Perhaps one of the more daunting risks
businesses face in today’s competitive
environment is the threat of intellectual property (IP) litigation. IP litigation involves
patent, trademark, copyright and/or trade
secret rights. There are numerous issues that
may be the subject of IP litigation, including
ownership, infringement, breaches of contracts, enforcement of licenses and the like.
Some of the risks posed by IP litigation
include being unprepared to enter litigation
and the potential for court-ordered damage
awards or injunctions.
Smart Business learned from Michael J.
Powell, a shareholder with Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC, what
businesses should know to minimize the
risks of intellectual property litigation.
Why must companies be proactive about
intellectual property protection?
The best defense is often a good offense.
Every business has IP rights and should invest reasonably in protecting them. Inventions should be patented; trademarks, service marks and copyrights should be registered; and trade secrets should be guarded.
Competitors take note of others’ IP portfolios, given the public information available
through the United States Patent & Trademark Office and the Library of Congress.
Often, the very existence of a patent or a
trademark registration is enough to dissuade
a would-be litigant from filing suit for fear of
potential counterclaims. If suit is filed, the IP
rights you have protected may form the basis
for counterclaims against the plaintiff, which
can help level the playing field in IP litigation
and provide strategic advantages that enable
you to control at least some of the litigation.
Proactive actions, such as conducting
clearance or patentability searches prior to
rolling out a new product or mark, may
reveal activities of competitors — the knowledge of which may provide an advantage in
IP litigation or in the marketplace.
How can business owners be prepared in
case litigation arises?
Business owners can prepare for litigation
by managing evidence under their control.
An increasingly important source of evidence in federal and state litigation is electronically stored information (ESI). The
process of handling and collecting ESI during
litigation is referred to as electronic discovery. Businesses should manage their ESI well
ahead of litigation by implementing document retention plans. Also, in-house litigation
response teams, including IT professionals
and legal professionals, can be prepared to
respond quickly in the event of litigation. If
businesses plan appropriately, litigation costs
and the risks of adverse consequences for
lost or destroyed ESI, such as spoliation
charges or sanctions, should be minimized.
What are some specific risks businesses
should know about?
Willful infringement: Defendants in intellectual property litigation are often at risk
that a court might award a plaintiff enhanced
or increased damages due to infringement
caused by willful or reckless conduct.
Clearance searching is recommended to
show one’s diligence in trying to avoid any
infringement prior to a product or trademark
being introduced into a marketplace. Where
there is a potential for infringement or an
intellectual property owner is known to be
particularly litigious, it is advisable for a company to obtain a noninfringement opinion
from intellectual property counsel before
engaging in the potentially infringing activity.
Note that some companies assume incorrectly that because they are seeking or have
obtained patent protection for an invention, a
product subsequently marketed or sold is
clear of infringement. This is an incorrect
assumption and can be quite costly to companies. What is patentable, if made or sold,
may infringe another’s patent.
Trolls (and leprechauns): We are increasingly seeing IP litigation initiated not by competitors but by purchasers of IP rights. These
are not traditional businesses that provide
products or services to customers. Instead,
such businesses are based on leveraging the
IP they have purchased for royalties or other
payments from defendants who they believe
will not be able to withstand the costs of
complex IP litigation or are more likely to settle. We refer affectionately to these types of
plaintiffs as ‘trolls’ or ‘leprechauns.’
Commonly, IP trolls are not litigating to
redress any legitimate damage they have suffered, but their rights in IP can be legitimate.
Factors to consider in setting litigation strategy against trolls include an assessment of
the IP rights allegedly owned by the troll,
strengths and weaknesses of the case (both
substantive and procedural), the likelihood
of a successful outcome in litigation, the
costs of litigation versus settlement and the
likelihood of any precedent being set by any
settlement (which can set a company up as a
target for subsequent trolls).
Why should businesses make minimizing the
risk of this type of litigation a priority?
Due to the significant amount of work involved in prosecuting or defending IP litigation, costs of IP litigation are among the highest litigation costs in the U.S. Being proactive
in protecting your IP, planning ahead for electronic discovery issues, responding appropriately to trolls (and leprechauns), and setting
a solid litigation strategy will help control
costs and minimize the potential for exorbitant damages being awarded.
MICHAEL J. POWELL is a registered patent attorney and an intellectual property litigator. He has handled intellectual property litigation in many
federal jurisdictions in the United States and in several foreign jurisdictions. Reach him at (678) 406-8707 or [email protected].
