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Patent Litigation Management - Strategic Decisions Can Help Manage the Cost of Litigation

James C. GuminaFall 2017 (snippets)

With respect to patent litigation one thing is true – it can be very expensive. This expense is often viewed as a barrier to patent owners enforcing their patent rights and properly protecting their inventions and the products they cover, particularly for smaller companies in smaller economic markets. As a result, a company may find itself in a situation having to either live with the existence of an infringer or settle for less compensation through licensing than it may be truly entitled to. They are faced with either devaluing the patent asset or wasting it entirely.

While there are many things that lead to this expense, some within a patent owner’s control and some not, there are strategic decisions that can reduce costs and manage the expense associated with litigation. These decisions should start before the case is filed and should be managed and revisited throughout the litigation. While each case has its own facts and issues, some key decisions that tend to appear in every case are discussed below.

Define and Understand the Goals of the Litigation

It is important that before you start any litigation, you understand what you hope to achieve as a result. This is perhaps the most important decision you can make with respect to the expected cost of the litigation. These goals should control how you conduct the litigation. Again, the goals and likelihood of meeting them should be reevaluated throughout the course of the litigation

From a patent owner’s perspective, there are generally three possible ultimate goals of any patent litigation – (1) recover damages; (2) remove the infringer from the market through injunction; and/or (3) create circumstances for a favorable licensing program. Each of these goals has distinct proofs associated with it and, as a result, developing evidence on each issue has an expense associated with it as well. Therefore, in the pre-litigation preparation, a cost-benefit analysis should be performed to determine if it makes sense to pursue all these goals or just a subset. For example, if a business is in a small or relatively crowded market, damages may be relatively small as compared to the cost of the litigation. But an injunction and removal of the infringing product from the market may be crucial to the success of the patented product. In such a case, it may make sense to simply waive damages in the complaint and seek only an injunction. Removal of damages not only eliminates an issue from the case but also potentially costly (and intrusive) discovery as well as significant expert expenses. A similar effect can be obtained by limiting the theory of damages to a reasonable royalty and foregoing lost profits. If such a drastic step does not makes sense (especially since damages often supply strategic pressure for settlement), you can choose to de-emphasize certain issues and concentrate on those more directed to your goals.

Framing a definitive litigation strategy before the litigation begins allows you to conduct all your actions from pleadings to discovery to trial towards a defined end. This requires a well-thought-out and thorough pre-litigation investigation. However, this investigation pays off in the end, helping you avoid costly and unnecessary wild goose chases.

Have the Right Team

How you staff a litigation can have a direct correlation not only to the cost of the litigation but also its success. Staffing a case will depend largely on the nature of the case. In almost all cases, however, it makes sense to staff with a blend of younger and more experienced lawyers. Youth brings lower billing rates and experience brings efficiency. Most litigations present challenges and tasks that call for the best use of both.

The technology involved in the litigation can also greatly impact how to best staff a litigation team. It is generally beneficial to have counsel familiar with the technical field or at least the general technical area of the patent. This tends to have at least two effects – it reduces the ramp up for the lawyers to understand the technology associated with the case and it makes working with inventors and experts more efficient and thus less costly. There is, however, a balance that must be struck. Litigation skills cannot be sacrificed in order to address technical knowledge. In an ideal world, a litigation team would have a blend of both types of skills.

One practice that can be particularly helpful to narrow and properly target discovery is to get experts involved early in the case – often, before the case is even filed. Make the expert(s) part of the team. In patent litigation, the bulk of the liability and/or damages evidence is very often introduced through expert testimony at trial or during motion practice. As a result, it makes sense when conducting discovery to understand the evidence the expert will need to support your case and to have the expert available to help you shape your discovery effort. While at first blush the expense of an expert may seem like it would add to the cost of the litigation, in truth, it very often does the opposite. Working with an expert during discovery allows you to understand where the key issues in the case will be and to focus your pleadings and discovery on those issues. It allows you to avoid spending time and effort on issues that are unlikely to yield any important evidence for your case. Indeed, if you develop evidence that your expert does not (or is unwilling to) support, it generally does you very little good. As noted in most cases the expert is the conduit for providing the evidence to the fact finder. Moreover, if an expert is involved in the case during discovery, it often significantly reduces the expense associated with the preparation of her expert report, as she is more familiar with the case and will know what matters and, perhaps more importantly, what does not.

