Here’s what you need to know and do.
A typical story of infringement.
Your top salesperson just reported that you’ve lost another customer. The customer said, “We can buy it cheaper.” You wonder, how is that possible? You have a patent. No-one else can sell it. What do you do?
Step one: Understand the Scope of your patent claims.
You have to understand the scope of your patent claims. Only patent claims can be infringed. The accused product has to have every element in the claims, or its equivalent. An equivalent is generally defined as performing substantially the same function, in the same way, to get the same results. But equivalence is limited by the what was negotiated with the Patent Office. Determining the scope of patent claims is complex. To truly understand the scope of your patent claims and whether there is infringement you will need to consult with patent counsel.
Step two: Don’t be satisfied with winning.
Don’t be satisfied with the answer, “Yes there’s infringement, and we can win.”
Winning to a trial lawyer is not necessarily winning to a business owner. Most trial lawyers have a binary approach to patent law. We can win, or we can’t win. Most are sure they can win. They’re talking about a trial that will rack up millions in fees. But that means massive frustration and sleepless nights for you. I remember as a young lawyer congratulating our client on their victory in a patent case. The owner turned to me and said, “Yes, we won the case, but our business is bankrupt.”
There are also risks in patent litigation. Your patent can be lost. There are two defenses to patent infringement, 1) I don’t infringe, and 2) your patent is invalid. If the infringer is found not to infringe, there is a clear roadmap for others to start competing. The same is true if the patent is found invalid.
Step three: Understand your options.
Litigation is a last resort in my opinion. Typically, if you win, it will be like kissing your sister. Damages will likely be a reasonable royalty, and an order requiring the infringer to stop. Getting the infringer to pay your legal fees is as rare as the Detroit Lions winning a Super Bowl. Plus, the infringer has to be capable of paying the damages.
There are a few reasons to litigate. Some examples are:
- Dominating the market and maintaining your monopoly.
- Showing the industry that you will defend your patents.
- A large damage award is likely and the infringer has the resources to pay.
- The infringement is willful and you have a shot at treble damages and attorney fees.
- You are required to litigate pursuant to an agreement.
2. Talk to the infringer.
They may not be aware of your patent and voluntarily agree to stop. Few businesses want to be in litigation. If there is an acceptable workaround, propose it. A client suggested a different design. Not quite as good as his, but acceptable to the infringer. Litigation was avoided.
3. License the Infringer
Litigation costs an average of $2 million. So each of you are looking at a $4 million pot of money. That leaves a lot of room to negotiate a certain deal. Remember litigation is uncertain; a jury will ultimately decide the outcome.
A license to use your patented technology brings you regular royalty payments and some control and information (sale volumes) on your competitor.
4. Cross License
Does the infringer have something that you want? If so, give them a license in exchange for a license to their technology. This happens in a lot of industries.
5. Private Label
A client visited an infringer and offered to manufacture the infringers products for them. Unusual, but creative. It turned out to be a great deal and a long relationship. Years later the owner told me that the agreement doubled his profits.
When you think your patent is infringed, step back and think through what you want. It is likely not a lawsuit. Think about acceptable alternatives. Be creative. Litigation should be a last resort and business owners who are talking can usually find a resolution, because the risk and expense of litigation is just too high.