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On Guard!

When your patent is under attack, these tips can protect it from infringement.
August 1, 1997
URL: http://www.entrepreneur.com/article/14456

No subject makes an entrepreneur's blood pressure rise more than patent infringement. Having spent hundreds of thousands of dollars defending my patents, I've learned some valuable lessons. Let me share them with you.

If you own a patent and you become aware that someone else's new product or process is alarmingly similar to your own, chances are your patent is being infringed upon. That said, let's clear up some important misconceptions about infringement.

First, the U.S. Patent & Trademark Office can't take any action on your behalf regarding patent infringement. That's not its job. You, the patent holder, assume the full burden for stopping infringers and collecting any damages.

Once you file a patent application with the Patent Office, you are given the right to claim "patent pending" status on your product. However, your product can be copied legally--yes, legally--until the date you are awarded a patent. From that day on, any identical or strikingly similar manufactured product is infringing on your patent. Unfortunately, you cannot collect damages for infringement during the patent-pending period. That makes bringing your product to market tricky.

With that in mind, it's no secret why it's so important to keep your patent filing date confidential. If potential infringers know you just filed your patent, they probably also know it will take approximately two years to be issued. That gives them two years to copy your product before you can do anything about it. If they don't know when you filed, infringers may not risk the time and effort trying to knock off your product.

One solution to this patent-pending marketing problem is to determine the approximate issue date of your patent (and keep it confidential) and put your product on the market three to four months before then. An infringer will not want to spend time and money on production only to have to stop once your patent is issued.

Drawing The Battle Lines

So you've discovered an infringing product on the market. What do you do? First, gather as much information as you can about the infringer and the infringing product. Get names, addresses, correspondence, literature, manuals, advertisements, catalogues and anything else to prove your case. Also, take pictures of where the infringing product was found in the market, and purchase it if possible.

You also need to be on record as responding very promptly to a potential infringement. There are several ways to handle the situation, from fighting it out in court to giving up your patent altogether--for a fee. Write a letter to the infringing company requesting one of the following actions:

Request that the infringer buy your patent--either all or part--for a fee that covers past and future sales.

Ask the company to stop infringing and to pay you compensation for what they have sold.

Request that the infringer compensate you for what he or she has sold and that they offer you a licensing or royalty payment agreement on future sales.

Offer a business deal to the infringer in which he or she can continue to sell the product but in turn gives you rights to his or her patents or other products which may complement yours.

Send your letter by certified mail, return-receipt requested, and include a copy of your patent and, if possible, a sample of your product. The kind of response you get will give you insight into what strategy the infringer may take.

Acting promptly with a letter gives you the ability to recover damages for past infringement (assuming you claimed patent protection for your product) and reduces your chances of falling prey to the legal doctrines known as estoppel and laches. These provisions allow the infringer to argue that he or she should be able to continue to infringe because you did not show enough concern to act promptly. Infringers use this argument to get a reduction in the amount of damages they have to pay to the patent holder and to gain the right to continue to infringe in the future. This is another reason you have to police your market and act quickly when you see possible infringement.

The Lawsuit Route

A more serious recourse is to sue the infringer in federal court. If you win the lawsuit, you're awarded damages and a possible injunction, which will prevent the infringer from using your idea for the remaining life of the patent.

However, lawsuits have a big downside: Patent infringement lawsuits are lengthy and very expensive. Intellectual property attorney Bob Chiaviello of Baker & Botts in Dallas estimates the average cost of a patent infringement lawsuit for a simple case is around $300,000 for each side, even if the case settles before going to trial. If the suit goes to trial, costs average $600,000 per side. However, he warns, costs can run into the millions if your patent deals with complicated technology. Obviously, if the damages you'd collect are less than the legal fees, it would be foolish to pursue this option. Also, you need to make sure your infringer could pay such a judgment for damages. Otherwise, collection will be impossible.

Deciding whom to sue in a patent infringement lawsuit is not obvious. Most think they can sue only the manufacturer. The truth is you can also sue the retailer or ultimate purchaser of the infringing product. There are advantages to doing this. If retailers get sued, they will be less likely to buy knockoff products in the future because of the time and expense of lawsuits. Also, the Uniform Commercial Code requires the manufacturer of the infringing product to step in and defend or reimburse a retailer or ultimate purchaser if they are sued. Since your court costs will be less if you can sue in the state where you do business, suing an interstate retailer creates a big disadvantage for the manufacturer (if out of state), who then has to defend the retailer from a distance. This strategy also puts a damper on any future relationship the manufacturer might have with the retailer.

If you decide you can't avoid a lawsuit, be sure to request a jury trial. It's been shown that juries love patent holders because they're perceived as the little guys. Huge awards have been granted, especially to individual patent holders going up against big corporations. But courts are not awarding tripled damage amounts or attorney's fees to the patent holder as frequently as they used to. Only in cases where extreme and flagrant abuse can be proved will there be any chance for these awards.

More and more, patent infringement cases are being settled by arbitration, which is cheaper and faster than a traditional lawsuit. An arbitrator, who is usually a patent attorney or former judge, is an impartial person who will listen to each party in the dispute and help settle the matter. The arbitrator's fee can run from $2,000 to $20,000, and each side pays equal amounts. Although this is costly, it's less expensive--and less time consuming--than a lawsuit. Get a referral for an arbitration firm from your lawyer or insurance company.

Patent infringement is an awful experience any way you look at it. You'll feel betrayed and robbed. Unfortunately, until our laws are changed to better protect those with patents, this problem will not go away. Until something does change, your best defense is to be first in the market, with all your ducks lined up beforehand so you can hit the market hard and fast.