INNPERSPECTIVE

A Series of Industry Focused Articles
Read about the latest trends and updates in the intellectual property industry from the Innography perspective.

The Rise of the Infringement Letter

Monday 09, February 2009 by Tyron Stading

When The Economic Stabilization Act of 2008, better known as the first bailout bill, was proposed, the price tag ($700 billion) seemed staggering. It also confirmed what most of us knew and (as I mentioned in my last post) what the NBER finally admitted: a recession wasn’t looming; it’s already here.

I don’t really want to focus too much on the negative sentiment about the economy. However, I do think it’s important to take stock of some pertinent facts that we simply can’t afford to overlook in the current economic climate. A primary fact that most companies are going to have to deal with is the rise of the infringement letter.

In a previous post, for example, I charted documented recessions that demonstrate a 30% rise in litigation over the subsequent three years following the start of a recession. This occurs primarily because companies tend to become desperate when traditional revenue channels begin to dry up during challenging economic times. Many of these companies then seek patent infringement claims as an additional source of revenue.

According to CIO Magazine “Between 2007 and 2008, 29 percent of billion-dollar firms were served with more than 50 new lawsuits. Forty-three percent of those in the same bracket anticipate that in the coming year, there will be a rise in IP litigation.” Furthermore, a recent survey produced by The International Law Firm of Fulbright and Jaworski suggests an anticipated rise in infringement claims as well.

Their survey, the Fifth Annual Litigation Trends Survey reported that 83% of surveyed companies expect a rise in infringement claims and 90% expected their companies to increase their own infringement claims. The survey also indicated that the most litigious industries, technology/communications, retail/wholesale and manufacturing, had definite expectations regarding a rise in infringement claims.

graphic - anticipated infringement claims

As a case in point, a large printer maker, who in previous years received about one infringement letter each year, now receives approximately 100 infringement letters per year. To make matters worse, all these statistics are really just the tip of the iceberg. 86% of all litigation ends in either an out of court settlement or without a documented resolution.

Many companies who threaten to file infringement often use a shotgun approach, sending out dozens of infringement letters hoping that most of the recipients will negotiate an out of court settlement.  As it turns out, this actually works in your favor.

There’s an old adage that says when a bear is chasing you, you don’t have to be faster than the bear, you just have to be faster than the guy running next to you. What that means in the case of infringement claims is that you don’t necessarily have to prove the claim is invalid or even negotiate with the claimant. All you have to do is make it a lot more work for the claimant to go after you than the other companies who were also sent infringement letters. The key is preparation.

First, you should perform your due diligence to know who is most likely to target you for an infringement claim. This will enable you to gather the intelligence necessary to deflect the claim.
The next step is to investigate the patent held by the companies you uncover to understand how the patent might be asserted against you. It’s important, in this step, to examine independent vs. dependent claims, the assignment chain and additional litigation in which the patent has been involved.

You’ll then want to try to invalidate the patents you’ve been researching, so that you can prepare a response to that effect ahead of time. You should also research the holders of these patents to better understand potential aggressors.  As you develop your response strategy, it’s helpful to understand the company’s financial status, litigation history and other entity names the company might be using.
Patent Research is an important step for all IP strategies.
You should also investigate possible counter-assertion opportunities to serve as another weapon in your arsenal. Finally, you should identify potential experts that can assist you in the event that litigation becomes necessary and to advise you on your litigation strategy.

Armed with this information, you can develop an infringement claim response strategy, which should include a response letter, enabling an immediate response. We’ve outlined all these steps and a few others in an instructive brief you can download here.

By following these steps you can make your company look very unattractive to a potential claimant because the other infringement targets will seem much more vulnerable than you are.

Sources:
CIO Magazine


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