Legal departments often grapple with the issue of how to review a competitor’s patents without stepping into a hornet’s nest of increased liability. Reading a patent and realizing your company potentially may be infringing it can lead to a finding of willful infringement in court, whereby the judge can triple any damages award against your company. It also can establish the knowledge element of inducement of infringement and contributory infringement.
On the other hand, company management and product development teams often push the legal department to confirm that a new product idea will be free of any infringement problems. Faced with these competing concerns, what should an in-house attorney do?
The worst case scenario
Efforts must be taken to minimize the chance that the company will unnecessarily create bad evidence. As patent litigators, when we defend a company accused of patent infringement, we often are nervous about finding a smoking gun in the company’s files—for example, an email from one engineer to another saying, “Hey, I read our competitor’s new patent, and we are infringing the heck out of it.”
That type of email, even if sent in jest, can be damning in front of a judge or jury. In fact, a substantial portion of the cost spent on e-discovery is incurred solely in hopes of finding that type of evidence. As a potential defendant, you need to prevent such documents from being created and train employees as set forth below.
Ensuring that non-lawyers do not create bad evidence
In general, only two types of people are interested in patents: lawyers and engineers. The latter poses a greater concern because an engineer’s actions will not be protected by the attorney-client privilege or the work product doctrine if the engineer acts on his or her own. Most established technology companies hold formal patent training sessions for engineers and product teams to encourage them to file patent applications. We think it is advisable to spend a portion of these sessions discussing how to deal with another company’s patents. Ideally, you would convey the following:
- All emails can be used against the company in litigation. If the company is sued, outside lawyers will capture all emails of any relevant employees and search through them. Anything related to the case (and “related” is defined broadly) will be given to your opponent’s lawyers and authors of important emails—such as emails discussing the patents—will be deposed and possibly will be required to testify at trial.
- Employees should not search for or read another company’s patents without first speaking with the legal department. This will provide the legal department the opportunity to remind employees of these safeguards and may present an opportunity for the review process to be protected under the work product doctrine. Further, communications with attorneys in the legal department (or outside counsel) are privileged.
- If an employee or product group wants to do a serious review of a patent portfolio before embarking on a new project, they should contact the legal department, which will then spearhead the effort. Ideally, only attorneys would review the patents. Engineers can assist the attorneys in understanding the relevant technologies, but (if practicable) the engineers themselves should not read the patents. This will save you from a situation where a deposition witness is asked, “Did you think your company had a problem when you first read the patent?”
- If an employee disregards these warnings, reads a patent and thinks there is a problem, he or she needs to realize that there is a body of caselaw on how to interpret patents as well as a Patent Office file history that will impact the scope of the patent claims. Without that critical information, it is impossible for a reader to determine the scope of the claims.
- Employees should never send an email about another company’s patents. If they have a serious concern about a patent, they should call, not email, the in-house legal department.
- To reiterate these points in an effective manner, employees need to be told that another company’s patent is like an armed missile. They should not attempt to study it without calling someone who can disarm the missile—you.
Ensuring that lawyers do not create bad evidence
Assuming that non-lawyers in your company follow this advice, the job of examining another company’s patents ultimately will end up on your desk, and you will need to determine if the company has an infringement problem. Here are a few quick points on best practices for you to follow. In a subsequent article, we will explore these more fully:
- Assume that all emails and documents you create will be discoverable
- Do not mix your attorney hat with your business hat
- Use an outside counsel
- If you conclude that you may have an infringement problem, hire someone to search for prior art
- If litigation seems likely, get a written opinion of counsel
No approach or company policy can remove risk completely. However, with these suggestions in mind, you can review a competitor’s patents while minimizing the chance that an unsuspecting engineer—or worse, a lawyer in your department—will be placed in the unenviable position of being cross-examined at trial regarding a casual email sent years before without realizing he or she had placed a smoking gun in the company’s email server.