Defending Patent Licensing Demands (Part I of III)

I. Evaluate and Respond to the Demand

According to a 2011 patent litigation study, the median patent infringement award in U.S. courts over the past 16 years was $5.1 million – and that doesn’t include attorney fees. Fortunately, most demands can be disposed of by in-house counsel, without licensing or litigation. This is the first of three posts discussing basic strategies for companies to resolve licensing demands internally at little or no cost.

The first step is to evaluate the severity of the demand. Examine the demand letter. Does it target your company specifically or appear to be part of a mass-mailing? Is it addressed to a named individual or “Dear General Counsel”? Does it identify specific products or refer broadly to a vague category of products? Is it phrased as a cordial invitation to “license early” or a firm notice of infringement?

Perform a Google search on the patent owner and patents. Are they well-known and feared or small and obscure? Have they been involved in prior litigation and licensing with major companies or is your company the first target? Are the patents registered where your company has substantial manufacturing or sales or not?

Talk with your business unit. Is it true your company sells the accused product? What was your past sales volume for that product; what is the future forecast? Make sure you receive figures for just the region covered by the patents. If volume is trivial, it may not be worthwhile for either party to spend time or money on the matter.

Talk with your engineers. Does it appear your company may be using the patents? Does the problem lie in design? Components? Compliance with industry standards? Is it the fault of your company, your suppliers, or your customer? Can use of the patents be avoided by switching suppliers or designing around?

Respond promptly in writing to show good faith and put the ball back in their court. Send a list of further information required. Does the demand specifically identify the accused product and relevant patents? (I recall one demand that referred cryptically to “certain patents related to semiconductor products.”) Ask them to identify all relevant patents and products (by model number). Request a claim chart and copies of the patents. Assure them you will look into the matter, but cannot respond further without such information.

Often that will be the end of it. Many licensing demands are mass-mailings, casting a wide net without having actually evaluated the use of the patents in your products. Once you call their bluff, they may find it too much trouble to pursue the matter further. Moreover, even with more legitimate demands, one will almost always benefit from delaying the matter, buying time and gathering further information, while courteously demonstrating good faith.

While I prefer to always respond politely and put the ball back in their court (which has worked for me), I’ve heard others sometimes prefer ignoring the demand. Would you ever refuse to respond? When?

If you have any questions, please contact our Taiwan patent attorneys.

One thought on “Defending Patent Licensing Demands (Part I of III)

  1. Pingback: Managing Costs of Patent Litigation - International Tech Law Blog

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