June 23, 2010

Interview with Todd R. Miller, part II: patent disputes and patent litigation

In part I of my discussions with Todd Miller, we discussed the ins and outs of applying for patent protection, when to apply, how to apply, and what to expect. In part II, we discuss what to expect if there’s a patent dispute or litigation. This is Todd’s specialty, and if you have any questions about patent disputes or how to handle them, make sure to leave your questions in the comment section here. We will compile your questions with responses from Todd for the third installment of this series.

Please note specific cases will not be considered for discussion.

If patent rights are being violated, what are the options?

The options generally include doing nothing, filing a lawsuit, or putting the infringer on notice by sending what’s commonly referred to as a notice letter.

Why would you want to give an infringer notice?

To dissuade commencement or continuance of infringement, to seek license royalties, to seek some other business relationship, to start running the damages where actual notice is required by law, or to give the infringer knowledge of the patent to set up possible liability for enhanced damages or active inducement.

Are there any issues with sending a patent notice letter?

Yes. Depending on how notice was provided and other circumstances, the recipient may choose to file a declaratory judgment lawsuit. Doing so gives the choice of forum and timing to the accused infringer. Other issues include legal retaliation such as the filing of a lawsuit asserting patent violations by the other side. Business retaliation is also a possibility.

Are there any practical tips for sending patent notice letters?

If the product is covered by a patent, mark the product; it provides constructive notice. Care must be taken here to make sure the product is indeed covered by a patent and only active patent numbers are marked.

If there is a concern with a declaratory judgment action, consider giving notice of the patent without mentioning infringement or licensing, or requesting a confidentiality agreement, or filing an infringement suit first but not serving it.

To set up a willfulness claim, elaborate with a claim chart or otherwise show why it would be objectively reckless to continue. In anticipation of litigation, appropriately label documents and involve counsel on communications. Finally, before sending, conduct a thorough litigation risk analysis.

What about receiving a patent notice letter? Are there any issues there?

A patent notice letter may provide the accused infringer of actual knowledge of the patent and infringement, and thus set the stage for a willfulness finding or patent inducement.

Are there any practical tips with regard to receiving patent notice letters?

Immediately after receiving the notice letter, send out a litigation hold notice and label attorney-client and work product documents appropriately. Take advantage of the opportunity to make your own evidence and keep managing it. Under attorney-client privilege and work product protection, determine if a design-around is possible. If so, take remedial steps. Have defenses that make it a “close case.” Determine if an offensive case is possible and how best to use it. Consider reexamination or the threat of it.

What percentage of patents end up in litigation?

Very few, roughly 2%.

Once a patent ends up in litigation, what is the likelihood of adjudication versus the likelihood that the case will be settled?

Patent cases, like other civil matters, typically settle. Looking at the 2009 data as a guide, roughly 88% of the patent cases settled. About 8% were disposed of by summary judgment; about 3% were disposed of by jury trial; and about 1 % were disposed of by bench trial. From January 2005 to May 2010, there have only been 263 patent verdicts.

What is the typical period from start to finish for a patent litigation?

This depends on multiple factors including the case filing location, whether the jurisdiction has patent local rules, the court’s existing docket load, the merits of the case, the amount of damages at stake, etc. Total time can thus range anywhere from weeks to years.

Do companies typically recoup their entire cost of litigation?

Successful patent holders typically recoup their entire cost of litigation. A victory also provides a number of other intangibles including increased leverage in future settlements.

What is the median cost of patent litigation?

The median cost typically depends on the amount and the location of the suit. According to the AIPLA Report of the Economic Survey 2009, the nationwide median cost where less than $1 million was at stake was $650,000. For cases between $1 million and $25 million, the median cost was $2.5 million, and for cases with over $25 million at stake, the median cost was $5.5 million.

How should a company deal with international patent infringement?

For international patent infringements, a company needs to have a strategic plan of where to sue first and when to sue. While U.S. litigation is more expensive, the market is typically larger and thus more damages may be at stake. For purposes of maintaining costs and effecting a coordinated approach, it is preferable to have a single firm handle such work.

What’s the best way to prevent a patent litigation case?

Short of completely staying out of the market, a search for patents that may pose a barrier should be performed. If there is anything close, the options include designing around, licensing, and obtaining advice of counsel. A company should also build up its own patent portfolio as a deterrent, as well as for cross-licensing and offensive position.

What industries are currently experiencing the most patent disputes?

There has been an explosion of internet-related business method patent cases. Cases involving the electrical arts and pharmaceutical industries continue to be prevalent. There has also been an uptick in litigation involving the “clean tech” area including hybrid cars, wind turbines, and smart grids.

Todd R. Miller is a trial attorney who represents clients in high-stakes, complex intellectual property disputes. He has particular experience in patent litigation arising in the electronics, computer, semiconductor, and software industries. Having tried and won matters before jurors, judges, and arbitrators, Todd is a seasoned litigator who efficiently and effectively advocates the case to obtain client goals. More at: http://www.jonesday.com/trmiller/

The answers provided reflect only the present considerations and views of Mr. Miller, and should not be attributed to Jones Day, or to any of his or its former or present clients.

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