STRATEGIC INSIGHTS Suing for patent infringement may seem rewarding, but you could lose even more.
By Cathryn Campbell
June 17, 2004 | After spending tens or hundreds of thousands of dollars on patent applications for a single invention, biotechnology companies may well wonder what they have received for their investment. Too often, companies lose sight of the fact that
patents don't give the holder any affirmative right to practice the patented technology. The sole benefit provided by an issued patent in the United States is the right to exclude others from making, using, importing, selling, or offering to sell the invention. The exclusivity provided by this right to exclude others is intended to promote and reward innovation.
Patent rights are not self-executing, however. The government doesn't monitor or punish infringement.
Frequently, patent holders sell licenses in exchange for royalties on sales of patented products, or for other compensation. The granting of licenses can result in significant income if the licensed patent rights are valuable. In the United States, a patent holder has no obligation to license his or her patent rights, on reasonable terms or otherwise. If a patent holder chooses not to offer licenses, or if he or she and an infringer cannot agree on terms, the patent holder's only recourse is to bring a lawsuit to stop the infringement.
Patent infringement lawsuits have become increasingly common. Media reports of large damage awards may make such proceedings sound rewarding, but patent infringement litigation isn't for the faint of heart. In fact, it's unusually expensive and carries unique risk for a plaintiff that is often underappreciated.
Ounce of Prevention
A patent holder enforcing his or her right to exclude others risks losing his or her patent entirely if it's found to be invalid. This danger doesn't typically confront plaintiffs who sue to enforce other rights. For example, when suing a trespasser, the property owner doesn't normally risk losing title to his or her land. But you can bet that a defendant in a patent infringement suit will raise the issue of patent invalidity. And if the patent is found to be invalid, it cannot be asserted against another infringer.
Patentees generally assume that since their patents have been examined and issued by the U.S. Patent and Trademark Office, they must be valid — particularly given the extensive application costs. But the same standards by which the PTO determines whether an invention is patentable (e.g., novelty and unobviousness over the prior art) are also applied by the courts to determine validity.
So, before filing a lawsuit, the prudent plaintiff should be fully aware of any and all weaknesses in his or her patent. He or she should perform an exhaustive search of the prior art and carefully analyze the impact of any discovered art. In addition, the inventor's own publications should be reviewed to make sure that they don't raise issues such as the best mode for practicing the invention, which must be disclosed in the patent application.
In short, the patent holder needs to determine the strength of the best defense that can be mustered by the defendant. While the cost of such study can be substantial, it will pale in comparison to being bushwhacked in court.
The winning plaintiff in a patent infringement suit has two remedies available. First, he or she may collect damages for past infringement. Traditionally, damages are calculated as the reasonable royalty, which the patent holder would have received if the infringer had taken a license, or as the profits that the patent holder lost as a result of the infringement. Other measures may be used, particularly if there have not been product sales.
In either case, biotechnology companies must proceed with knowledge — and caution — to avoid the risks and reap the rewards afforded by patents. Before investing in an extensive patent portfolio, establish a clear strategy for exploiting right of exclusivity. Do you want to benefit from licensing others to practice your invention, or do you want to exclude all others' use? And are you prepared to file suit to prevent unauthorized infringement?
Meanwhile, keep abreast of patents awarded to others that may preclude the free use of certain technologies. With foresight, the substantial rights afforded to you through the U.S. patent system can be used to best advantage.
Cathryn Campbell is a partner with McDermott, Will & Emery in San Diego. E-mail: ccampbell@mwe.com.
ILLUSTRATION BY LUC MELANSON