Defending Against Patent Infringement

Computing and the Law

Defending Against

Patent Infringement

o company welcomes the

news that it has been sued for

patent infringement. How-

ever, defendants can gain

an advantage by understanding their

available options from the outset. In

this month’s installment, we present

a general overview of how a company

should respond after learning it has

been sued for patent infringement.

Be sure to check the IEEE Com-

puter Society’s website for the podcast

that accompanies this article (www.

computer.org/portal/web/computing

now/computing-and-the-law).

RESPONDING TO AN

INFRINGEMENT SUIT

Even if it’s not completely unex-

pected, when hit with a patent

infringement suit, many companies

quickly realize they’re unsure of how

to respond after being served with

the summons and complaint (the

documents that initiate a lawsuit).

A defendant company might spend

time focusing on the patent(s) it’s

accused of infringing and the associ-

ated technology, but lose sight of its

Is the plaintiff using the lawsuit as

a tool to fish for confidential informa-

tion about the company’s business

without a sufficient basis to support

the infringement claim? Does the

company have any of its own patents

that it can assert against the plain-

tiff’s products or processes? What

are the realistic options for resolving

the case?

Performing this type of economic

and strategic assessment quickly

but carefully, with input from all

interested internal constituents

and experienced patent lawyers,

will shape the best possible defense

strategy.

In the US, federal district courts

handle patent infringement cases

and most follow a fairly predictable

path when managing those cases.

Even so, patent infringement cases

are generally expensive and resource-

intensive, draining valuable time from

those employees assigned to support

the case and costing a lot of money

to defend.

To achieve success, it’s crucial to

put together the right team of lawyers

The fourth in a series of articles providing basic information

on legal issues facing people and businesses that operate in

computing-related markets explores patent litigation from the

defendant’s perspective.

Brian M. Gaff, Brian P. Murphy, and Peter J. Cuomo

Edwards Wildman Palmer LLP

available defenses and the potential

counterclaims it can make against

the plaintiff.

So, how does a company position

itself for the best possible outcome

when defending a patent infringe-

ment suit?

First and foremost, the defendant

company needs to understand and

frame the case’s potential economic

and strategic impact on its business.

Is this a nuisance suit in which the

company is a bit player among many

defendants caught in the plaintiff’s

net, or is this likely to be a ferocious

struggle with a direct competitor

who’s striking at the heart of the com-

pany’s business? Is there a risk of an

injunction shutting down all or part of

the defendant’s business?

After all, the patent right is the right

to exclude others from making, using,

selling, or importing the patented

invention. What are the potential dam-

ages if infringement were to be found?

Can the company execute a new

product design to avoid the plaintiff’s

infringement charge? If so, how long

will it take and how much will it cost?

r4law.indd 9 3/22/12 11:25 AM

10 comPuteR

Computing and the Law

At this point, the company

should also consider retaining

outside lawyers with experience

in litigating patent lawsuits. The

internal lawyers are usually very

busy with other matters, so in most

instances, companies decide to

engage an outside law firm to handle

the infringement case. The outside

law firm typically performs detailed

analyses of the patent(s) and prior art

at the start of the case. This provides

an objective assessment of the

company’s infringement risk and is

an early step in developing defenses

to the lawsuit.

Duty to preserve evidence

The rules governing litigation

require a defendant to preserve

evidence after learning of the

lawsuit. In addition to that

obligation, a defendant company will

need some of its own documentary

evidence to defend itself and raise

counterclaims. IT personnel fill an

important role here by working to

preserve e-mails and other docu-

ments. They help the internal

lawyers and the outside law firm

work with the affected employees

so they abide by the same guidelines

to preserve evidence.

In this age of electronic documents

and the widespread use of e-mail, no

company should underestimate the

need for involvement by IT when liti-

gation begins. That early involvement

facilitates the preservation and col-

lection of materials the lawyers will

need to review.

In this age of

electronic documents

and the widespread

use of e-mail, no

company should

underestimate the

need for involvement

by IT when litigation

begins.

and business managers to develop and

execute the strategy in an efficient,

cost-effective manner. Failure to do

so will lead to a suboptimal outcome

at greater expense.

Gathering the team

The company should quickly

assemble a team of personnel

who can help with evaluating and

managing the patent infringement

case. Clearly, a company’s internal

lawyers and responsible product

managers should play a large role.

The company also should consider

assigning duties to employees from

other departments such as research

and development (R&D), sales and

marketing, as well as information

technology (IT).

Small enterprises without such

personnel should seek individuals

within the company, or outside

it, who can perform in a similar

capacity. The company should also

contact its insurers and determine if it

has coverage for patent infringement

lawsuits. Insurers can help the

company understand the resources

available to it to defend the suit.