Be Smart About Discovery

Discovery can be a long and expensive part of patent litigation. While discovery is necessary, it should always be done with a purpose. If possible, scorched earth discovery tactics should be avoided. All too often, a lot of time, money, and effort is put into discovery with very little gain or benefit. This often results from the pursuit of tangential issues and dealing with issues that have little to do with the core of the case or the goals set in the beginning. Of course, a party has little control over how the opposing party chooses to conduct discovery. However, simply because the other party chases peripheral issues does not mean you have to respond in kind. While you always have to be mindful of developing the appropriate record, the focus should be to develop your case for trial.

Be Timely

A significant portion of the cost of patent litigation can be attributed to its duration. The longer a case is pending, the more likely it is that costs will escalate. The best way to address this issue is to set a schedule early in the case and work hard to meet all of the scheduling deadlines. Requests for extensions of time are sometimes inevitable, but a party should work to keep those extensions within the existing schedule. Indeed, courts tend to appreciate that a party is trying to work within the established schedule. Once a court sees one party trying to meet all the deadlines, it is more likely that the court would be less willing to grant significant extensions of time.

Working within an established schedule has another benefit – it demands that you keep your case moving forward and that you continue to refine and develop your case. This in turn tends to focus your case on the issues that really matter. When focusing the case in this manner, the preparation effort becomes more efficient and, as a result, less costly.

Pick Your Battles

During litigation, there are always various issues that arise and potentially warrant court intervention. These issues range from discovery disputes to motions for summary judgment. While having the court resolve these issues seems to be inevitable and can, at times, actually streamline the litigation, it is important to weigh the costs and benefits of such disputes. Engaging in motion practice costs money. Before initiating such a dispute, it is important to understand what can be achieved from the motion, its impact on the litigation as a whole, the likelihood of success and the alternatives available. Sometimes the dispute involves a key issue and court involvement cannot be avoided. However, too often the dispute involves a minor or peripheral issue and there are faster and less expensive ways to resolve the issue without involving the court. Instead of fighting over every little disagreement, often it makes sense to find ways to resolve disputes in a more efficient manner. All too often, instead of an effort to find a compromise, a party rushes to the court. Taking the issue to the court is not always the best answer however, especially since the court often fashions a compromise the parties could have reached independently.

Focus the Trial

Trial is the most important and most expensive event in a patent litigation. It is the culmination of all the efforts in the litigation up to that point. Most pre-trial activities should be done with trial presentation in mind. Everything from pleading to discovery to motion practice should at least in part (if not in major part) be done to further the presentation of the case at trial. As such, all through the case, a party should be visiting and revisiting its plan for trial presentation. Generally, this will result in both streamlining the issues that will actually be presented at trial and evidence used to support those issues.

A good trial presentation is a cohesive and persuasive explanation of your case to the fact finder. To achieve this result it is generally good practice for the presentation to focus on the key issues. While skirmishes on the peripheral issues often cannot be avoided, they tend to dilute the message in your case, and the effort should be to demonstrate your strength on the issues that will win the case. In so focusing the trial presentation, time (and money) is spent where it truly matters and expense associated with the peripheral issues is minimized or avoided altogether.

All too often patent litigation becomes an exercise where neither party is willing to relinquish any argument or issue. This has resulted in high litigation costs. While there are certainly cases where such an effort is warranted (as in a “bet the company” case), not all patent cases are the same. Indeed, not all patent litigation should require such an effort. If a case is managed with the ultimate goals in mind, it is possible to reduce the cost of litigation and enhance the value of the patent asset. 

© 2017 McDonnell Boehnen Hulbert & Berghoff LLP

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