Giving Your IP Projection Some Teeth: [Practical] Monitoring and Enforcement [Strategies]

Background

As with all aspects of IP protection, both monitoring and enforcement has to be appropriate for the situation, cost-effective and achieve the desired outcomes. This is relatively easy to state but how is it achieved in practice?

In formulating a practical and effective enforcement strategy it is necessary to:

a.First understand what IP protection is involved, for example, what a company’s key technology and brands are and whether it owns this technology and brands or licenses them;

b.Then understand whether there are “freedom to operate” issues, for example, whether competitors have patents on key technologies or similar brands in key market categories or indeed whether there are regulatory barriers that could get in the way; and

c.Finally ensure that any enforcement strategies, once established, are constantly reviewed and updated and that appropriate funding is set aside not just at the outset but going forward.

When setting up and reviewing an enforcement strategy it is important in my view that lawyers with litigation experience are closely involved in that process.  Likewise, when wider strategic and “freedom to operate” issues are considered, a lawyer with high level litigation experience who is able to offer a wider (not just legal) perspective is likely to be well worth the investment.

In formulating a plan, issues of scope, validity and enforceability will need to be considered in order to assess the scope and strength of a company’s commercial assets, including its IP. In doing so, it will be necessary to carefully assess the context in which it is being put together and then look “backwards” at existing protection and any gaps in it. Only once this has been done can you look forward to potential future protection.  Equally, it is necessary to try as best as one can, to anticipate and thus prepare for potential litigation.  This may come from an expected source for example an existing and often well known competitor.

However, it could equally come out of “left field” from a new competitor or even from a patent “troll”, as Blackberry maker RIM discovered. “Patent troll is a derogatory term used to describe a patent owner, frequently a small company, who attempts, under the threat of litigation, to license the patents which it never had intended on practicing. Typically, a patent troll seeks royalties or other payments at rates higher than would otherwise be expected, but calculated to be less than the cost of litigation. A patent troll neither performs research nor manufactures products incorporating its patented technology” (Wikipedia, the free encyclopedia)

In addition to this, potential litigants in the US need to take a number of other considerations into account, including:

•a relatively liberal approach to patentability;

•ability to forum shop;

•treble damages; and

•multiple appeal avenues.

In the US, attention also needs to be given to potential difficulties arising from inequitable conduct and more generally the conduct of inventors, assignees and prosecuting attorneys and their duty of disclosure under Rule 56 (37 CFR § 1.56). This imposes on each individual associated with the filing and prosecution of a patent application a general “duty of candour and good faith” in dealing with the United States Patent and Trademark Office, including a specific “duty to disclose” to the USPTO all information known to be material to patentability. It should also be noted that the rule has been found by the courts to include a duty on counsel to investigate things and to not turn a blind eye.

Finally, awkward questions may arise from inquiries made by a government agency such as the Commerce Commission. It is only through proper analysis of the opportunities and threats that nasty surprises can be avoided or at least prepared for, as best as possible.

Offence and Defence

Like any good sports team, the focus has to be on the honest appraisal of both offensive and defensive capabilities. Take for example the development of a protection strategy for a company in the software area.  Software and business method patents offer a highly effective means to protect innovative, or more properly inventive, solutions. They also have the ability to seriously trip up the unwary or ill informed.

When developing a protection strategy, in this situation the first step is to identify just what protection the company has and to identify any gaps in the portfolio.  Equally, it is important to identify any patents or potential patents which might inhibit the company’s ability to exploit its existing and developing technology.   Here the risk is that a “submarine” patent has managed to stay below the radar.

A submarine patent is  “an informal term for a patent first published and granted long after the original application was filed. Like a submarine, it stays under water, i.e., unpublished, for long, then emerges, i.e., granted and published, and surprises the whole market”. (Wikipedia, the free encyclopedia)

Options have to be addressed in the context of both protecting technology, but also avoiding infringing other companies’ patents or IPR’s.  Defence and offence have to work closely together.

It might be possible to address difficulties by appropriate licensing or cross-licensing strategies.  In the case of two dominant players in a market, there is no reason why some form of coexistence arrangement cannot be negotiated.  For example, I am aware of two large overseas competitors who are often in conflict and have agreed to run an infringement ledger and set off successful claims and thus damages against each other.  This means that while legally indebted to each other neither company has to pay the other damages.

Equally, it may be desirable or necessary, depending on the situation, to identify and seek to undermine or at least neutralise a competitor’s patent rights, for example, if they potentially block future research, or the development or marketing of products.

Equally importantly, one has to properly understand a company’s risk management attitude.  For example, is the company’s management keen to litigate to enforce its IP or is it by nature litigation adverse, in which case other less adversarial approaches may be necessary.

You may also be used to living somewhat more “on the edge” or to use the Blackberry example, under the bridge, and while not being at all averse to risk you might have few financial assets.  In this case higher risk/high return strategies may necessarily be a big part of any plan, as would the use of contingency fee arrangements. These are of course very common in the US, and while less common in New Zealand, they are becoming more accepted now. Depending on the likely damages this may well be the best option to take.

Jurisdiction

Any party considering enforcing, or defending allegations relating to, IP rights will need to consider issues of jurisdiction, governing law and proper forum.  Things can get particularly messy if the infringements occur in, for example, the European Union or alternatively if the validity of a patent needs to be tested in a country within the Union.  Having said this, the European Court of Justice (“ECJ”) has just handed down two important cases concerning jurisdiction in IP cases under the Brussels Convention: Roche v Primus and GAT v LuK.

In summary, the courts in countries such as the Netherlands and Germany, which have until now been willing to grant final cross-border relief are unlikely to continue doing so. That is, other than in exceptional cases in which validity is not raised as an issue and only one company, domiciled in the member state of the court, is responsible for all infringing acts in other member states.

