Responding to Accusations of Patent Infringement
(as published in Printing Industries of America)
An accusation of patent infringement, which may appear seemingly out of the blue, is enough to set any business owner’s heart racing. Such an accusation typically arrives in the form of a letter, which may either directly accuse your business of infringing a patent or more obliquely mention a patent. The letter will usually include a demand that you stop the activity considered to be infringing and/or pay some amount of money. Sometimes these letters include a threat of litigation, but other times, may contain a more softly worded invitation to negotiate.
Some demand letters represent serious threats; others can be dealt with easily. It is important that you, or your attorney, review these letters carefully and consider your options. Here we provide a framework to conduct that review and decide how to respond—or not respond—to such threats.
What does it mean to infringe a patent?
A patent provides its owner the right to keep others from using the invention described in the numbered “claims” listed at the end of the patent. If you are making, using, selling, or offering to sell something that meets all of the requirements of any claim, you are infringing the patent. No prior knowledge of the patent is necessary, and no intent to infringe is required.
The patent may not look as though it covers any part of your business, but the claims may be drafted so that it does. The opposite might also be true. It is best to seek guidance from a patent attorney to help you sort it out.
If a court finds that you have infringed a valid patent, you will be required to pay monetary damages – at least an amount considered to be a reasonable royalty for your use of the invention (e.g., a penny per page printed using the technology). In less common circumstances, the court could order you to stop using the invention or pay the patent owner for lost profits.
A patent infringement lawsuit can represent a significant threat to a small business. Demand letters should be taken seriously unless and until you can comfortably determine that they can be ignored. Realistically, you will not be able to avoid hiring an patent attorney if the demand letter escalates into a lawsuit. However, it is almost always in your best interest to consult with a qualified patent attorney well before the matter reaches litigation.
Step 1: Triage
There are things you should learn more about to position yourself to achieve the best possible outcome.
Who sent the letter? If one of your competitors (such as another printing company) sent the letter, you need to take it seriously and consult with a patent attorney. A competitor is more likely to attempt to interrupt your business operations by demanding that you completely stop the infringing conduct and is more likely to file a suit. A patent attorney can help you evaluate the merits of the competitor’s demand and craft a strategy for dealing with the accusations. If your business owns any patents, you can evaluate whether you could assert them against your competitor in a defensive manner to strengthen your bargaining position.
If an equipment manufacturer or some other entity with a role in the printing industry sent the letter, you should also take it seriously. They are less likely to demand you stop the infringing conduct, but may aggressively seek licensing fees. The equipment manufacturer could be looking for a business resolution, such as getting you to consider its equipment. In these scenarios, your initial consultation with an attorney may educate you about how much to say while exploring the patent owner’s motivation.
If an entity outside of the industry sent the letter, it is more likely to be chasing a quick payment. Research that entity. Is it a real company offering a service or making a product? Does it look like a patent holding company simply in existence to enforce the patent? A patent holding company may be less likely to bring a suit and may just be “trolling” for companies willing to pay a fee. Try to determine whether you have been individually targeted, or if similar letters were sent to others. If the patent holder has targeted a broad segment of the industry, it may simply be fishing for targets. Under those circumstances it may be best to keep a low profile and not respond to the letter.
You should also check out the patent’s enforcement history to determine if it has been litigated, how often, and the results. A patent attorney can help you conduct background research. If the patent has been aggressively enforced, you could find out whether the amount to resolve the dispute is small enough to settle. But do not rush to make contact. If the patent holder is targeting several companies, it could be beneficial to determine whether others are willing to work together to defend against the threat. Pooling your resources makes it more cost-effective to fight allegations.
Are you indemnified? Assess whether anyone else should be notified about the letter and whether anyone else is responsible for the alleged infringement. For example, did you purchase the technology from another business? Are they willing or obligated to indemnify you or litigate the dispute on your behalf? If so, there may be a provision in the indemnification agreement requiring you provide notice of the alleged infringement. An attorney can help you sort out whom to notify and when.
Have you already been sued? Check whether the patent holder has already filed suit against you. Patent holders will sometimes file suit before or at the same time they send a demand letter. You might be able to find information in a database such as PACER (available at www.pacer.gov), about the patent holder’s current pending lawsuits. If a lawsuit has already been filed, you should immediately contact a patent attorney for assistance.
Can you easily determine if you are infringing the patent? Interpreting patent claims and assessing infringement requires specialized knowledge and expertise. The safest course is to consult with a patent attorney. In some circumstances, it may be obvious that something is required which is not present in your process or product (you must meet all of the requirements of a claim to infringe it). In other circumstances, you might be able to easily change what you are doing to avoid the claims.
Step 2: Responding to the letter
From the moment you receive a demand letter, you will be faced with a challenging decision: ignore the letter, settle, or fight? Consider the strength of the patent, the strength of your defense, the importance of the accused technology to your business, and your personal tolerance for risk and uncertainty. Once you have triaged the letter and assessed the risk, you may respond to the letter, though you have no obligation to do so. If you do decide to contact the entity, consider the following are some guidelines:
- Volunteer as little information to the patent holder as possible.
- Whether you are targeted individually or as part of a group, do not rush to contact the patent holder.
- If you decide to forego counsel and interact with the patent holder, do not offer any information that could be used against you.
- If you feel compelled to provide information, frame it as a negative by stating that your technology does not include specific elements described in the patent claims.
- Avoid providing a detailed description of your technology – it will likely come back to haunt you. Such information can weaken your position in a lawsuit and will make you appear overeager to settle.
Receiving a demand letter is often an emotional experience. It may feel like an unwarranted attack, and you may view a licensing offer as extortion. You may want to fight on principle, but note that defending a patent suit can be expensive and is often costlier than a quick settlement. But settling every threat of patent infringement can mark you as an easy target, and you may spend more in the long run as you receive an increasing number of demand letters. Also, putting up a strong defense and showing a willingness to fight could result in a lower final settlement.
Keep in mind that every case is different, and this summary is not intended to replace the guidance a patent attorney can provide. An attorney can handle communications and negotiations with the patent holder, ensuring you remain in the strongest possible bargaining position.