Hello there. This is John Cronin from Invent Anything. In this episode, we will cover a very important problem in the intellectual property space that is that a business has just been threatened. A close competitor got a very broad patent just issued, and the company believes they are violating the patent. Now what do they do?
As a little bit of background to this, you would be surprised how many times I get a call with this exact subject. It’s a very important area of concern for a business because if your business is being threatened because you believe you’re violating a patent that really takes the wind out of product development and sales. Doesn’t it?
Well, the company profile that I’m talk about – I certainly won’t talk about the individual client, but one thing they did say right off the bat, they said John, we will not knowingly violate a patent. Well, good for them. There’re a lot of other companies that may not take this approach, but I think this is a sound approach because at least you can sleep at night knowing that you won’t violate the patent, and you’ll do right. So, over the years, we’ve been advising clients of how one might approach this.
So, I’m going to talk about five different areas. There are 20 points to make within these five areas. The first area I’m going to talk about is to be able to sleep at night, area No. 1. I’ll then go on to talk about area No. 2, how to avoid willful infringement. I’ll then move to area No. 3. How do we challenge the patent and should we? And then, area No. 4, how do we protect our very near future? And then finally, area No. 5 – Defcon 3, let’s get ready for war.
Area 1: Sleep at Night
1. Create a Task Force
So, in area No. 1, sleep at night, the very first thing to do is item No. 1. Create a taskforce. Have somebody in charge. Call them a guru. Ask that guru to give you weekly updates. There is nothing better to know than somebody is looking at a key problem in your business.
2. Estimate the Damages
The next thing to do is No. 2. Estimate the damages and/or the royalties involved. Figure out what the size of the breadbox is if you will. How much will you owe? It’s surprising that many people don’t do this step right off the bat. You see, there is a maxim here that if it takes more to sue you in terms of money versus how much money will be awarded it makes no sense to sue somebody.
So, if the legal fees are going to be much, much greater than the damages, then there’s likely not to be a lawsuit. And legal fees or patent infringement could cost the plaintiff millions and millions of dollars. So, if you have an opportunity to estimate the damages here, that might be very good. We do this with the back of the envelop kind of model and many times, on a first call, I’m able to have my potential client relax a bit because they recognize that the damages are not going to be as large. So, I think it’s one of the most important things to do right off the bat. No. 2, estimate the damages and the royalty rates.
3. Is the Competitor Litigious?
The next thing, No. 3, is to ask the question is the competitor litigious? Well, if they’re not litigious, it certainly doesn’t change the situation about the patent infringement, but at least you know that there’s some probability you might not get sued. On the other hand, you may find that the competitor is very litigious. This is not a very good place to be. You may find that some competitors will litigate just for spite or to cause trouble in the market. Sometimes, the competitors are very small, and they wouldn’t have the money to litigate. Sometimes, the competitor could be “a university,” and they certainly don’t tend to litigate.
4. Is Your Customer Involved?
So, the next area of area No. 1, sleep at night, is point No. 4. Is your customer involved in this somehow? Do you hare agreements with your customers? Are you indemnifying them against you being sued by patents and basically if you’re producing a product that they would then integrate to their product, their product might get held up because yours does? So, indemnity is a place that many people find is an issue. So, you need to size that because this could make matters worse.
5. Analyze Your Portfolio for Counter Assertion
Another issue under area No. 1, sleep at night, is to analyze your own portfolio for counter assertion. Do you have patents that you can use for counter assertion? If you do, very good. If you don’t, we’ll talk about later how we might be able to help that. But you should know this is really a point of strategy. In general, a good IP strategy should always develop patents for your main competitors that you can counter insert.
6. Competitor Watch Chaser
The next thing to do, point No. 6 in area No. 1 – sleep at night – is to set up a competitor watch chaser. That is to say what you need to do is to literally be able to get a weekly snapshot of that competitor. What are they doing? Is the product that their developing based upon the patent growing? They’re more likely to sue if it is. Are they even having a product right now that has to do with their patent that you feel threated by because if they don’t, then that’s good news? Are they involved in any new licensing, or new customers, or patent litigation? These would be good things to know. And again, developing a sort of AI based chaser would allow you to get a weekly report.
