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Defending against asserted patents

by: Charles Bieneman

This article originally appearin in Michigan Lawyers Weekly on October 6, 2008

Defending against asserted patents

Charles A. Bieneman explains why business sense is a necessity, and the merits of settlement over litigation

Technology

If you’re an attorney providing legal advice for a business of any size, odds are that at least once in your career you will be faced with a client threatened by a patent. And if you’ve read anything about patents in the popular press, you have probably read about the proliferation of litigation and licensing involving patents, especially patents covering business methods and software, my practice area.

Many people have criticized the United States Patent and Trademark Office for supposedly issuing patents of poor quality (again, software patents have gotten a lot of attention), and for allowing invention owners to run amok.

As someone who both helps clients obtain patents, including software patents, and helps clients defend against others’ assertions of patents, I’d say such criticism is overstated. More to the point, such criticism is largely irrelevant if you become aware of a patent related to your area of business, or if you are threatened with a patent enforcement action.

Many of the world’s largest technology companies, from software companies to traditional manufacturers such as the automotive companies and their suppliers, have obtained and own multitudes of patents. Yet, as critics point out, many patents, particularly for software, have ended up in the hands of so-called patent holding companies, which have no other business than enforcing patents to obtain royalties and license fees.

All litigation is expensive, but patent litigation is particularly costly and time-consuming. Patent holding companies go after deep pockets, and have been able to extract payments even from smaller or midsized companies. And many companies continue to use patent enforcement to protect intellectual property related to their core businesses.

When the letter arrives

What often happens is that you or your client will receive a demand letter, often out of the blue, from a patent owner. It will state that such-and-such entity is the owner of such-and-such patent or patents, will generally state that the recipient is infringing claims of the patents, and may include an offer to license the patents, or an invitation to discuss the possibility of licensing. If the demand letter is from a competitor, and they often are, instead of an offer to license, you may simply see a cease-and-desist order from practicing patent claims.

While it’s generally a mistake to ignore a demand letter, it’s also a mistake to respond to one without performing some basic research. Even for this basic research, one should probably consult a patent attorney, but what follows will give you an idea of the questions that you and your patent counsel should be asking.

First, make sure that the patent owner has not already filed suit. Recent case law gives the recipient of a demand letter a very solid basis to obtain jurisdiction for a declaratory judgment action. Patent owners usually like to forum shop and, at a minimum, want to see you in their home court, not yours.

Thus, before sending a demand letter, many patent owners file a complaint, even if they don’t serve that complaint, so that they can control the venue of any litigation. If the patent owner hasn’t filed suit, you might consider a declaratory judgment action, but if suit has been filed, you should feel much greater urgency in addressing the demand letter.

Doing investigation

Whenever you’re faced with an assertion of patent infringement, you should start by confirming that the asserted patent is in force, and that it has never been invalidated. It’s pretty unlikely that you will be so fortunate as to determine that an asserted patent has expired or lapsed, but it happens.

If the patent term has expired, or if maintenance fees are unpaid and the patent has therefore lapsed, your maximum potential exposure should at least be limited, as the statute of limitations in patent cases is six years.

Assuming that the patent is in force, you should answer several questions before making any response to an assertion of infringement. For example, has the patent owner included a claim chart or any other explanation of its basis for asserting infringement? In looking at the asserted patent claims, can you identify elements of those claims that your accused product or process clearly does not meet?

Unfortunately, even if you have strong non-infringement arguments, you may still find that it makes business sense to negotiate with the patent owner, because the cost of defending patent litigation can be so high.

All lawyers know that people often get very emotional when threatened by or involved in litigation. Patent litigation is no different. Clients often see assertions of patent infringement as attempts at extortion, which they sometimes are.

I believe a good lawyer always tries to see issues from his or her client’s business perspective. Because patent litigation is both expensive and often of a high-stakes, “bet the business” nature, nowhere is this more important than when evaluating patent assertions. Sometimes, even where one can identify good defenses, the client is better served by reaching a quick business resolution than by engaging in protracted litigation.

What does history say?

Whether litigating against or negotiating with the patent owner, you want to have as much information in your pocket, and as much potential leverage, as possible.

Has the patent been the subject of prior litigation? If so, have other parties been found to infringe or have the patent claims been construed? Although claim construction in a prior case may not be binding on you, as a practical matter, courts generally accord great weight to their own or another court’s prior claim constructions.

Patent counsel may also find it useful to review a patent’s prosecution history. This is the file containing records of the application for the patent, and the back-and-forth between the applicant and the patent office that resulted in the patent issuing. Prosecution histories can often contain useful admissions by the applicant that a court will use to limit the scope of the patent claims.

Reviewing the prosecution history, or from other research, counsel may also be able to determine the likelihood that patent claims are invalid or enforceable. Many people read the claims of software patents, for example, and say, “That sure looks obvious.” However, a patent claim is only invalid if there’s prior art that anticipates, or at least in some way suggests, what’s in the patent claim.

Many seemingly obvious patent claims are surprisingly difficult to invalidate. And even if you do find “killer” prior art, the amount of money you’d spend in a year or two of litigation before you could get a summary judgment of invalidity often far exceeds the amount you could spend to simply license the asserted patent and make the matter go away. On the other hand, good prior art can sometimes make a patent owner suddenly offer a very reasonable settlement, or can be a litigation necessity when non-infringement defenses are poor.

To settle or to defend?

There are times you may wish to forgo a response to a demand letter. For example, you may have reason to know that the patent owner is not serious about pursuing its claim, does not have the means to sue you, or is otherwise simply fishing for a response. In such cases, you may not want to give credence to the demand letter by responding.

Likewise, if you have decided to file a declaratory judgment action, you may not want to respond and to provide any information at all to the patent owner. In general, however, responding to a demand letter, at least to obtain information about the patent owner and its counsel, is a good idea.

Another way to protect yourself against patent infringement assertions is to obtain an opinion of counsel that the patent is not infringed or is invalid. Opinions of counsel are generally considered when a defendant wants to show that it did not “willfully infringe” patent claims. This is important, because a finding of willful infringement can allow a plaintiff to collect enhanced damages.

Although recent case law has made things a little easier on defendants lacking such opinion letters, in general, a reasoned opinion from competent counsel can still be very useful to a defendant to rebut accusations of willfulness.

As with all litigation, the sound business approach when defending patent litigation is to weigh the cost of settlement against the potential costs and exposures of litigation. Most often, the best method is to use information you have obtained in your investigation of the asserted patent and the potential plaintiff to negotiate the best settlement you can.

Charles A. Bieneman is a partner at the Bloomfield Hills intellectual property law firm of Rader, Fishman & Grauer PLLC. Contact him at (248) 594-0648 or cab@raderfishman.com.