Each member of the in-house team

serves an important a role. The IT

representative can begin to preserve

relevant electronic data, such as

e-mails, design information regarding

the products accused of infringing the

asserted patent(s), sales, marketing,

and other documents. The sales

and marketing representative can

help with determining the level of

exposure from sales of the accused

products and can handle any public

responses to the lawsuit.

Someone must evaluate the claims

in the asserted patent(s) and decide

whether those claims could cover

the accused products. If the internal

lawyers have experience reviewing

and understanding patents, they

should work with a technical person

from R&D to begin investigating the

technology at issue and the “prior art,”

which includes materials published or

sold before the patent(s) at issue.

At this stage of the litigation,

it’s possible that the volume of

materials to be preserved, collected,

and reviewed is much larger than

expected. It’s not uncommon to

feel overwhelmed, and sometimes

that triggers a reassessment of the

company’s document retention policy

to make future preservation and

collection tasks less onerous.

Legal strategy

The defendant company must

decide on its initial response to the

complaint. The rules governing US

patent litigation allow most defen-

dants 21 days to answer after being

served with a complaint. A defendant

can request that the court grant it an

extension of time to respond, and

most plaintiffs will not oppose a rea-

sonable extension.

The defendant can use the

additional time to evaluate the lawsuit

and consider the plaintiff’s motivation

for bringing the suit. It must consider

the resources (financial and

otherwise) it has available to deal

with the suit.

Also, the defendant must gauge

its own willingness to fight in court

as well as the likelihood of settling

the matter. For example, when

the plaintiff is a direct competitor,

settlement might be less likely

compared to instances where the

plaintiff is operating outside the

defendant company’s market.

Some plaintiffs are nothing more

than patent holding companies

(“nonpracticing entities”) that

use patents as a tool to generate

revenue either through licensing or

litigation. Therefore, it is important

to understand what type of plaintiff

you’re dealing with and to assess the

plaintiff’s motive for bringing the suit.

Unless the lawsuit is settled

very quickly, a defendant will need

to answer the complaint. As it

works with its lawyers to prepare

the answer, the defendant should

evaluate the plaintiff’s chosen venue

and consider whether to request

r4law.indd 10 3/22/12 11:25 AM

APRIL 2012 11

cooperating with the other defen-

dants. Codefendants in certain cases

can pool their efforts, which might

reduce litigation costs.

Alternative forums for

resolving the dispute

Litigation, especially patent

litigation, is expensive and time-

consuming. Today, a modestly com-

plex patent lawsuit can easily cost

each side several million dollars in

legal fees over a three- or four-year

period. Certain events can increase

costs beyond that range—for exam-

ple, if there’s a large volume of

litigation documents that require

special processing, such as transla-

tions of foreign language documents.

A company facing a patent infringe-

ment lawsuit that affects a significant

portion of its business might have

no choice other than to litigate, not-

withstanding this expense. Other

companies, however, simply can’t

afford to litigate.

In either scenario, a defendant

company should consider the aptly

named alternative dispute resolution

in place of litigation. ADR differs from

a court proceeding and involves an

independent third person who helps

the parties resolve their conflict on

mutually acceptable terms. Par-

ties can choose from multiple ADR

processes, including mediation and

arbitration.

Parties selecting mediation agree

to let a neutral mediator help the

parties communicate with each

other so they can settle the dispute

themselves. In arbitration, a neutral

arbitrator hears arguments and

evidence from each side and decides

the outcome.

Most ADR proceedings are gen-

erally faster and less costly than

litigation. However, in arbitration or

mediation, neither side can receive

the opportunity to develop its case

fully. Parties should also realize that

litigation and ADR are not mutually

exclusive. Unless they agree to bind-

ing proceedings, parties engaging in

ally involve complex legal arguments

that the asserted patent(s) are invalid,

not infringed, and/or unenforceable.

A fact-based, evidence-driven non-

infringement defense is very potent,

but not always available. Therefore,

the defendant should work with its

lawyers to collect and assess what-

ever prior art is available and ensure

that there is a thorough understand-

ing of the relevant technology and the

development history of the accused

products.

Having strong invalidity or unen-

forceability defenses helps in several

ways. It can provide the defendant

company with grounds to chal-

lenge the asserted US patent(s) in

administrative proceedings at the US

Patent and Trademark Office. Many

US courts will temporarily suspend

a patent infringement lawsuit if the

patents at issue are involved in such

proceedings. Also, strong defenses

can put the company in a better

negotiating position with the plaintiff,

particularly if the plaintiff is a “patent

troll” (another name for a nonpractic-

ing entity).

