Patent Litigation: Everything You Need to Know
Patent litigation is a law process in which one party sues another over the unlawful use of a patent and may involve seeking monetary damages and an injunction.17 min read
What Is Patent Litigation?
Patent litigation is a law process in which one party sues another over the unlawful use of a patent. A patent holder might sue a company or individual in federal district court for monetary damages and an injunction against the infringement. The patent holder must take legal action within six years of the infringing date.
Why Is Patent Litigation Important?
Patent litigation is important for protecting your patents from infringement or violation. Even if you own a patent, you're not necessarily protected from infringement. With patent litigation, you can take another party to court if you believe they've used your patent without licensing or approval. However, patent litigation costs time and money. In most cases, the plaintiff is a small business and the defendant is a large corporation. This makes it hard for the plaintiff to win the case.
If you're involved in patent litigation, the court can issue several types of penalties, most commonly:
- Actual damages
- Lost profits due to infringement
- Royalties for unauthorized use
- These are based on the time left on the patent, product type, and other royalties agreements.
- Court filing fees
- Litigation expenses
- Attorney's fees
- Exclusion order brought about by the International Trade Commission (ITC)
- Negotiated Settlement
- If the patent owner works with a top-notch law firm, he or she might be able to negotiate a settlement. Rather than the courts deciding the penalty, attorneys decide on the amount owed to the plaintiff. Seventy percent of cases are settled within one year of litigation. Only 4 percent go to court for a final decision. That makes negotiated settlements the most popular result of patent litigation.
- Mediation (Arbitration)
- A plaintiff litigator can force the defense to accept mediation, or intervention in the dispute to resolve it. This usually avoids trials and leads to a settlement.
- U.S. courts have the right to enforce arbitration clauses.
- Only appellate courts can review arbitration cases. However, private organizations often do this the same way.
Aside from costs and penalties, you can also ask for a permanent or preliminary injunction. A permanent injunction prevents the infringer from producing more of the product in question. A preliminary injunction occurs at the beginning of a case. It's only granted if:
- The plaintiff shows a high probability of winning the case based on the evidence.
- The patent holder proves financial hardship if the infringing product continues to be made.
- There's no harm to public interest or opinion.
Preliminary injunctions are rarely granted. However, it becomes easier if there's a prior case that proved patent validity. Injunctions do not provide monetary settlements to plaintiffs.
A Basic Explanation of Patent Litigation
There are two types of laws on patent litigation:
- Federal laws enacted by Congress. The principle source of this information is Title 35 of the U.S. Code.
- State laws.
In most regards, patent litigation deals only with federal laws. States are typically only concerned with contractual law and patent ownership.
On the federal level, federal district courts handle patent litigation. Their duties include:
- Interpreting the Constitution
- Interpreting federal statutes
- Creating laws, if necessary
- Applying the Federal Rules of Civil Procedure
- Applying the Federal Rules of Evidence
The United States Patent and Trademark Office (USPTO) and the United States International Trade Commission (USITC) are the two main governing bodies. The USPTO examines and issues patents. Within the USPTO, the Patent Trial and Appeal Board (PTAB) governs over inter partes (between parties) proceedings. The USITC enforces patents at borders and ports of entry.
Both organizations have their own rules and are governed by a set of federal regulations. In-house rules include the Manual for Patent Examining Procedure and Title 37 of the Code of Federal Regulations. These set rules and procedures for patent examination.
Order of Precedence
The order of precedence of law in patent litigation is:
- U.S. Constitution
- Federal regulations and statutes
- Case Law
In patent case law:
- U.S. Supreme Court
- Court of Appeals for the Federal Circuit
- Federal district courts within the regional circuit
- Federal district courts outside the regional circuit
- Decisions and rules of administrative bodies
To start, each patent litigation case comes before the Court of Appeals for the Federal Circuit (CAFC). Some might go all the way to the U.S. Supreme Court. Currently, the U.S. has no court specifically for patent litigation. That leaves each case up to the experience and discretion of a federal judge. Both the ITC and federal courts deal with infringement and validity. USPTO inter partes only addresses validity. However, litigants can ask the federal court for a stay of action when dealing with an inter partes case.
A stay of proceedings can be issued when:
- Both parties agree to settlement discussions.
- A re-examination or post-grant review is in order.
- There's an appeal from a non-final judgment.
Courts cannot amend patent claims. However, a party can amend patent claims in USPTO proceedings or post-grant cases. Patent amendment claims are available:
- If you want to correct an error without deceptive intent.
