You have a patent, and you believe someone is infringing it. There are a number of ways to address the infringement, such as send a cease and desist letter or file a lawsuit. But posturing for litigation is not always the best option. Just because you have rights does not mean that you should run to court to enforce them or even threaten to enforce them. Instead, a strategy to deal with a potential infringer should be well thought out and include an analysis of a variety of factors.
The first question is, “What harm is being done by the potential infringement?” Once you determine the harm of infringement, you can better gauge how to address the problem. For example, is the product or service at issue paramount to you or your company's business, or does the infringement affect you or your company's reputation on a small line of products or services? Are you dealing with a competitor? Do you have obligations to maintain exclusivity for other licensees? If the harm goes to a core issue for you or your company, then you may need to consider a more aggressive strategy. If the harm is merely peripheral to your business, then you can likely address the problem with a more conservative strategy.
The second question is, “How much is at stake?” Although this question is similar to the first question, it focuses on the actual dollars at stake. The answer to this question gives insight into how much litigation could cost and the impact on your business. The more that is at stake, the higher the cost to litigate. The American Intellectual Property Law Association (AIPLA) examined the cost of patent litigation and found, not surprisingly, that the average cost of a case increases as the amount in controversy goes up. The AIPLA found that a case with less than a million dollars in claimed damages costs on average $970,000 to take through trial, whereas a case with $25 million or more in alleged damages costs on average $5.9 million to take through trial.
The third question is, “What are the likely outcomes?” Answering this question helps to flesh-out what you can realistically achieve by pursuing the infringer, which in turn helps you decide which strategy to adopt. To help with this analysis, think about what you would do if the shoe were on the other foot. On what issues would you be willing to compromise? Litigants like to argue extreme possible outcomes to leverage their positions in the dispute, but rarely do plaintiffs or defendants get everything they want as relief in a judgment or settlement. Whether by settlement or final judgment, cases often end up at a point between the extremes. Therefore, before adopting a particular strategy, consider the likely achievable outcomes, as opposed to just the potential result if everything goes in favor of one party or the other.
The fourth question is, “What are the leverage points?” Leverage or pressure points are issues that can tip a case into resolution. When evaluating the likely achievable outcomes, you should consider the leverage you will need to make that outcome a reality. For example, are there business issues that can be addressed in addition to the patent infringement? Perhaps there is a business resolution that can be achieved, putting aside the patent infringement, that would be advantageous to both parties.
The fifth question is, “What is the exit strategy?” If the case or negotiations do not develop the way you thought they would, you want to have an exit strategy in mind as essentially a “stop loss.” Patent litigation can be very costly, and you do not want to continue to incur litigation costs if the case is not going to yield a result you had hoped to achieve. The “stop loss” can be quantified a number of ways, including a dollar amount spent on the case, developments or rulings on critical issues in the case, or even a time period depending on the state of the technology or invention at issue. For example, some technologies have short life cycles, and pursuing drawn-out litigation over a product that has become obsolete in the marketplace is not necessarily practical.
The last question to consider, once you have answered the preceding questions, is “How do I approach the potential infringer?” Through business contacts? Escalate the issue with a cease and desist letter from counsel? File suit to preserve venue and then engage in negotiations? Or file suit and serve the other side to get the lawsuit started? There are risks and benefits associated with each approach, and you should discuss these with counsel before you contact a potential infringer. For example, if you send a cease and desist letter, you run the risk of being sued by the potential infringer in a court of its choice. Conversely, if you have business people from each party talk first, they might not correctly frame the issue or fully resolve the matter.
Consider these questions, your company’s answers to them, and discuss your possible enforcement strategy with your counsel as soon as a problem arises. A good strategy is often the key to swift resolution.