While a defendant company

might prefer a settlement in the short

term, it must consider the long-term

ramifications of immediately paying

out in certain cases. Future plaintiffs

might emerge if the company

becomes known as one that quickly

antes up to avoid time in court. A

company will benefit in the long run

by taking the time to show that it

will vigorously defend itself when it

matters.

Where the company is one of sev-

eral defendants in a single lawsuit,

it should explore the possibility of

a transfer to a different US district

court. Requests for transfer can be

based on, for example, convenience,

particularly when the defendant

company’s headquarters isn’t

located near the court. In certain

circumstances, a defendant can also

choose to respond to the complaint by

asking the court to dismiss the case

because the plaintiff failed to allege

sufficient facts to support its claim.

This can also buy the defendant

more time to try to settle the case or

consider additional options.

Regardless of a decision to litigate

or settle, a company accused of

infringement should always strive to

operate from a position of strength

and avoid appearing too anxious to

settle the case, thereby handing the

plaintiff additional leverage. The

company should know (or learn) what

patents or other intellectual property

(IP) it might have available to assert

against the plaintiff. If the plaintiff

has products of its own that infringe

the company’s patent(s), that provides

a basis for the company to raise a

counterclaim of infringement against

the plaintiff. This puts the plaintiff’s

business at risk and can help level the

playing field.

Companies can benefit in other

ways by taking the time to return

some legal heat. Defendants who are

aggressive in raising defenses and

counterclaims can gain significant

negotiating leverage. Indeed, all

plaintiffs have different risk tolerances

and pressure points; it’s the defense

team’s job to find them. Additional

leverage might lead to a quicker

settlement. Counterclaims might

stimulate favorable cross-licensing

of each other’s patents. Moreover,

by not panicking, companies can

protect themselves from the risk of

inadvertently disclosing sensitive or

compromising information while

pressing for a fast settlement.

A defendant needs to recognize

the importance of fully develop-

ing its defenses to the allegations of

infringement. Those defenses usu-

Defendants who

are aggressive in

raising defenses

and counterclaims

can gain significant

negotiating leverage.

r4law.indd 11 3/22/12 11:25 AM

Computing and the Law

12 comPuteR

in its best interests to settle if more

lawsuits are a likely consequence.

Moreover, a company that asserts

its own IP against a competitor in

response to an infringement suit

might be able to better protect its

stake in the marketplace.

echnology companies of all

sizes should recognize the

value of IP, particularly pat-

ents, in both building market share

and fending off the competition.

Companies that develop a compre-

hensive plan to defend against patent

infringement lawsuits have the best

chance of achieving a successful out-

come at an acceptable cost.

Brian M. Gaff is a senior member of

IEEE and a partner at the Edwards

Wildman Palmer LLP law firm. Con-

tact him at bgaff@edwardswildman.

com.

Brian P. Murphy is a partner at

Edwards Wildman Palmer. Contact

him at bmurphy@edwardswildman.

com.

Peter J. Cuomo is an associate at

Edwards Wildman Palmer. Contact

him at pcuomo@edwardswildman.

com.

company should initiate an action

plan immediately after learning of a

suit so it has the appropriate people

involved and makes the best possible

strategic and economic decisions.

Such a plan should include

conducting a comprehensive

evaluation of the plaintiff’s case and

its potential economic and strategic

impact on the defendant’s business,

which will lead to a strategy for

how to resolve the case. Whether

the strategy takes on the form of

a making a quick settlement or

mounting a vigorous defense, it must

always fit in with the company’s

ultimate business goals. A defendant

company might decide that it isn’t

ADR can always return to court. As

a result, ADR is usually worthwhile

and, indeed, many US courts require

the parties to explore ADR as a part of

patent litigation.

BE PREPARED,

STAY INFORMED

Patent infringement suits can be

daunting. Small companies with busy

personnel can easily underestimate

the ramifications or, conversely,

overpay in settlement simply to make

a less-than-certain liability go away.

In so doing, the company might lose

sight of an opportunity to leverage

its own IP for a previously unseen

business advantage. Therefore, every

Selected CS articles and columns

are available for free at http://

ComputingNow.computer.org.

The content of this article is

intended to provide accurate

and authoritative information

with regard to the subject matter

covered. It is offered with the

understanding that neither IEEE

nor the IEEE Computer Society

is engaged in rendering legal,

accounting, or other profes-

sional services or advice. If legal

advice or other expert assistance

is required, the services of a

competent professional person

should be sought.

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