Area 2: Willful Infringement
7. Attorney Client Privilege
So, let’s move from area 1, sleep at night, to the next area, area 2 – avoiding willful infringement. So, in point No. 7, you want to do as much as possible under what we would call “attorney/client privilege.” Talking to your patent attorney or your general counsel, everything you talk with them about can be put under privilege and not divulged in a formal litigation and subpoena process. So, you want to make sure that you do the right things legally. Of course, in this podcast, we’re not talking about anything that’s legal advice. Always consult your patent attorney or general counsel.
8. Do Nothing in Writing
Point No. 8, in terms of area No. 2 – avoiding willful infringement – is to do nothing in writing that is no emails, no presentations because you could be developing information that could be subpoenaed that will actually come out in the trial, and it’s certainly not good to have an email, we are infringing this patent but who cares because that’s a definitely problem you might have for willful infringement. Willful infringement means that the judge when assigning damages could multiply those damages up to 3x if he wills you willful infringement. So, from here on in, no more emails, no more presentations about this. And you need to school everybody in your business to do the same.
9. Evaluate Your Website
Number 9 is evaluating your own website to see if you’re showing how you’re violating the patent. It’s always surprising to me how marketing and website development is devoid of any kind of legal process. And then, many times, what’s happening is you’re giving away in your website technical information that could be later on used to exactly show that you’re infringing. So, what you need to do is to eliminate all information on the website that teaches how.
It’s okay to talk about the product benefits and features, but don’t say technically how things are done. Also, it might not surprise you that many companies that are called non-practicing entities, or NPEs, their basic way to find out if you’re violating the patent is reviewing the website. It’s searchable and it can be dissected. And literally changing things on websites might be something that you think would make sense, but with the way back machine, you can go back to previous versions.
10. Create a Website Review Process
So, that’s not always an option to just change things after the fact, which leads to point No. 10 under area No. 2 – avoiding willful infringement – is to create a process to review websites going forward to make sure that you’re not showing your competitor that you are violating their patent.
11. Create a Marketing and Sales Review Process
Now, check point No. 11 is to create a process to review marketing and sales presentations. Once again on the how to, if you’re marketing a sales presentation showing technical details, you might consider changing them quite a bit because many times customers do not need to know technical details. You may be using them as a badge of honor or how innovative you are, but it could lead directly to showing infringement. So, area No. 2 – avoiding willful infringement – point No. 11 here, create a process to review marketing and sales presentations and make sure that changes.
12. Create a Trade Secret Process
Point No. 12 is to create a trade secret process immediately. In general, for avoiding willful infringement, a trade secret process is keeping those kind of things, sort of, in a document held trade secret that are not divulged to everybody but just to a few people. And although it’s not as good as an attorney client privilege because you can’t operate everything you do in your business technically and for practice as an attorney/client privilege, certainly you could have a trade secret practice that stops others from learning how you do what you do. So, No. 12 if you want to avoid willful infringement is to create a very good thorough trade secret process so you could practice immediately.
Area 3: Challenging the Patent
13. Evaluate the Prior Art
Let’s move on to area No. 3, challenging the patent. It turns out that one of the thing it had done all the time is what’s called an inter parts review. In essence, you can put together information to try to convince the examiner to either not allow the patent or to invalidate the patent. The process for IPR is expensive, but one of the fundamental things you can do in challenging the patent is No. 13, evaluate the prior art.
So, you get your internal experts together and they review the prior art of maybe what your company has divulged over time. If you can find prior art, prior to the date of your competitors’ patents application, then you have the ability to basically say that you were practicing the invention. Or maybe you can find other prior art that somebody else was showing the invention, and that is a good case to make the patent invalid.
The examiners who allow patents to be issued, try to do the best they can to find prior art, but they really only have to spend so much time looking at prior art. They’re allowed to look at three patent offices and maybe one outside reference. And they literally have to spend only a set amount of time looking at prior art. So, they don’t have the ability to do infinite prior art searches. But in this case, because your business is being challenged, you might do a lot more work on prior art.
As soon as you get a reading that you found some internal experts that found prior art, check it with your patent attorney. If they also agree, now what’s happening is you’re feeling a lot better that you now know that if you were challenged to go to court, you might be able knock the pattern out. One of the things that others do is they hire outside experts because internal experts might not have access to all the information of other countries in multiple languages.
There are companies today that allow one to kind of use a crowd to basically go out and to ask many thousands of people if they have prior art on a particular patent claim. I bought a company a while back called Article One Partners, which then later on we sold, but Article One Partners was involved in providing a prior art services where you could provide a patent claim, and the crowd would go find the prior art.
