent cases, settle before trial. Patent cases are expensive because they have their own rules and procedures and require specialized knowledge to litigate them well. If you’re taking a case from complaint all the way through to trial, a case may cost several million dollars. Of course, it depends on the number of patents involved as well - does the case involve just one patent, or multiple patents."

"These days, a vast majority of patent cases get settled before trial, often after the Markman ruling by the judge. The Markman ruling is the judge’s decision on what the claims of the patent mean. Both sides in the case then know how the claims will be defined, which oftentimes provides the parties an opportunity to find a resolution to the case."

Q: Do you ever try to intercede in a patent disagreement before it goes too far?

Miclean:

"We typically talk with clients, and potential clients, who have previously tried to work out agreements with competitors over their patents. We try to evaluate their overall situation before proceeding with a litigation. We often try to work with a company to seek a business solution to achieve their goals. If the company can suggest a resolution that works for the other party, it’s a win-win arrangement for both - particularly if you go for a licensing or cross-licensing agreement."

"We always encourage clients to explore resolving a business conflict outside of court - a lawsuit should generally be your last alternative. Sometimes there is no other reasonable course, or there is a practical strategic reason why a lawsuit makes more sense"

"Of course, I’m not talking here about dealing with an outright counterfeiter, in which case you might be able to initiate a criminal investigation and enforcement in addition to a lawsuit. I’m talking about those businesses that have a lot of inter-linked customers with their competitors, and therefore multiple overlapping relationships."

"In Silicon Valley, people move around a lot. We know it’s a big valley, but it’s actually a small place in terms of people interacting with each other. If you can resolve things without litigation, it makes for better business relations and opportunities for continued business relationships. If a business resolution is not possible, then go forward with the litigation."

Q; Do you counsel clients involved in patent litigation to avoid letting the matter get ‘personal?’

Miclean:

"I do see it as my role to help people resolve a problem. Oftentimes bitterness or enmity gets in the way of good business decisions. I try very hard to resolve problems in a smart way for the company - and that usually requires a cool head. So I try to calm, not ignite the situation. The first thing I need to do is to have them identify what their problem is, and what their goals are related to a resolution. That helps me fashion a recommendation for them, or to lay out various scenarios about how the dispute or resolution might play itself out."

"Perhaps I try to get the heads of the two companies to sit down together, with or without their lawyers. We might be able to see an early resolution to the conflict in some cases. But, if you’ve got a group of people who are bitter from the very beginning of the process, it’s going to be very difficult to have resolution at the front end."

"Sometimes, in fact, there has to be a certain amount of ‘bloodletting’ before either side is ready to explore alternative solutions to resolve a dispute. Bitterness and acrimony often lead to a prolonged process, and a period during which good business resolutions often get ignored."

"I tell clients that anger is a reality, and that we may need time for anger to subside. I often suggest that they take time, sit back, and wait for the anger to cool. We all need a clear presence of mind to move forward to a positive resolution to the problems that crop up in patent disputes. You don’t have to like the other side to get a deal done, but you - or at least your lawyers - normally have to be civil."