5 Things to Know Before Filing a Patent Lawsuit

I’m a member of Vistage, an international group of business owners. Recently, a member was considering filing a patent infringement lawsuit. He asked what advice other members could offer, and what to expect. It’s a great question. This is what I tell my clients.

First, you need to know that this is a business decision. This may seem obvious, but it’s often an emotional situation that can cloud your judgment. Patent lawsuits are expensive and time-consuming for both parties. You need to set aside your emotions.

I was once involved in an emotional lawsuit. The owners of both companies were enemies. The patent owner offered the accused infringer a paid-up license to the patent for $20,000.00. Taking the license was the wise answer, but emotions ruled, and war was declared. Both parties spent millions in legal fees. After a trial and an appeal, they settled for $20,000.00, the original license amount. Crazy, I know. I admit this was an unusual case, but it illustrates how emotions can take over.

Take time to reflect on what business result you really want to achieve. The most common outcome is to stop your competitor from selling the infringing product. But that isn’t the only purpose of a patent lawsuit. For example, a less common purpose is to drain resources from a competitor, especially a start-up.

I once represented a start-up company that was sued for this reason. Two guys started the company after leaving their former employer, who sued for patent infringement. After two years of fighting, we won the lawsuit, but the start-up declared bankruptcy shortly after. The patent owner lost the battle but won the war.

You can also grant a license to the infringer or offer to private label the product. I’ve seen both happen. Cross-licensing is also a possibility when your competitor has technology you want. Audi and Porsche avoided litigation by cross-licensing the Audi all-wheel drive and Porsche turbocharger patents.

Once you know your reason, discuss it with your attorney. He can help create a plan to get you where you want to be. You may not need a lawsuit. It might just take a phone call.

My most bizarre patent infringement suit was between two tool manufacturers. The case was starting, and one of our engineers suggested that he call a friend at the company that was suing us. He learned that they were upset because we had the premier location at the Chicago Tool Show. If we agreed to trade booths, they would drop the suit. That was easy because we were already giving up the location because it was too expensive. That phone call saved millions.

Second, you should keep communication open with the other side’s owner. Lawyers can only talk to the other side’s lawyer, never directly to the other side. You have no such restriction. It may not be easy to open communication channels. They’re your adversary, but most companies don’t want to be in lawsuits and are willing to talk. If the owners talk, you might be able to resolve the case. I’ve seen this happen with many lawsuits. Business owners can usually come up with a solution to save millions in legal fees.

Third, understand what you’re getting into. You need cost estimates. You must also consider the time commitment and the distraction from your business. These cases are costly in all three categories. A typical patent case will last at least a couple of years, and cost upwards of a couple million dollars. Enormous demands will be placed on your time. These come in batches as lawsuits tend to jerk along with periods of intense work. But you aren’t in control of when the demands occur. To help you plan for these, ask your lawyer to explain the scheduling order and the time commitments. You will have to produce documents, financials, and witnesses. You will be distracted from your business. You or your employees will spend weeks in Court.

Fourth, understand how much the infringement is really hurting you. Does the damage justify the costs in money, time, and distraction?

Fifth, understand that you are risking your patent. The lawsuit can backfire, opening the door to more competitors. If the court finds the defendant didn’t infringe, it sets a precedent that’s a road map for your competitors. If the court invalidates your patent, you lose your advantage.

A patent is an excellent resource for your business, and enforcing it is imperative. However, enforcement doesn’t always require litigation. If it does, don’t approach it with Eyes Wide Shut. Consider what you’re getting into, and evaluate it like any other business decision.

To learn more about your IP assets, grab a copy of my new book, Invisible Assets: Maximizing the Hidden Value in Your Business. You can get your FREE Copy by clicking the link below.

About the Author:

Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the new book, Invisible Assets – How to Maximize the Hidden Value in Your Business.

To get answers to your questions schedule a time to talk, you can access my calendar by clicking here, email Bill@IPGuy.com, or call me at 248-433-7381.