14. Artificial Intelligence Prior Art Review
Another thing you could do in area 3 challenging the patent is item No. 14, set up an artificial intelligence assistant that continually looks at the art for you. You’d be surprised how straight forward this could be. But basically, what you want to do is to take the product that you believe is being violated by the patent and maybe set it up to keep looking at other patents or continuations of things that are being added to the patent office that you might be infringing.
There’s nothing worse than thinking you have a case against the competitors patent to find out that they issued another patent with different claims that maybe doesn’t have prior art. So, setting up an AI assistant to continue to look at the prior art is very important. We call that freedom to operate chasers. You’re asking do I have freedom to operate my product without being sued by others.
15. Hire an IPR Assistant
And the last thing of area 3, challenging the patent, is No. 15. Please think about hiring a competent IPR assistant entity that can assist you through that whole process. Now, we do know the patent attorneys can do this of course, developing an IPR assistant for you. But there are some firms that really specialize in it. So, if you can hire a very competent IPR assistant, that’s what I would do.
Area 4: Protecting the Very Near Future
16. Invent Around the Patent Claims
So, after thinking about thinking about challenging the patent area 3, let’s move on to area 4 – protecting the very near future. And one of the first things one can do is item No. 16 is to invent around the patent claims. Over the years, I have watched this go on and been involved in many sessions where we try to invent around the patent claims.
But several decades ago, I started to watch how people invent around patent claims. And I recognize it to be very ad hoc, that is let’s develop some technical people, a patent attorney, and maybe the business leader. Let’s get into a conference room for a half a day. Let’s look at the claims and talk about ways that we can get around those patents. Over time, I recognize that there was “a mental checklist” that one could create. We have an 18-point check list for instance that makes inventing around a much more systematic versus an ad hoc method. And usually invent around should produce no less than 60 to 100 ideas because just like our creative costs we talked about in episodes 2, 3, and 4 by diverging and converging lots of options, we have a better opportunity, a higher quality output.
So, if you’re going to invent around, I highly suggest that you do not do this in an ad hoc way because if this is really threatening your business, you’re not going to leave it to people that don’t have the experience to invent around. And by experience I mean having done it 20, 30, 40, 50 times not this is the first time. In our checklist, there are very simple things in the check list like is there a different technology that can be used to replace the technology in the claim? Or another would be does this patent claim suffer from multiple entities and does it take multiple violators to string together to produce infringement, which makes the patent weaker? So, it could be a simple or more advanced check list but nonetheless inventing around patent claims is really important.
One of things about item 16, inventing around patent claims, is many times what you’ll find is you find really good inventions that come out of the inventor realm meaning that sometimes you find ideas that are even better than the product you have invent around the patent, which is very good news. You might considering patenting those really good invent arounds or you might consider publishing a lot of these invent arounds so at least down the road somebody can’t get another incremental improvement on your product.
If you go through checklists as we’re talking about in doing the No. 16 invent around for the patent claims, it is very likely that if you can show that in your business, you will avoid willful infringement because you’ve definitely done the only thing a business can do, which is to be convinced that they are not inventing around and move forward. So, if all that is documented, it’s very likely that you’ve eliminated infringements. So, it’s a great return on investment, if you will, to do the invent around of patent claims because whatever that’s going to cost can pay big benefits later on by eliminating willful infringement.
17. Change the Product ASAP
And the next thing to do under area 4, protect the very near future, is No. 17 and that is to change the product as soon as possible. As soon as you can find an invent around that you think reasonably gets around the patent claims and is easy enough to implement, do it right away because that will do is mitigate the going forward damages meaning that you get sued based upon damages in the past and going forward that you might need a license.
So, if you can change the product, you’ll eliminate needing a license for sure taking pressure off the litigation. But you might even be able to change the product as soon as possible and recognize that your product may not have been infringing for more than six months. So, going back to the back to the envelop calculation that we talked about at sleep night, No. 2 – estimating the damages – if you could estimate the damages today and forward, you might recognize that the monetary damage of a potential infringement could be very small if you can vent around it.
Area 5: Getting Ready for War
18. Buy Patents
So, let’s go to the last area, area 5 – Defcon 3 – getting ready for war. Certainly, if you’ve done everything you can in this checklist so far, one of the things that could be done, which could really strengthen your position particularly if you have analyzed your portfolio and you don’t have patents for counter assertion is to set up a process to find patents to buy that you can use to counter assert against the competitor that has the pattern that you think you’re infringing.
