Responding to Threats of Patent Infringement
Patent disputes have proliferated in Alberta. As the economy has levelled-off in recent years, patentees have increasingly sought to enforce patents as part of their business strategy. Threats of patent infringement have proliferated and infringement actions have been filed in all Courts, particularly the Federal Court. Companies in the oil and gas sector must be ready to respond quickly and properly to the threat of patent infringement.
On March 27, we met with in-house counsel and other industry leaders at our Calgary office to discuss effective responses to threats of patent infringement. By taking the 10 steps outlined below, a potential defendant will put itself in the best position to respond to threats of patent infringement.
1. Investigate Business Relationship with the Patentee/Complainant
Understand the complainant. In many instances, the complainant may be known to you or well known in the business. You may already have a business relationship with the complainant. Understanding the complainant may reveal business solutions that avoid litigation.
If the complainant is not active in the industry but rather is a patent holder seeking to enforce patent rights, a license may be a potential solution. However, the merits of that approach can only be assessed after evaluating the strengths and weaknesses of the case and the merits of litigation.
2. Review Patent Portfolio for Potential Counterclaims
If your business owns patents, consider whether any can be asserted against the complainant. Threatening a complainant with a countersuit that can disrupt the complainant’s business puts you in a better position to find a settlement that avoids litigation.
3. Retain Experienced Patent Counsel to Assess Merits of Threatened Litigation
Patent expertise is important, but litigation expertise is equally important. Counsel who handle IP generally (e.g. trade-mark agents or patent agents) may not be well positioned to represent your interests in litigation. Seek legal advice early from patent litigators who can help create a winning record from the outset of the dispute.
4. Retain a Properly Qualified Expert in the Field of Technology of the Patent
Patents are directed to persons in the field to which the patents relate. Any patent must be understood from the perspective of the ordinary person working in the field. Retaining an expert early who can provide that understanding, if one is not available at your business, is an important step in determining how the Court would interpret the patent and, along with it, your odds of success.
5. Determine Potential Liability
How much money may your company owe? Your company’s potential exposure is a key driver in developing an appropriate response. To assess your liability you must first determine when the alleged infringing acts occurred. The complainant will typically seek the higher of its damages (how much it has lost) or your profits (how much your business profited from the infringement). Because profits are an “equitable” remedy, you should be aware that they are not universally awarded.
A second key determinant in determining potential liability is to compare the alleged dates of infringement with the date the patent was issued. Damages or profits are only available from the date the patent was issued. “Reasonable compensation” may also be owed for the time period commencing on the date the patent application was published and ending on the date the patent issued. Reasonable compensation may take the form of a royalty.
6. Project Management
Project management can help organize your response and maintain efficiency throughout the process, including through litigation. Using a project management platform early can save hassles and costs in the future as the file becomes larger and more difficult to manage.
7. Limit Your Potential Losses
Once you understand what the patent claims and the alleged infringing activities are, you can determine whether a “work around” is available to limit your company’s future liability. By making changes to essential elements of the complainant’s alleged invention, you may be able to continue your business and limit your exposure. You also may be able to apply for your own patent if your “work around” is inventive.
8. Document Retention
Once litigation has been threatened, you need to retain documents which may become relevant to the dispute. This may include schematics of your machinery, work orders, invoices and correspondence relating to the complainant and his or her patent. Ensuring that relevant custodians are identified early and their documents are retained will help you meet your legal obligations and respond to any assertion that relevant information has been destroyed.
9. Consider Patent Impeachment Action in the Federal Court
Consider taking the initiative. If a complainant threatens you with an infringement action, you may be best served by commencing litigation in the Federal Court to impeach the patent. Such a step positions you as the plaintiff and allows you to better control the pace of litigation. Also, by selecting the Federal Court as the forum, you may achieve important objectives. For instance, the Federal Court is notoriously hesitant to enjoin activities pending trial. By proceeding in the Federal Court you may be able to continue your business with minimal interference, prior to trial.
10. Consider Settlement
Mediation should always be considered, and settlement (on your terms) is always a good solution. Understand your situation so that you can enter any negotiation in a position of strength. Settlement discussions prior to litigation may yield business solutions which are not available after the parties have expended significant sums in litigation.
Responding to threats of patent infringement in Alberta requires considered and deliberate steps. Following the 10 steps set out above will put companies in a good position to effectively respond to any threat quickly and decisively.
Patents; Infringement; patent litigation; patent trolls; federal court;