Thoughts on Patent Defense and How to Fight Knockoffs

by Mike Marks

In a perfect world, the patent that the government issues to me would be automatically and vigorously defended by that same government. When a product that violated the claims of my patent hit the market, the all-knowing (and benevolent) government would immediately dispatch law enforcers to remove the offending product from the shelves and plow it into the earth. Alas, as we all know all too well, the world is far from perfect.

It is bad enough to spend some $6,000-10,000+ to get a patent to issue. The cost of defending a patent can rise into millions. How does an independent inventor fight a large corporation with limitless resources? What does an inventor do if the value of the patent is probably less than the cost of defending it?

The first time I saw a product that violated a patent of mine was at a trade show. I got red in the face, went up to the salespeople in the trade show booth and loudly demanded that the offending product be removed. They put the product away… until I walked off. When I went back an hour later, surprise, surprise, the product was back on display. So I took the General Manager aside and said (I was calm now), “Listen, you’re blatantly violating x,y,z claims of 2 of our patents. Here are copies of the patents I’m talking about. Why don’t you go around our patents by changing this and that. If you make those changes you’ll have an inferior product but the product cost will be less. There’s no reason for us all to waste a lot of time and money in court.” The General Manager replied, “You’re being decent about this. You know what, I’ll do as you suggest.” They pulled the product off the market, made the changes I’d suggested and reintroduced it a year later. The redesigned product failed. The outcome was perfect.

The next time we were knocked off, we ended up in courts in Taiwan and the USA. The bottom line from that experience was that winning an infringement suit in Taiwan was worth almost nothing – the copycat was slapped on the wrist and kept on copying. In the USA the copycat (a different one) backed off before we went into court. The cost was around $50,000 in legal fees for each country, a total of $100,000. The good news is that knockoffs of this product, in the USA at least, have not been a problem since then.

More recently we had the experience of going to court to defend our patents. One case went through jury trial and appeals. The cost to our side to defend our patents was $5,000,000. Our side "won" and received $300,000 in compensation and had the offending product pulled off the shelves. Fortunately for us, our licensee paid the legal fees. Fortunately for our licensee, their lawyers took the case on contingency - it sadly didn't turn out well for the lawyers, they lost millions in fees. But our patents were upheld and we continue to get royalty income because of them.

The lesson of going to court is that no matter how strong you think your patents are, the other side will find ways to punch holes in them. Everything in your patent can be a problem, from the filing process, to the prior art you cite, to a comma in a patent claim. The quality of your patent doesn't matter... until you end up in court. Avoid court if you can.

In the examples cited above, I was writing about companies that engaged in blatant violations. What happens when the violation is not so blatant and the company doing the violating is humongous? The discussion below is not based on personal experience, but on information I gleaned from speaking with attorneys about my company’s patents. This is not legal advice. I am not a lawyer.

Imagine I have a patent claim issued for “…a square recess.” Now imagine that a large corporation is making my invention with a more or less square recess. Is there a violation if the recess is mostly square, perhaps incorporating small flats in each corner? If I asked a patent attorney, depending on many details, the likely answer would be one of three choices: 1) "maybe" 2) "possibly" or 3) "perhaps" and I’d spend $5,000 to $10,000+ to get that in writing.

Let’s make the matter squishier by adding that I believe I might earn something like $75,000 by licensing the patent. In other words, the cost of fighting the violation could very well and very quickly exceed the award I might receive in court… if I win.

One thing I should NOT do is to write the corporation a cease and desist letter. If I do that, I could be sued by the corporation for threatening them. I could quickly spend $20,000 answering a lawsuit against me! However, I have been told that (check with your attorney before doing this), if I include an offer to license my patent along with the assertion that it is being violated, then there are no grounds for being sued. In other words, if licensing is a possibility, then I should make the offer to license my patent at the same time I assert that the corporation is violating it. In combining the offer with the accusation I should (again, check with your attorney) avoid being sued.

Legally speaking, the corporation does not need to recognize my patent until I tell them about it. It seems that just having the patent issued is probably not enough to meet the requirement of informing an infringer. It might be enough to have a patent number written on a product that is publicly available. Sending a certified letter with a copy of my patent and a discussion of how a claim in the patent is being violated should certainly qualify. There are many possible pitfalls in this process and there is no way to proceed safely without hand holding from an experienced patent attorney. Once the corporation has been informed, they become liable for treble (3X) damages starting from the day I informed them… but not before. Thus, it makes sense to tell a corporation that they are violating my patent sooner rather than later.

There is one other thing to be aware of. If I do not use it I lose it. This concept is called laches which means undue delay or negligence in asserting my legal rights. In practice, once I accuse the corporation of violating my patent, even if I include an offer to license it, even though 3X damages are accruing, the corporation might choose to ignore me. Even if I begin negotiations I might not reach an agreement. In either case, if there is no agreement then my next step is to initiate a lawsuit. The good news is that I should have somewhere between 1-6 years, from the time of either, a) informing the company or, b) failure of negotiations, to initiate the lawsuit. In the meantime the 3X damages continue to accrue.

If the patent violating product is successful the violating company will have a strong incentive to settle. If the product is a dud then they might well ignore me until since 3X nothing = nothing.

Don't let this discussion discourage you. Most companies seek to avoid violating patents and would prefer a fair licensing deal if one is offered.

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