- If you want to increase the patent's scope. This must be done within two years of filing.
- During re-examination requests.
- During inter partes and ex partes USPTO post-grant proceedings, including inter partes reviews (IPRs), covered business method reviews (CBMs), and post-grant reviews (PGRs). However, you cannot conduct PGRs and IPRs if an invalidity allegation is made during:
- Patent infringement acts.
- ITC Section 337 proceedings.
- Detailed bases of invalidity in new drug/pharmaceutical cases.
Patent claims can also be unenforceable due to:
- Fraud (inequitable conduct) when obtaining the patent.
- This is a breach of good faith by patent holders against U.S. laws.
- To prove unfair conduct, the defense must show that the patent holder left out information in its claim to deceive the USPTO.
- The patent holder can use an explanation of the claim to protect against this conduct.
- Information given in a supplemental examination of the claim is not valid.
- Misuse of a patent.
- This includes antitrust and anticompetition violations.
- Arrangements that tie the licensing of a patent to an unrelated product.
- Licenses that require post-expiration royalties and improper packaging.
- Unreasonable delay in a lawsuit against the infringing party (laches and equitable estoppel).
- This is when the patent holder misleads the infringer through statements, action, silence, or inaction.
Who Can Sue or Be Sued for Patent Infringement?
Parties that can sue for patent infringement include the:
- Patent holder
- Exclusive licensee as a party to the patent holder
- Patent co-owners
Distributors and non-exclusive licensees cannot file for patent infringement or pursue patent litigation.
Parties that can be sued for patent infringement include:
- Any party that sells, makes, uses, or imports an infringing product.
- Contributes to the acts above.
Directors of a company are not personally liable for infringement, even if employees are. Infringement is only considered in court if:
- They have direct or indirect knowledge of patent infringement.
- They have willful blindness, meaning the infringer took steps to avoid learning about the patent or the defendant strongly believes such a patent exists.
Courts can add and remove suing or sued parties during a case. However, the America Invents Act (AIA) prevents cases where all parties are one defendant unless:
- The accused infringers are both liable.
- Questions of fact are common to all defendants.
What Are the Types of Patent Infringement?
- Literal Infringement: A direct relation between words in the patent claim and the infringing product.
- Contributory Infringement: A third-party supplies the infringer with a part that has no use except to create an infringing product.
- Willful Infringement: Intentional disregard of another company's patent. This includes a direct copy of a patent. It also includes continued production after an infringement notice.
- Direct Infringement: Another company makes a patented product without permission.
- Indirect Infringement: A company or individual helps a third-party create a patent-infringing product.
- Doctrine of Equivalents: If a product doesn't infringe on another patent, it could still fall under this doctrine. This doctrine states that a product infringes on a patent if it performs the same task in the same way to produce a similar result. The doctrine of equivalents does have some limitations:
- Prosecution history estoppel: It cannot be used to recapture information surrendered to obtain patents.
- Under the "all elements" rule, the doctrine is not applicable if one limitation is not present in the accused product.
- The doctrine cannot be used to expand a claim's scope.
- The doctrine cannot be cited to spoil a claim limitation.
- It cannot be used to erase functional limitations the public needs to avoid infringement.
What if I'm Sued for Patent Infringement?
If you're sued for patent infringement, you have several defenses. The most common is that the patent is not valid. A patent is invalid if:
- The defendant can prove the patent didn't meet the requirements of nonobviousness and novelty. A patent must have both of these qualities to be valid.
- Novelty means the invention is new.
- Nonobviousness means the patent cannot be an obvious variation or improvement of an existing invention.
- The patent holder included false information on the USPTO application.
- The patent resulted from anticompetitive business practices.
- Subject matter isn't patent eligible.
- It's not useful.
- There's lack of enablement or lack of description.
- Claims are indefinite.
For patents filed before March 16, 2013, these defenses are available, even after the passing of the AIA:
- The invention was in use or on sale in the United States more than one year before the date of patent application.
- The patent was abandoned.
- The inventor didn't invent the patent claim's subject matter.
- The invention was made in the United States by someone prior to the latest inventor's date of invention.
- The claimed invention was patented outside the United States for more than a year before filing in the U.S.
If you're sued for patent infringement, the plaintiff has the burden of proof. This means he or she must show more evidence to prove you infringed on the patent. Other defenses include antitrust issues and prior commercial use under the AIA.