Basically, there is a process to use here to look at the competitors’ products and technology and to find patents that “would show evidence of use.” There are processes to do this. We do evidence of uses all the time, many, many a month. And we can tell you that there are ways to do this that can be very efficient to take a product, strip it down to its components and then find patents that might relate.
But once we do find patents that we think are very strong that could provide evidence of use that we could buy that we could insert to our competitors is to hire a third party to get in the middle to go buy those patents. You’ve got to take advantage of the Zeitgeist of the patent monetization space because people do buy and sell patents all the time. By taking advantage of that and having a third party do that, you may be able to find a patent you need at a very reasonable price. As a matter of fact, you might be able to find that you could buy a patent for just a period of time. And then, when it’s done, you could go resell it.
19. Develop A Negotiation Package
Believe it or not, No. 18 here, evaluating and then buying of these patents for counter assertion is really done all the time. So, this is not a strange strategy at all. The next area in No. 5, Defcon 3 getting ready for war is No. 19, developing a negotiation package, getting ready for that time where you might have to sit down and negotiate and hammer out terms if you’re found infringing. Now, of course, a court might award damages but somewhere in the of a damage assessment, people do come together. The competitor and you might come together and have some meetings to talk about could you settle out. So, developing a negotiation package for how to settle out would be very important.
Now, if you’ve taken the steps we’ve mentioned above, 1 through 18 in the five areas, then you can at least put together a presentation and maybe it’s 20 to 30 slides, and maybe all it is, is just a demonstration of what you would do and how you’d negotiate it, you start to think about the risk you actually have. And when you go through a negotiation package like this, you may actually find that you have to go back up to the areas we talked about to do a better job. Maybe you need to do a more of an invent around and more time on it. Maybe you have to a very specific calculation of damages, or maybe you have to really figure out whether the prior art is good enough. But either way, developing a negotiation package is very important.
20. Sit Tight and Wait for War
And finally, area 5, Defcon 3 getting ready for war, is No. 20, which is called sit tight and wait for the war. Well, it’s not easy to just sit tight and wait for war. We know of course many companies build walls, and they build counter defenses because they want to feel protected. But by doing these items we’ve talked about in the five areas, you will actually feel better protected. You’ll sleep better at night and you’ll know you’ve done the best job you possibly can.
So, whether it’s developing things under area 1 to sleep at night, doing things like a taskforce, or estimating damages, or figuring about the competitors if litigious, or is the customer involved? Do you have patents of counter insert, setting up watch, very reasonable things to do? And area No. 2, doing everything you can to avoid willful, getting your patent attorney involved and getting things under attorney/client, putting nothing in writing, looking at your website, developing processes for that, looking at the marketing and sales presentations, and making sure you’re not showing how your violating people’s patents, and certainly developing a trade secret process immediately.
And even No. 3, challenging the patent commonly done finding prior art, the sooner you get started on that the better but note that internal experts can only take you so far. Hiring outside experts is really important, and I would consider doing that immediately. If you want to get more automated about this, set up an AI assistant to continually look at your product with the freedom to operate chaser and to see if things change. It wouldn’t be uncommon to find out that you think you know what the case is, and on the way up to the door, if you will, finding out the case changed because another patent just issued. Whatever you need to do, you need to avoid getting into that situation. So, hire a competitive, competent IPR assistant.
In area in No. 4, you need to protect the very near future. So, invent arounds are really important. A highly recommend that an ad hoc process not be used because if it’s this big a deal, you want to do this absolutely right. And maybe you’ll find some really good patents to invent around. Maybe it’ll change the products. Maybe that will avoid the going forward damages. For sure, by doing this, it will set you up to avoiding willful, well worth the ROI. And change that product as soon as you can. That’ll mitigate the going forward damages.
And we just talked about at in area 5, Defcon 3, getting ready for war, see if there’s some patents you can buy that can beef up your counter assertion. And certainly develop a negotiation package to let you know how you can sell this out if you had to and maybe in just going through that process, you could find other things that you might do to beef it up, and then sit tight and get ready for war.
So, I hope this has helped. I hope in the long run this podcast can give you some ideas to work on so that you can sleep better at night. This is John Cronin in Event Anything. My competitor just got a very broad patent that I think I’m violating. What do I do?