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February 6, 2008

Why Litigate?

Patent litigation is tremendously expensive. And noisy. The ruckus has stirred quite a crowd: fat geezers with political heft to match are jostling to shuffle the seating arrangements in the patent spat ballroom. The stakes for infringers can stray to six to nine figures or more. Microsoft keeps a small army of patent litigators marching on the defense of 30 to 40 contemporaneous assertions. Though not as bad a barrage as Microsoft, quite a few large firms face regular patent battles. Why not take a more civilized path?

Once upon a time, patent notification was like Joan Rivers hosting: "can we talk?" A patent owner could write a pleasant missive informing, though not accusing, of possible infringement. Then the Supreme Court, in its MedImmune ruling, made litigation de rigor: a whiff of fear by a potential defendant became cause célèbre for a declaratory judgment motion. In short, the courts encouraged business.

But why not hang out a "can we talk?" sign?: public notice of declaratory judgment restraint pending investigation of assertion. In one scenario, an uninterested third party could vet an asserted patent for validity; assess infringement; study damages and reasonable royalty if merited. Patent arbitration of a sort. Sure would save buckets of money.

But only if the interested parties were willing to be reasonable. There's the rub. Inventors with "billionaire" on the brain aren't prime candidates for tuning into the reality channel to watch their shoddy patent get gunned down as an academic exercise. Steroid competitive corporate pit bulls aren't about to bend over and take a license, foregoing a fighting chance of evading a "patent tax."

However the worm turns, the worm belongs to the other guy. Well, at least until court-mandated claim construction, when the judge puts the Markman on the wall. Only about 3% of patent assertions face trial, but many make it to Markman. Only when clarity of conviction becomes crystalline does the motivation sway.

Simply put, reasonable rational calculation in the face of a patent being waved around just is not happening. It's an emotional jolt, and the jangling vibe is positively reptilian. There's just too much at stake; roll the dice.

Posted by Patent Hawk at February 6, 2008 1:55 AM | Patents In Business

Comments

Good post. I have recently come back to patent licensing after an absence of a little over 20 years.

The change is amazing. During my earlier experience, prospective licensees were willing to talk and generally reasonable during those talks, whether or not they decided to take a license. We were a small company and sold all of our licenses without a hint of litigation floating around. There was an unspoken assumption on the part of both sides that the patent was valid.

Nobody can change the tenor of these times, but some sort of statutory or judge-made safe haven for frank discussions and negotiation would be an excellent idea. Everything that took place would be confidential and admissions against interest, etc., would not be admissible.

At the option of the parties, a mediator or arbitrator could be brought in to assist in resolving one or more issues. Again, everything would be off the record.

Pursuant to agreement of the parties, at the end of the proceedings, either side could make an equivalent to an offer of judgment under Rule 68 with cost-shifting penalties if the opposing party got less than the offer at trial. In addition to monetary damages, perhaps an offer of judgment that as to claims X and Y, patent Z was valid could be included with cost-shifting for the expense of proving validity if a court upheld the claims.

Posted by: dvan at February 6, 2008 10:03 AM

As long as patentees can file any patent suit in the Eastern District of Texas, smart potential licensees will file dj actions in more hospitable locations at the first chance.

IF the venue provisions of the Patent Reform bill become law, maybe potential licensees will be more willing to talk before pulling the trigger.

However, even that will not stop dj actions when a potential licensee smells a troll.

Posted by: Alan McDonald at February 7, 2008 8:04 AM

"However, even that will not stop dj actions when a potential licensee smells a troll"

So how does a troll smell ?

Does he smell like a dirty sock or like a flower?

Good advice though... when I am about to talk to a prospective licensee (aka willfull infringer of my patent) I will make sure I smell like Hugo Boss or Alain Delon :-)

Posted by: angry dude at February 7, 2008 12:34 PM

"but some sort of statutory or judge-made safe haven for frank discussions and negotiation would be an excellent idea."

How about Federal Rule of Evidence 408?

Posted by: Michael Martin at March 1, 2008 12:15 PM