Contingent Fee Patent Litigation Basics

Patents give their owners both offensive and defensive rights. Offensive rights include the ability to stop others from making, using, or selling the patented invention. Defensive rights are more difficult to quantify, but include the fact that holders of patented technology discourage others from entering the market with similar products.

What is Patent Infringement?
A United States utility patent gives the owner 20 years, in the case of patents issued since 1998, during which they may exclude others from making, using, selling, offering to sell, or importing an infringing article or process into the United States.

The boundaries of patent protection are determined by the claims of a patent, which are the numbered paragraphs that make up the last section of an issued patent. Under what is sometimes called the all elements rule, a device or method that includes all the structures or steps (elements) of any one of the claims is said to infringe the patent; unless the owner of the patent ha given his or her permission to do so.

It is not necessary to intend to infringe a patent; and it is not necessary that a potential infringer even know of the existence of the patent. Regardless of motive, it is sufficient if the alleged infringer’s device or method includes all the elements of a single valid claim of the patent in question.

Preliminaries to Patent Infringement Litigation
A patent holder often has an attorney send what is called a demand letter to someone that they believe may be infringing. If you receive such a letter, it is wise to immediately contact a qualified patent attorney, as important legal rights come into being as soon as a demand letter is received. These may include the ability to have a case tried in a court convenient to the accused infringer, rather than one more convenient for the patent owner.

Typically, a demand letter will put the accused infringer on notice of the patents, as an infringer who actually knows of the patent that he or she is infringing may be subject to enhanced damages for willful infringement. The letter will generally include a demand that the alleged infringer stop producing the invention, and may propose settlement terms. The terms proposed by patent owners are often more than what they are willing to accept, and skillful negotiation at this point may eliminate litigation altogether.

However, if there is no agreement, and the patent owner is unwilling to drop the matter, the case must go on to actual litigation in the courts.

What are the Steps in Patent Infringement Litigation?
Patent litigation cases are governed by federal law, that is, by the United States Code, so they are almost always heard in federal court. Every state in the United States has at least one federal court, and most states have more than one, which are called districts. For example, federal courts in our home state of Ohio are divided into a Northern District; with principal seats of court in Cleveland, Toledo, Akron and Youngstown; and the Southern District, with principal seats of court in Columbus, Dayton, and Cincinnati.

In many respects, the fact that patent infringement is a federal issue makes the law more consistent because there is not a state-by-state variation in the law, as would be common with most business issues. For example, our law firm has recently been involved in patent litigation that has involved parties and courts that include Ohio, California, Georgia, Mississippi, North Carolina, New York, and Maryland, but the same federal law was considered in each.

Patent Litigation Begins With a Complaint
Patent litigation begins in earnest when the owner of the patent, who is the Plaintiff, files a Complaint in federal court. This may be done in the district court in the defendant’s home district, or under some conditions, may be filed where the Plaintiff lives, or where the infringement allegedly took place. The decisions as to where a case will eventually be tried, which are called issues of jurisdiction and venue, are critical, and sometimes determine the very outcome of a case. As is easy to see, it is much easier to have a case in your own back yard than across the country, and while the Plaintiff can be counted on to ask for a convenient location when the suit is filed; it is important that the defendant examine all possible arguments that favor a more convenient location for the defense.

It is vital that the accused Defendant take action immediately when served with the Complaint. Under the federal rules, a defendant may have as little as 20 days to make a response. If he or she does not, the court may enter a default against the defendant that, unless later reversed, acts as a fining of guilt on the issue of infringement. The court may then impose a monetary judgment against the defendant.

Next Comes the Answer
After the Complaint is filed, the defendant makes a response, which may be a Motion to Dismiss, or an Answer, or sometimes both. The Answer serves as the defendant’s first opportunity to defend the case on the merits, that is, to say why the defendant is not guilty of infringement. The defendant also has the opportunity to bring counterclaims; which are generally claims against the Plaintiff that seek to bar the Plaintiff’s claims from enforcement.

What is Discovery?
The case next enters the stage of discovery. Both Plaintiff and Defendant are allowed, generally though their attorneys, to conduct sworn interviews, called depositions, as well as to inspect records and documents that are in the hands of the other party. The period of discovery can last as much as a year or more, depending on the complexity of the case. The purpose of discovery is to allow both sides to unearth as many facts as possible before trial. Based on discovery, some issues may be resolved, or dismissed, before trial. If there are multiple plaintiffs or defendants, some may be dismissed, and others may be added, before trial.

What About Settlement?
Some surveys have indicated that as many as 95% of all civil cases in the federal courts, that is, non-criminal matters, do not go to trial. Many are dismissed by the court, or, if the facts are overwhelming on one side or another, the court may enter summary judgment, giving victory to one side. Many cases are settled by agreement of the parties, or settlement.

Wise Plaintiffs and Defendants are always open to the possibility of settlement. Patent infringement cases are grueling and expensive endeavors, and a settlement may be the best resolution for everyone. The closer a case comes to the time of trial, the more pressure that exists on both parties to settle, and it is not unusual for case to settle, “on the courthouse steps,” that is, just before trial.

While some preliminary matters are decided by a judge, most patent cases have their primary issues decided by a jury. During a trial, which may last anywhere from a few days to a few weeks, there is direct examination of witnesses and experts, cross-examination of witnesses, and a number of documents placed before the jury. Attorneys for both sides will make arguments intended to cast the evidence in the best possible light for their side. In the end, the case will go to the jury for decision.

What Are Possible Defenses to Charges of Patent Infringement?
The simplest defense to understand is non-infringement: that is, the accused device or method does not infringe the claims of the patent, and which might be analogized to a simple “not guilty” plea. However, there are a number of other defenses, many of which are extremely powerful. If a plaintiff has not followed the correct procedural steps, a case maybe dismissed very early. If there are defects in the patent, or there were defects in the process of obtaining the patent, even if it was many years ago, the patent may be held to be invalid. If the Plaintiff, or a previous owner of the patent, has violated the law or administrative rules regarding patenting, the patent may be held to be unenforceable. Any of the above holdings will mean a victory for the defendant. One of the things that make patent litigation very unpredictable is the large number of issues that are not fully decided until trial, any one of which may mean the difference between victory and defeat.