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Prepping for Battle - Best Practices for IP Litigation Strategy Vary Depending on Venue and Industry

1 September 2015

So far, this IP-themed issue of InsideCounsel has taken us through the steps of monetizing and protecting IP assets. But the fact of the matter is, in this day and age, the biggest trends that in-house counsel are tracking are those involving IP litigation. Whether your company is an accused infringer or you think someone else is stepping on your patent's toes, having a clear IP litigation strategy is a key component toward getting the most out of your patent assets. As it turns out, those IP litigation best practices can vary quite a bit, with factors like venue and industry playing a large part in litigation strategy.

Prep, 2, 3, 4

Fortunately, IP lawsuits don't just pop up out of the blue. Most of the time, patent owners or alleged infringers have some time to meet with counsel to discuss how to prep for the suit—or perhaps avoid it altogether.

When you are the patent holder, the first step, according to John D. van Loben Sels, partner at Fish & Tsang, is to “investigate the rights that you have to the copyright, trade secret, patent, etc.” He suggests you scrutinize the strength of the asset, looking for any obvious weaknesses. At the same time, you should look into the alleged infringer, to see if you could end up facing an infringement suit of your own. Plus, you need to do a cost/benefit analysis: “It's important early on to look at the business aspects of the dispute, to see whether the time and resources needed are worth it,” he says.

In some cases, IP owners may be inclined to send a cease-and-desist letter, but, cautions Avi Israeli, partner at Holwell Shuster & Goldberg, that is not always the best strategy. “Cease-and-desist letters usually get a good result, especially when you have a situation where the defendant is clearly infringing,” he explains. “But you need to be aware of potential pitfalls.” In some cases, he says, without proper research, you may run into a situation where you invite litigation against yourself, creating a problem where there wasn't one in the first place.

When you find yourself in the crosshairs of IP litigation as the alleged infringer, you must also do prep work. There are multiple factors that can come into play here, but one important issue to consider is whether the suit is coming from a non-practicing entity (NPE) or a competitor.

“Whether your opponent is an NPE or a competitor, the analysis is different,” explains Maya Eckstein, partner at Hunton & Williams. “NPE suits are more involved than they used to be, because of recent Supreme Court decisions and the America Invents Act (AIA).” Depending on the situation, certain paths laid out by the AIA can prove to be avenues for invalidating a weak patent.

Additionally, companies that are accused of infringement need to make a difficult but important decision. “One thing I always talk about with my clients is the decision between settlement and litigation,” Eckstein says. “Whether you can settle is not something you can control, the plaintiff has to be involved.” Companies should seriously weigh the cost of a settlement against the potential time and money that would be expended by going to court.

ANDA 1, 2, 3

There is one very specific kind of patent litigation that differs greatly from the norm, and it's seen in the pharmaceuticals industry. Abbreviated New Drug Application (ANDA) cases, as outlined by the Hatch-Waxman Act, come about when a company wants to make a generic version of a popular drug. In these cases, the owner of the patented drug has plenty of awareness that it needs to prep for an ANDA suit, and should use that lead time wisely.

“The generic company files an ANDA, and it triggers certain events. After that, the branded company sues the generic, but the first steps should be taken well before the litigation starts,” explains Dominick A. Conde, partner at Fitzpatrick, Cella, Harper & Scinto. “The branded company knows what patents will be targeted, as they are listed in the Food and Drug Administration's Orange Book, so it can do pre-suit analyses, including a review of patents, file histories and interviews with inventors.”

This process, of course, is a bit of a flip from the usual patent litigation script. “The patent holder does the preparation and is on the offensive. In most litigation, the patent holder looks for products on the market that are infringing, does research and goes after the infringer,” explains Lisa M. Ferri, partner at Mayer Brown. “With Hatch-Waxman cases, the practice is flipped. The generic is the one that starts the process.”

But, no matter how it starts, the key to the process is lots of due diligence. Much of that prep work has to be done well in advance, because the maker of the branded drug only has 45 days after the filing by the generic company to decide if it wants to go to court. This involves lots of early case assessments, anticipations of challenges to products, and, of course, picking jurisdiction. Ferri notes that Delaware has been a popular jurisdiction for these types of cases.

Where it's at

And, while jurisdiction can play a major role in ANDA cases, it's also a crucial factor in non-ANDA patent litigation as well. The choice of venue can often make or break a case. In some instances, it makes sense for the entity that holds the IP rights to choose the International Trade Commission (ITC) as the proper venue for a patent dispute.

“The ITC is still the venue where you have the best chance of getting injunctive relief,” says van Loben Sels. “It can be the most powerful hammer out there for IP owners.” ITC cases tend to be fast-moving, so it can be a good way to put pressure on alleged infringers. In most cases, though, patent owners will bring parallel cases, in both the ITC and federal court, especially if they are looking to recover damages, as the federal court is the appropriate location for that.

When the topic of venue selection comes up in IP litigation, the Eastern District of Texas is almost always mentioned, because it has gained a reputation for being very friendly toward plaintiffs in these sorts of cases. Michael Wilson, a partner at Munck Wilson Mandala who has a great deal of experience in that district, says that the perception is that the judges handle procedural topics in a favorable fashion and that juries tend to award large damages there.

But perception may no longer be reality. “In some ways, these widely held beliefs might be overstated. In recent years, there have been a fair number of favorable defense verdicts in the Eastern District of Texas, and judges have been more receptive to things like motions to transfer venue or motions to stay,” Wilson explains.

No matter where the case is being argued, or what type of industry the IP falls under, the key takeaway is that time is money, and preparation for IP litigation is valuable currency. Inside counsel should know that they can and must consult with IP experts early and often in order to have the best possible strategy, offensively or defensively, for IP litigation.

Reprinted with permission from the September 1, 2015 edition of InsideCounsel © 2015 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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