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Protect yourself from patent trolls

Published On: Sep 04 2013 10:57:50 AM CDT
Updated On: Sep 04 2013 10:58:29 AM CDT

It's every small business owner's worst nightmare: getting a letter from a lawyer alleging that your business is infringing on someone else's patent. Even worse, the patent you're accused of infringing sounds like a farce. How, you ask yourself, could someone possibly have a patent for that? So you call a lawyer and they tell you, yes, that patent is legitimate and you might have to pay a licensing fee for continuing to do some basic business process, like scanning and emailing documents. This situation is referred to as patent trolling.

Patent trolls are companies, often run by lawyers, that amass large portfolios of often-spotty patents and enforce those patents for financial gain by targeting any business that may by infringing on those patents, whether intentionally or not.

What happens if your business is targeted by a patent troll? THELAW.TV asked that question to patent attorney Corey Donaldson of the Westlake Village, Calif., firm Koppel, Patrick, Heybl & Philpott. Mr. Donaldson is a USPTO registered patent attorney. Here are his suggestions:

1) Be prepared to spend some money upfront in order to avoid potentially large losses later. In the rare case where a business is already aware that they may potentially infringe a patent, it may be worthwhile to seek a legal opinion on the matter. Initially, a law firm should be able to do an infringement search if you are unaware of patents you may be infringing. Some firms will use a third party contractor specifically specializing in such searches to keep costs down, and then perform the legal analysis on the search results. Alternatively, you may already have a specific patent in mind, which would save costs. If the initial post-analysis legal opinion is infringement, you may want to consider designing around the patent in question. If the initial opinion is non-infringement, you may want to ask the attorney to prepare a formal non-infringement report, which can later be used in court. Even if you are found to be infringing, such an opinion can help to limit the amount of damages.

2) In most cases, a business isn't aware of potential infringement until it receives a cease and desist letter from a PAE (patent assertion entity) or its attorney. Part of spending money upfront to avoid big losses later includes seeking the advice of a patent attorney at this point, as opposed to looking at what the patents cover and saying something to the effect of "there's no way I'm infringing that, it has nothing to do with my product." Patents and patent claims have a language of their own, and are usually very difficult to understand -- even for an expert in the relevant technological field. It can therefore be very difficult for a non-attorney to perform an accurate infringement analysis.

3) If the accusing party is vague in its accusations, request that they specify exactly what rights it is that your company is allegedly infringing. The best starting point is to request that they point out specific patent and claim numbers that they believe your company is infringing. You can also request that they provide an analysis of why your product infringes each claim, although the PAE may refuse to give this until a later stage.

4) After analyzing the PAE's accusations (or, preferably, after a patent attorney analyzes the accusations), do a cost/benefit analysis of your options. One option, if you believe that the PAE's claim is baseless, is to state your case in a letter and "call their bluff," which may cause the PAE to cease their efforts. However, if you believe that the PAE may have a legitimate case, some other non-litigation options include:

- Challenge the patent's validity. Many times when a patent claim is overly broad, the claim can potentially be invalidated without going through the full litigation process. Under the recently-implemented America Invents Act, the United States Patent and Trademark Office has three proceedings that are substantially cheaper and less involved than full-blown litigation: Post-Grant Review (for patents issued within the past nine months), Ex Parte Reexamination, and Inter Partes Review. I'd be more than willing to discuss the advantages and disadvantages of these if you would like to get into details.

- Alter your product such that it does not infringe. Patent claims are often narrowly written such that a minor change in manufacturing or product structure will avoid infringement.

- Negotiate a licensing agreement. Even if you have a good faith belief that your product does not infringe, but realize that the PAE has a legitimate argument, this can sometimes be the best option to avoid litigation and keep costs down.

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