Following the AIA for all patents filed after March 16, 2013, defenses available include:
- The plaintiff claimed the invention from another who filed for a patent within one year of issuance.
- The scope of prior art expands to include that the patent is in public use or described in a publication.
- On sale to the public before filing.
- Described in a published patent application.
The AIA also gives a one-year grace period for disclosures from the inventor.
Patent Litigation Insurance
A party involved in or considering litigation might buy patent litigation insurance. Also known as After the Event (ATE) insurance, it covers the risk of litigation around a patent or family of patents. Both a defendant and plaintiff can buy patent litigation insurance for reasons of prosecution or defense. Don't confuse patent litigation insurance with intellectual property (IP) insurance. IP insurance covers the patent owners before litigation starts.
Patent litigation covers:
- Legal costs a party might face during a lawsuit.
- Costs if litigation is unsuccessful.
- Costs in a "loser pays cost" ruling. This is also known as a "security for costs" ruling.
Patent litigation insurance is unique because of how it's paid. There's always flexibility when it comes to premium payment. Examples of payment time include:
- Premium only payable if the case succeeds. This is also known as a contingent, deferred, or self-insured premium. This allows parties to get patent litigation insurance without initially having the money to do so.
- Premium payable up-front or when taking out the policy. The advantage of this payment is that the up-front cost is usually cheaper than a deferred payment. It's also beneficial if the case involves injunction instead of monetary damages.
One problem with patent litigation insurance is that only a few law firms have the ability and expertise to offer it. Drafting the policy is a complex issue. It must have a seemingly endless amount of situations relating to the patent. Different industries also require different policies. For example, pharmaceutical policies vary greatly from engineering or tech patent policies.
What Can I Expect in Court (Civil Case)?
Before the case goes to court, both parties make written submissions about juries and documentary evidence. Once in court, you can expect:
- Evidence presentation to judge and jury
- All evidence must comply with the Federal Rules of Evidence.
- Opening and closing arguments
- Live testimony of witnesses
- Both parties can question a witness.
- Entrance of documents and physical evidence
- Expert evidence
- Before the trial, experts are selected to explain financial matters, infringement, and patents. The expert can only testify in his or her area of expertise. The jury or judge can use this evidence or reject it. Sometimes, a court or judge decides the experts for the case.
- Markman hearings. This is when a judge examines both parties' physical evidence.
Issues decided by a jury include monetary damages, infringement, and novelty and obviousness of the patent. Judges decide cases on claim construction and inequitable conduct.
Pretrial issues are vast in civil cases. They must both issue initial disclosures (discoveries) that include:
- Total damages
- Identification of relevant documents
- Requests for documents
- Depositions by oral testimony
- Requests for inspections and admissions
- Written questions
- Written reports from experts
- Third-party inclusion with a filed subpoena
- Discovery by entities outside the U.S. as stated in HCCH Convention on the Taking of Evidence Abroad in Civil and Commercial Matters (1970).
Patent Litigation and the U.S. International Trade Commission
The ITC provides alternatives to traditional patent litigation. According to Section 337 of U.S. Code (U.S.C.), the ITC can hear cases from U.S. patent holders. These cases involve patent infringements from imported goods. While the ITC work differently from a district court, it's a good solution for some patent holders.
Advantages to Litigation With the ITC
- Quicker decision times: According to Section 337, the ITC must make an investigation and ruling "expeditiously." This includes setting a deadline for judgment shortly after case filings. This is usually between 12 and 15 months. Rarely, it's extended to 18 months. The ITC also has 30 days to decide to start an investigation after the plaintiff's filing.
- No juries: There are no juries in ITC Section 337 cases. Instead, an administrative law judge (ALJ) hears the case and makes a decision. If both parties agree, a committee of six ITC commissioners can decide the case. The Administrative Procedure Act and the Federal Rules of Civil Procedure govern case proceedings. Because of this style of proceedings, a Section 337 ITC trial resembles a district court bench trial.
- Wide jurisdiction: The ITC has in rem jurisdiction over all import goods. This allows one person to bring action against several parties at once. This includes parties in different jurisdictions. If necessary, the ITC can issue subpoenas to all U.S. states and territories.
- Customs enforcement: If the patent holder wins the case, the ITC will ask customs to prevent the violating product from entering the country. The U.S. Customs Service enforces this. The ITC also meets with customs to create a document easily understood by customs officers. With the help of customs, the patent holder isn't the only party responsible for enforcing the decision.
