Here at the Mann Law Group, our focus is on helping smaller patent owners take on much larger opponents. I find it helpful, therefore, to keep track of what corporate counsel and management are thinking, particularly with regard to patents and related lawsuits. An article in the September 3, 2004 Silicon Valley/San Jose Business Journal, discusses how larger corporations should react when faced with a charge of patent infringement and provides valuable insight.

The article rightly notes that lawsuits are expensive, disruptive and potentially life-threatening to a company that loses in court. “For an accused infringer with no patents of its own to assert, the only reward in patent litigation may be the ability to continue to sell its product, but the risks can be great. Not only will a proven patent infringer have to pay for patent damages and its cost of defending the action, it may have to take its product off the market until the patent expires.” True.

What’s interesting about this article is its recognition that taking an early license under a patent might be preferable to mounting a scorched earth defense. Why companies almost always refuse to do this has always baffled me. (Having had two decades of first hand experience with the need for law firm partners and associates to “make their hours,” I have a guess why this may be so.) Many companies and their lawyers immediately say “No” to any licensing proposal and begin planning an aggressive defense right away. The only thing certain about defending agressively is that it will be expensive, not necessarily successful. As the author notes, “But if these defenses fail, the hostility of litigation could destroy any chance of obtaining a license after the fact.” This is a polite way of saying, “Don’t expect favorable treatment from someone who is forced to sue and ultimately wins.” The time for “win-win” negotiations is before the case is tried, not after.

My sense is that large companies may now be moving away from the “defend at any cost” approach and may be willing to entertain licensing proposals even from small patent holders. That’s good news for those of us who have experienced how large businesses sometime treat those they consider too small to matter. However, and as noted by the Federal Circuit in EMC Corp. v. Norand Corp., 89 F.3d 807, 811 (Fed. Cir. 1996), “Any time parties are in negotiation over patent rights, the possibility of a lawsuit looms in the background. No patent owner with any sense would open negotiations by assuring his opposite party that he does not intend to enforce his patent rights under any circumstances. The threat of enforcement–either directly by the patentee or indirectly by a third party to whom the patentee licenses or sells the patent–is the entire source of the patentee’s bargaining power.” The problem for small patent holders, of course, is that, without a credible threat of litigation, this “bargaining power” may be small indeed. In my view, the possibility of having a jury of ordinary citizens make the final call is ultimately what drives corporations to make a deal.

Although the risks of ignoring the patents of others is enormous, many companies continue to do so, especially when they think the patent owner is unable to do anything about it anyway. This article suggests that attitude might be changing.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Philip P. Mann Philip P. Mann

Philip P. Mann is a trial lawyer with over twenty years experience litigating patent, trademark, trade secret, and other intellectual property matters throughout the country.
Mann’s trial work has taken him to various federal and state courts where he’s tried both cases to…

Philip P. Mann is a trial lawyer with over twenty years experience litigating patent, trademark, trade secret, and other intellectual property matters throughout the country.
Mann’s trial work has taken him to various federal and state courts where he’s tried both cases to the court (a judge) as well as before juries. In addition to trial court work, Mann has performed appellate work before the United States Court of Appeals for the Federal Circuit.
Mann began his legal career in Chicago and Milwaukee before heading to Seattle where some of America’s most innovative companies were developing new technologies at breakneck speed. Before founding his own firm, he was a member of the Seattle Intellectual Property Law Firm, Christensen O’Connor Johnson Kindness.
Mann is an “AV” rated lawyer by Martindale Hubbell, indicative that he has reached the height of professional excellence and is recognized for the highest levels of skill and integrity.
He holds a degree in Electrical Engineering from the University of Illinois (Urbana) and received his law degree from the Washington University School of Law in St. Louis, Missouri. He is admitted to practice in the States of Illinois and Washington, as well as before the United States Patent and Trademark Office, and in various courts around the country.