Patent litigation is notoriously expensive, which poses a particular problem for smaller and emerging companies who, given their resources, simply cannot afford to incur the type of multi-million dollar legal bills that large companies routinely incur in such cases.
Recently, in trying a patent infringement case for an emerging company, I learned a few lessons about keeping costs down, which are summarized below.
Marshal your resources
An emerging company holding a patent has a number of options to reduce legal fees if it elects to sue an infringer, including obtaining representation on a contingency basis or on some type of alternative fee arrangement involving reduced rates with a success “kicker” paid to counsel only upon a successful outcome, namely a recovery.
Indeed, an emerging company that sues has the chance of recovering significant damages or a large settlement that will reimburse the company’s coffers for the amounts paid to the lawyers to prosecute the patent infringement case.
For an emerging company charged with infringement, however, those options don’t exist, and it becomes crucially important to find other ways to minimize the impact of the costs of defending a claim of patent infringement.
The first and best place to look is to the company’s insurers. Although not necessarily an obvious source of contribution in a patent infringement action because few companies actually have coverage for patent infringement claims, experience teaches that insurers nonetheless often end up paying at least a substantial share of the costs of the defense of a patent infringement action. This is because most standard business owner policies include advertising injury coverage, which does not cover patent infringement claims but may, among other things and depending upon the particular policy form, cover copyright infringement actions.
It is not uncommon for a plaintiff suing for patent infringement to also allege additional causes of action, such as for copyright infringement of related marketing or instructional materials, in the same action.
When claims are within the scope of a policy’s advertising injury coverage, they trigger an insurer’s duty to defend, and that duty usually extends to the entire lawsuit, including the patent infringement claims. This means the carrier picks up the costs of defense, including those related to defending against the patent infringement claims.
The next best place to look is to the defendant company’s vendors, if any, who may have provided it with the allegedly infringing product. The terms of sale may include an indemnity agreement providing reimbursement of defense costs if the vendor’s product gave rise to the patent infringement claim.
Watch the meter
Like a passenger in a taxi, keep an eye on the meter. A company should not focus too excessively on the number of hours expended, as patent litigation consumes large numbers of hours if done even halfway right, yet alone well.
Research into prior art that might invalidate the patent, paper discovery, working with experts, all of this takes substantial lawyer hours. Beyond that, one cannot understate the importance of investing the time needed for the lawyers who will try the case to completely understand the client’s operations and sales, the patented invention, and how they all fit together.
But while an emerging company trying to control its litigation expenses probably has little room to affect the amount of time that has to be spent by its counsel in a patent infringement action, it has plenty of ability to affect the rates charged for those hours.
Careful vetting of counsel and close review of the legal market as a whole should uncover experienced, talented trial lawyers who can handle a particular infringement action at rates that, while probably still expensive, won’t result in the whole company essentially working just to pay the lawyers.
Simplify, simplify, simplify
Patent cases begin in complexity but need to end in simplicity, meaning that while the patented product itself and the history behind it is often complicated, the case presented to the jury must be much simpler.
From the bench work behind the invention, through the linguistic complexity of writing the patent application, and onto to the difficulties of manufacturing the patented product, the story of bringing a patented invention to market dwarfs, in terms of factual detail, the back story involved in almost any other type of lawsuit.
However, should the case ever get to trial, most jurors will not have the experience or knowledge base to analyze much of that detail and, moreover, it would likely be a tactical mistake to ask a jury to focus on that much material. Instead, by the time of trial the case needs to have been reduced to only a certain subset of key points on which the jury will be asked to focus.
The costs for an emerging company of litigating a patent infringement action can be reduced by recognizing and utilizing this dynamic. The simplified version of events that will need to be presented to the jury certainly will not be obvious at the beginning of a case, but a keen eye should be able to spot it coming into focus reasonably early.
At that point, costs can start to be controlled by making a tactical decision to focus discovery and other work only on those points that will make up the narrower themes that will be presented to the jury, with a corresponding decision not to expend resources pursuing other possible issues that might, but are far less likely to, affect the outcome of the case.
A patent dispute is a business issue
Much as war is the continuation of politics by other means, patent litigation is the continuation of a business dispute by other means. Almost always patent litigation concerns a dispute over control of a particular space in the market, normally between competitors, but often as well between an inventor and a product manufacturer or seller.
These are business disputes that could be better resolved by negotiating a contractual relationship between the parties governing the rights of each to sell into the market sphere in question, rather than by litigation intended to completely exclude one party or the other from the marketplace.
It is important to keep this in mind throughout the litigation, particularly as evidence comes to light and court rulings appear which may weaken or strengthen each party’s position. By constantly evaluating the strengths and weaknesses of the case as these events unfold, the parties may be able to identify a point in the litigation where it becomes apparent that a negotiated resolution governing control of a particular market segment trumps the risks of continued litigation.
The best way to reduce the costs of litigating is to find common ground and end the suit. This is only possible, however, if the parties and their lawyers never lose sight during the litigation of the underlying business needs of the parties that have come into conflict, and if they continually look for creative ways to resolve that conflict.
Doing anything else allows the litigation itself, and the competitive urge to “win,” to become the end in itself, rather than the means to an end, which is a terribly expensive mistake to make.
Like kids’ Christmas lists, a trial lawyer’s demonstrative evidence wish list can break the bank. Although I love a good computer generated graphic as much as the next person – particularly when you can play it back for the jury on the high-end technology available in many federal courtrooms today – it is important not to reflexively buy into the idea that high-end graphics are always necessary when trying a patent infringement case.
Despite all the vendors and others pushing the idea that jurors today are particularly visual, human beings have been storytellers and lovers of the well-presented story for all of recorded history. They will listen to your case if you give them that story, even without expensive computer driven graphics.
While avoiding the use of such graphics may be difficult when an emerging company is the plaintiff and needs to be able to explain the invention at issue to the jury, a company sitting at the defendant’s table may be able to avoid presenting its own graphics, by instead using the plaintiff’s own demonstrative evidence as the opening to illustrate its own points to the jury.
Cost effective, not inexpensive
Despite these tips, all infringement litigation – patent, copyright, trademark or trade dress – is inherently costly. They simply cannot be litigated on the “cheap.” There is too much discovery, too many experts, too many legal issues, too much motion practice, and too many elements to the cause of action.
But the ideas sketched out above can accomplish the next best thing, which is cost effective prosecution or defense of the case at the lowest dollar figure consistent with winning.
Stephen Rosenberg practices commercial litigation, with a focus on intellectual property and ERISA litigation, at the McCormack Firm in Boston. He is the publisher of the Boston ERISA and Insurance Litigation blog that includes discussion on intellectual property litigation. Mr. Rosenberg can be reached at [email protected]