- General exclusion orders: If there are several infringing products from several sources, the ITC can issue a general exclusion order. This includes barring products from parties not named within the ITC lawsuit. This means the patent holder doesn't have to keep filing suits to keep the infringing product out of the country. To get a general exclusion order, the patent holder must show patterns of patent infringement from several competitors.
Disadvantages of ITC Litigation
- Domestic Industry Requirements: To have good standing with the ITC, the patent holder must prove there is a relevant domestic industry. To determine relevant domestic industry, the ITC has a two-part test. The first part is an analysis of the infringing product. The second part is economic, showing that the patent holder has made a significant investment in the United States. This includes hiring employees and having a manufacturing facility in the country.
- Unavailability of 271 g defenses: 271 g prevents importation of infringing products. However, it also gives two lines of defense for the allegedly infringing company. One is when the product becomes changed by certain processes. The other is when the product changes to become part of another product. This is usually seen in the biomedical and pharmaceutical industries.
Increased Popularity of Section 337 ITC cases
- From 1995 to 2000, the ITC controlled 12 cases annually. From 2001 to 2006, this number increased to 34 cases annually.
- Reasons for the increase in popularity include:
- 3.3 to 4 percent increase in imported consumer products.
- More foreign companies with a standing to bring a Section 337 investigation. One way foreign companies can set up a domestic industry is by investing in employment and labor. From 1986 to 2001, foreign companies employed 3.4 million workers. This gives them the ability to work with the ITC on Section 337 cases.
- Increased knowledge of an ITC case's benefits. As the benefits of the ITC over normal court litigation increase, they become more popular.
Trends in Patent Litigation
According to a 2015 study by analytics firm Lex Machina, patent infringement cases rose 15 percent from 5,070 to 5,830. However, this is less than the 6,114 cases filed in 2013. 2015 was also the first time since 2012 that cases rose between the third and fourth quarters. Cases rose 41.2 percent, which is the largest increase in the past 10 years. The reason is the U.S. Supreme Court's ruling to abolish Form 18 for patent infringement filings. This allows the party alleging infringement to navigate a motion to dismiss, even without listing the patent infringing products.
The Eastern District of Texas is still the most popular trademark infringement court. In 2015, it has 2,540 patent infringement cases. This represents 43.6 percent of the country's filings. One potential reason is the district's judge. Twenty percent of all U.S. cases are assigned to Judge James Rodney Gilstrap. The District of Delaware has seen the sharpest drop in infringement cases. The court now litigates less than 10 percent of the country's filings.
One reason the Eastern District of Texas and Judge Gilstrap have gained popularity is that they often side with patent trolls. Patent trolls have also become an important part of patent litigation. These companies seek and develop patents without producing any products. They license these patents to earn revenue. If you're a plaintiff, this court is the best choice. If you're a defendant, the courts of Delaware and Northern California are more receptive to your needs.
The Patent Trial and Appeal Board (PTAB) has stayed constant since 2014 with filings between 400 and 460 per quarter. Inter partes reviews are the most common type of filing. However, the last quarter of 2015 had only 375 filings. This is because weak patent claims need fewer re-examinations.
Trademark infringement cases remained consistent over the past 10 years. In 2005, there were 3,820 cases filed. In 2015, there were 3,449 cases. The high point was in 2014 when there were 4,282 trademark cases. This includes a huge uptick in third quarter 2014, which had 1,407 cases. Of those cases, about one-third were filed by National Football League (NFL) players against the league for using their likeness without compensation.
Copyright infringement cases dropped sharply since 2005. One interesting fact is that Malibu Media LLC has been the plaintiff in 4,332 copyright cases since 2009. Each of these filings is for file sharing. The next highest number of cases by a single plaintiff is 274. However, most filings are by adult media companies. Since 2009, file sharing cases such as Malibu Media LLC have an out-of-court settlement rate of 90.6 percent. This is a huge increase over other cases, which settle out-of-court just 64.1 percent of the time.
Patent Drawings in Patent Litigation
In 2012, a PricewaterhouseCoopers study revealed that more than 5,000 lawsuits were filed that year. This was an all-time record. Plus, each lawsuit had an average cost of $2.8 million. Because of the costs associated with patent litigation, many patent holders and attorneys are turning to improved patent drawings. Not only do quality patent drawings help you get a patent but they also protect against infringers.