In the UK, the Court of Appeal considered cross-border jurisdiction in the Internet gaming case Menashe v William Hill [2003] RPC 31.  The patentee, Menashe sued the bookmakers William Hill for infringement of a patent, alleging they had infringed it by “supplying and/or offering to supply in the United Kingdom … means relating to an essential element of the invention for putting the invention into effect. William Hill in turn said that their gaming system did not have means relating to an essential element of the invention for putting that invention into effect in the United Kingdom – the host computer was situated outside the United Kingdom.  They provided punters with a CD which allowed them to use their own computer which communicated via the Internet with a host computer.  As a result, the terminal computer used by punters had the necessary properties and carried out the functions of the host computer.

It was common ground that the claims included, as an essential part, a host computer.  The Court of Appeal’s view was that infringement was made out.   Its view was that because of the way the Internet works, it did not matter where the host computer is located. The Court took a wide view of the concept of “location” and in effect focused on who was “using” the system, rather than where individual components were situated.  As the punter was using the system in the UK that was the determining factor.

A similar approach has also been adopted in the US. In NTP v Research in Motion (Fed. Cir. 2004), BlackBerry’s manufacturer (RIM) had an injunction and damages awarded against it for patent infringement. RIM was found liable for direct infringement in the US even though some of the necessary elements of the asserted claims occurred in Canada. That is, even though RIM’s e-mail relay (a material part of its claim) operated in nearby Canada.

These cases show that even though the European Court of Justice has effectively ended the “spider in the web” mechanism for obtaining cross-border injunctions in Europe, that there is still fertile ground for jurisdictional problems to arise, if not properly addressed.

Monitoring Competitors’ IP

I find that insufficient attention is often given to monitoring competitors’ IP activities.  There can however be significant advantages in doing so.  A number of practical steps can be taken.  These include:

1.Monitor rights before they issue/are granted

Many patent applications are advertised 18 months after filing.  It is well worth monitoring these applications so that they can be opposed.  Likewise, many companies (particularly large multinationals) lodge trade mark applications well before they actually use them.  A watching service of relevant registers will give you advance warning.

2.Oppose patent and trade mark applications

Early knowledge of your competitors’ patent and trade mark applications will allow you to oppose these in good time, but equally importantly to modify your own activities, for example, to amend patent claims or alter products before any patent is granted.

3.Oppose rights before they issue

It is often far better to oppose before grant – thereby avoiding any risk of an injunction.  It also provides you with a strategic advantage in negotiating any settlement.

4.Don’t reinvent the wheel

When doing pre-litigation investigations and research, try and draw as much as possible on what others have done, usually at great expense.  For example, have similar cases been fought overseas; are there similar proceedings which might provide helpful legal research, pleadings or evidence?

5.Talk to your competitors

Advanced warning of their intentions allows you to approach competitors, if necessary reaching some form of commercial resolution, before the sparks start to fly and the parties become too polarised.  For example, it may be preferable to look at some form of cross licensing or sale/reverse licence arrangement, rather than engaging in a head to head clash, particularly if resources are limited.

Cost Effective Monitoring

Monitoring can be expensive.  Accordingly, like all of these steps it is obviously desirable to do so in a way which is affordable and achieves the optimum results.  For smaller New Zealand companies, there are a number of practical steps that can be taken to achieve this.  These include:

a.Utilising IP watching services, provided by various patent attorney firms.  These are not overly expensive and if properly directed can be highly effective in keeping an eye on competitors’ activities and long-term intentions.

b.Customs notices can be obtained, thereby providing advance notification of any incoming pirated or counterfeit goods.  Once again, the cost is not significant but they can be highly effective in detecting incoming infringements.

c.Trade associations or informal groups can be set up to tackle specific problems, for example, the “Fight the Patent” group, set up to tackle a particular business method patent.

d.Coalitions/alliances of competitors are often a useful way of pooling resources and keeping costs down.  These work well as long as there is sufficient mutual interest and commitment and workable goals can be agreed

Procedural Options

Full blown litigation is usually slow and almost inevitably expensive. Often, larger well funded companies come out on top, not because they are necessarily right but because they have the financial means to see the litigation through. There are however a range of procedural options that can make litigation work, depending on the circumstances. A couple of suggestions:

a.In an appropriate situation ex parte orders might be necessary.  That is, to preserve evidence and in effective terms give you the evidence you need to establish your case.  Once this evidence is preserved the prospects of an early settlement are likely to rise exponentially.

b.Summary judgment might be available, thereby potentially avoiding the need to go to a full trial.

c.Limited and properly directed interim orders might be sufficient, for example, a very limited freezing order or a highly targeted and specific inspection order. The key is to get the right order and no more than what is needed to obtain the right result.

d.Precommencement discovery might get you the evidence you need to not only bring the proceedings but also establish infringement.  It may be far better to spend the money on this than to blunder into ill conceived litigation.

e.Alternative dispute resolution should never be overlooked, whether it be mediation or arbitration or something similar.

f.Finally, make sure that you use the appropriate forum. A number of specialist dispute resolution tribunals have been set up, for example, under the UDRP – for resolving international domain name disputes and more recently the dispute resolution service set up by the New Zealand Domain Name Commissioner.  Both offer a cheap and efficient procedure to resolve domain name disputes and should be used.

Conclusion

In all of these situations, the key consideration is to ensure that the plan is effective and affordable.  If an IP right exists but cannot be enforced, it is really of little value.  If that occurs, the only real choice is to back off or try and get some outside assistance.  However, this can be difficult.

At the end of the day however, success or failure may well depend on understanding just what IP you have and setting up the right strategy to enforce it or indeed avoid attack by another.  The sooner this is done the better!

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