Patent risk profiles of corporations have dramatically shifted given two recent patent litigation dynamics:
- The rise of patent trolls or NPE's (non-practicing entities)
- The decline of patent infringement 'notice' letters replaced by direct filing of patent complaints
The first dynamic is economic and includes a range of strategic and financial investors, including for example the well-known Intellectual Ventures, and others such as Juridica and Altititude Capital. These investors and an increasing number of firms see opportunities in the exclusionary rights provided by patents to obtain high-risk / high-reward economic returns.
The second dynamic is legal - driven by court decisions that incent patent plaintiffs to file first and negotiate second (the reverse of historical tendencies).
No matter one's opinion of either dynamic, these trends create a need for more robust, information-efficient and effective methods to prepare for, assess and respond to unexpected patent overtures (be they licensing offers or lawsuits).
Historically, we have worked with clients to evaluate patent infringement notice letters through structured processes:
- Evaluate the economic relevance and risk profile of the claim
- Evaluate the relative availability of 'good' (e.g., potentially patent invalidating) prior art
Clients essentially followed an economics driven patent game theory:
Despite efforts to mitigate patent risk through defensive patent aggregation and defensive patent pools, patent litigation risk continues to increase. These increases are so large that some corporations now face a 10-fold increase in patent litigation.
With rule-of-thumb' base-line patent defense expenses starting at $3-5 million per lawsuit, patent risk management is now a key driver in many companies' financial planning and corporate risk management.
To combat this increase, we are now working with corporations and outside counsel to develop and implement more robust processes to proactively craft early case assessment procedures. These procedures compliment efforts to develop standing litigation response teams, often including both inside and outside counsel, who can avoid many of the initial expenses and time-delays inherent in traditional litigation response efforts.
Shifting from reactive patent risk management to proactive patent risk management is a key strategy driver made available by evidence-based IP insights and patent analytics that quickly (and cost-effectively) provide insights into the merits and potential response(s) to the alleged patent infringement.
Crafting an evidence-based approach to patent litigation defense provides corporate patent counsel with unique abilities to reduce patent risk, increase control, and to more effectively communicate financial costs for patent dispute resolution.
The early case assessment process arms corporate counsel and the litigation response team with answers to (or at least initial insights into) core questions including:
- Are all relevant patent rights controlled by the plaintiff disclosed?
- Are there any critical patent quality defects, such as poor claims construction, inequitable conduct, improper disclosures, title decencies or inventorship?
- What is the anticipated level of prior art available for patent reexamination or invalidation efforts?
- How can we best develop our case strategy -- and get the most effective return from our legal and technical experts?
The key take-away is to have an in-place process and method to assess and respond to patent notice letters, patent assertions and lawsuits -- including considering how you screen "patent offers" for sale and to develop strategies for early assessments of patent lawsuits.
In the end, a minor investment in creating or aligning proactive patent defense and patent risk management processes with corporate risk management strategy will generate exponential payoff over time.