Patent litigation is the worst scenario for a patent holder. With good drawings, litigation shouldn't even happen. Instead, it deters infringers from trying to steal your idea. Using computer-aided design and drafting (CADD) software is the best way to get quality and detailed drawings. You can also load them easily on your computer from a hard drive, saving time and money on resketching hand drawings.
The reason patent drawings are so important in patent litigation is because they educate judges, juries, arbitrators, and mediators on the patented product. They also help show your patent claims on the product. In some courts, attorneys might not be able to enter enlarged versions of patent drawings. Instead, they get a copy of the original patent application. The better the drawings, the better chance of a ruling in your favor.
If you need a patent drafter, look for one experienced in creating patent drawings. This should be for both the application and alternative dispute resolution (ADR). The more familiar you make this person with the patent, the quicker he or she can work. This saves money on a quality patent drawing. If you do go to court, patent drafters might be able to show the invention more clearly or in-depth. This includes 3-D animation or blow-up charts.
Many aspects of a patent drawing can help you in a court case. Size, position of elements, and clarity all help others understand your patent. Colors also help draw attention to parts in question. Generally, your patent drawing options in patent litigation cases include:
- Graphs and charts to simplify complex parts of your invention.
- Realistic animations to show differences and similarities between products.
- 3-D animations to show how a technology works.
- Powerpoint presentations, working models, or photographs.
Remember, the only drawings are used to decide infringement. Even proof of unfair competition is less useful in court.
If you're designing a patent drawing, remember that it needs the entire visual disclosure of the patent claim. According to the USPTO, this means that "nothing regarding the design sought to be patented is left to conjecture." This idea was central to the landmark court case of Gorham v. White. This case is the basis of the ordinary observer test, in which an ordinary observer must be able to determine that two inventions are the same. Because patent litigation looks at a product's design, visual aspects, and form, patent drawings are an effective means of defense and protection.
Recent Court Battles and Acts
Overall, patent litigation has seen a recent slowdown. One of the causes is Alice Corp. v. CLS Bank International (2014). This court deemed that business practices once thought to be patentable are not. This helped many defendants, such as Wal-Mart and patent trolls, have fewer dealings in court or suits against them. Cases that fall under the rulings of Alice are now getting dismissed quickly and inexpensively.
However, IPRs are a booming part of patent litigation. According to the USPTO, this type of case determines patent validity based on prior art. These cases are more popular than traditional cases because they are quicker and less expensive.
The 2011 AIA changed the landscape of infringement trials but not the trial's venue. And there's little reason to believe any legislation for patent litigation will come up in the near future. This is because of the changing parties of Congress, lobbyists, and other issues.
According to law experts, patent litigation is also slowing because of the amount of resources. Larger firms are putting lawyers on other cases and cutting budgets for smaller projects. To be considered by larger law teams, the settlement must be worth the effort. Other things that slow patent litigation are diversity of court cases and preparation.
Questions About Patent Litigation
- How long do I have to sue another company for patent infringement?
You must bring a suit within six years of the infringement date. After six years, the infringement becomes ratified. There is no legal recourse after this time. Proceedings can last any amount of time. Parties can agree to a timetable. They might also settle in courts with a "rocket docket." This aims to have cases settled within a year.
- Is patent litigation like other court cases?
Court cases involving patent litigation are similar to other court cases. They involve a plaintiff, defense, attorneys for both parties, and juries. The main difference is that the judge uses his or her own beliefs to decide what is patent validity and infringement.
- Where are court cases held?
The venue varies depending on the plaintiff. However, a major concern of defendants is that the trial is too far from their place of business. Calls to change this law are always on the debate table.
- Who can represent me in patent litigation?
In federal court, an experienced attorney is the preferred party. For PTAB trials, the counsel must be registered with the USPTO.
- What language are proceedings in?
All proceedings are in English. However, witnesses can testify through an interpreter if necessary. All other documents in foreign languages must come with a certified translation.
- What options do I have to enforce my patent?
You can file a civil lawsuit, which includes an injunction, a declaratory judgment, and monetary judgment. A border settlement prohibits importing the infringing good into the country. Currently, you can't file criminal charges against an infringer.
- What are some other considerations for patent litigation?
Do not file a cease and desist letter. This can be used to get a declaratory judgment by the infringer. U.S. courts can also recognize cross-border injunctions. However, they do not wait for pending litigation in foreign countries.
Patent litigation is a complex topic that needs the attention of qualified attorneys. If you need help with patent litigation, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.