In a world propelled by innovation and technology, the evolving nature of intellectual property (IP) law and the interconnectedness of global markets often lead to disputes and legal quandaries. When an entity or an individual believes their IP rights, be it a patent, a trademark, a trade secret, or a copyright, have been infringed upon, the typical first step is to send a demand or cease-and-desist letter to the alleged infringer.
In some situations, the recipient might view an alleged infringement claim as lacking merit and may opt for a proactive litigation strategy. Such strategies, as discussed below, allow the accused party to frame the legal issues proactively, select the most appropriate venue for the dispute, and potentially mitigate the impacts of disputes.
Let us explore proactive litigation strategy in IP disputes and consider when and why a party might opt for such an approach, the legal frameworks and components involved, and the inherent risks, challenges, and recommendations for implementing this strategy effectively.
When to Consider a Proactive Strategy
Consider a scenario where Company A, a leading tech firm specializing in advanced computing technologies, receives a letter from Company B, alleging infringement of a patent related to a specific data processing technique. The letter requests that Company A pay a license fee for the infringement and/or cease and desist the allegedly infringing conduct. After reviewing the claim and consulting with their legal team, Company A determines that the infringement allegation lacks substance.
In cases like this, where the recipient of a cease-and-desist or demand letter deems the claim meritless, pursuing a proactive litigation strategy might be appropriate. Such a strategy should be grounded in a comprehensive understanding of the IP in question, the legal landscape, and the potential implications of taking proactive legal measures.
By being proactive, the accused party can take control of the narrative, select the most appropriate venue among the available options, and potentially secure a swift and favorable resolution. However, it requires careful consideration and strategic planning to navigate the inherent risks and challenges effectively. By being well-informed and proactive, a party can turn potential legal battles into opportunities to protect their business interests.
Components of a Proactive Litigation Strategy
Embarking on a proactive litigation strategy demands a nuanced and multifaceted understanding of various components that can be leveraged depending on the specific facts and circumstances of each case. These components, including filing for a declaratory judgment, initiating an Inter Partes Review (IPR), and conducting a Post Grant Review (PGR), are the elements around which a proactive litigation strategy is built.
A. Filing for a Declaratory Judgment
By filing a declaratory judgment action, a party can receive a court’s affirmation that their activities do not infringe upon the accuser’s IP rights or that the claimed IP is invalid or unenforceable.
A declaratory judgment is a statutory remedy enabling entities to resolve uncertainties and potential threats to their operations, precluding subsequent infringement claims based on the same IP. By securing such a judgment, entities can safeguard their market position and maintain uninterrupted operations. The federal Declaratory Judgment Act provides that courts may “declare the rights and other legal relations of any interested party seeking such declaration” when there is a “case of actual controversy.” The receipt of a cease-and-desist letter threatening a lawsuit can be enough to confer declaratory judgment jurisdiction.
While seeking a declaratory judgment, the plaintiff must carefully select the proper venue for adjudicating the dispute. In intellectual property cases, which typically involve the design, manufacture, distribution, and sale of products in various geographic locations, determining the most appropriate venue can be a nuanced exercise. The evaluation must be managed properly to ensure that the desired venue for the declaratory judgment action is maintained.
B. Initiating an IPR
IPR, initiated in the U.S. Patent Trials & Appeals Board (PTAB), is another key component, especially pertinent when challenging the validity of patent claims based on prior art, which includes printed publications, patent applications, or other patents.
IPR is a trial proceeding providing a streamlined and cost-effective avenue to contest patent validity, offering legal leverage and opportunities for favorable resolutions in related legal disputes.
C. Conducting a PGR
PGR, which is also conducted in the PTAB, can also be an effective strategy, allowing entities to challenge the validity of patent claims on a wider array of grounds compared to IPR, encompassing patentable subject matter, written description, indefiniteness, enablement, and double patenting.
A challenger must initiate a PGR within nine months of patent issuance, making it a strategically significant early-stage option for entities seeking to invalidate newly granted patents on extensive grounds.
By understanding and strategically leveraging these components, a party can effectively engage in a proactive litigation strategy, whether opting for a declaratory judgment, IPR, or PGR, selecting the appropriate approach depending on the facts and circumstances is pivotal to ensuring success. Accordingly, it is important to consult with experienced IP counsel when evaluating the right approach.
While pursuing a proactive litigation strategy has its advantages, it also comes with inherent risks that require careful consideration.
A. Cost and Resource Considerations
The cost and resource investment to achieve a declaratory judgment in your favor are like those of defensive litigation. Depending on the circumstances and the complexity of the technology at issue, such costs can be high. And one should not assume the litigation will be settled swiftly. A declaratory judgment strategy should therefore be implemented with a strong case on the merits and the expectation of litigation through final judgment and appeal. IPRs or PGRs, in contrast, can be terminated by the petitioner at will, and are generally less expensive than declaratory judgment actions.
The multifaceted nature of proactive litigation, whether through declaratory judgments, IPR, or PGR, is inherently resource intensive. It demands substantial financial investment, time commitment, and meticulous preparation and research, potentially stretching an organization’s resources and focus thin, especially during extended legal proceedings.
B. Possibility of Unfavorable Judgments
Each component of a proactive litigation strategy carries the inherent risk of unfavorable rulings. A court or the Patent Trials & Appeals Board might uphold the validity and enforceability of the disputed IP, leading to potential financial liabilities and strategic setbacks.
C. Likelihood of Counterclaims
A declaratory judgment action or an IPR/PGR often provokes the intellectual property owner to retaliate by filing a counterclaim for intellectual property infringement and other related civil claims. And in some cases, unexpected counterclaims are filed that expand the scope of the litigation beyond the original dispute. For example, patents might be asserted in a counterclaim that are beyond those that framed the original dispute.
Proactive Strategy in Action
In a noteworthy instance underscoring the strategic utility of IPR, the PTAB, on September 15, 2023, delivered two conclusive decisions in favor of Brooks Kushman client Current Lighting Solutions, LLC (“CLS”), and Walmart Inc., in a patent dispute against Power Concepts, LLC.
Facing allegations of patent infringement levied by Power Concepts, CLS and Walmart took proactive steps. They filed petitions for IPR, challenging specific claims encapsulated within two patents held by Power Concepts. In its decisive rulings, the PTAB concluded that all claims in one of the disputed patents and the majority in the other had pre-existing counterparts in prior patents and published materials. Such a finding rendered the contested claims unpatentable over the cited prior art, illustrating the pivotal role of IPR in disputing the novelty and patentability of claimed inventions.
Navigating the world of IP can be complex, but taking a proactive stance in legal disputes can empower parties to protect their innovations and steer the legal narrative in their favor. Whether it is by seeking a declaratory judgment, initiating an IPR, or conducting a PGR, being proactive can help in resolving uncertainties and securing a favorable legal position. However, it is crucial to approach these strategies with caution, knowledge, and thorough planning. Parties should weigh the benefits against the risks, consider the potential impact on resources and reputation, and consult with experienced legal counsel to formulate a well-informed and effective strategy.