1/ i have recently had the “pleasure” to win a patent litigation. a friend got sued this friday. seeing it’s a rarely discussed topic, which benefits trolls, i decided to open this thread. 2/ patent litigations cost upwards of $2MM a year, and usually start with a threat to sue unless you “immediately settle”. extortion. 3/ most lawsuits happen post acquisition, ideally (for the troll) between signing and closing - most sensitive part in a deal as “no litigation” representations were already provided. 4/ many settlements include “non disclosure” clause. litigated (fully or partially) patents are considered significantly stronger. many times a troll will settle for a low (undisclosed) amount initially so they can approach others with higher “asks”. 5/ acquisition deals 1. include escrow put aside by the buyer to pay off issues discovered post purchase. IP issues could punch through into consideration already received. 2. the acquired company gives up control over future litigation. 6/ trolls believe that since the acquirer has control but doesn’t have a downside (settlement $ is taken from escrow), the trolls have an advantage of misaligned interests. 7/ when litigation starts, sides perform discovery of all communications that *might* pertain to the case. this makes it even harder to work as a team. depositions waste days and sometimes weeks. 8/ the holder of a patent will try to broaden their claims in an attempt to claim infringement. this makes them more susceptible to prior art - that’s one type of defense, called “invalidity”. there are other forms of invalidity - you basically attack their patent. 9/ another form of defense is called “non-infringement”, where you map what your product does against their claims and show that you don’t practice their “invention”. 10/ each side will interpret the claims differently, hence a step called “claim constructions”, followed by a joint filing containing issues that require judge ruling. 11/ 7-10 take months. it is followed by a (almost always) relatively short jury trial. we never got there as the lawsuit was dismissed with prejudice. 12/ takeaway1: the patent system is a mess. it just can’t be that patents which in cursory reading you just know are irrelevant to what you do go all the way to trial (and many settle) 13/ takeaway2: the basic issue is that patent litigation is an asymmetrical situation. it costs much more - millions of dollars - to protect against an IP claim than to assert it (many times under a contingency agreement) 14/ takeaway3: “Non-Practicing-Entities” (aka: trolls) are even harder to tackle - it doesn’t matter which patents you have when the other side doesn’t have a product that might infringe on them. 15/ takeaway4: in an acquisition situation, escrow and shared interests survive post closing. winning against trolls requires maintaining a good relationship and trust between companies. this is key. 16/ takeaway5: if done consistently, ”don’t negotiate with terrorists” can rid you of patent trolls. If the changes in congress & senate simplifying the grant of legal fees to the defendant go through, this will tilt the balance even further. 17/ takeaway6: delay announcement of deal closure as much as possible, ideally after closing and not just signing.
Posted on: Mon, 17 Nov 2014 06:57:05 +0000
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