Digital Media Patents for Profit

Be Prepared
What should corporate and outside counsel do to defend their clients against infringement allegations and possible payouts? The first rule of defense is prevention: companies should work with counsel during the development phase of their business to determine if patents relevant to their technology and products already exist in the market. If your company is approached regarding a potential licensing agreement, you can work with counsel to examine the opportunities, costs, and risks associated with that agreement. Should your company be faced with the threat of litigation, corporate and outside counsel may want to engage technical, industry, and economic experts to develop a comprehensive, fact-based perspective on the issues at stake.

This process should begin with a clear understanding of your products and services and your own patent portfolio, as well as an assessment of the presence and value of external related patents. Such an assessment can be complex and frequently requires the help of experts with specialized knowledge of the industry and the technology at issue who will, at a minimum, address five key issues:
--Ensure that you establish the validity of your/your client’s patents;
--Research patents and prior art (publicly available information) that may be relevant to your/your client’s products and services;
--Help determine whether you or your client are infringing if you are approached by an IP owner regarding a potential license;
--Weigh the costs and risk of litigation versus the licensing fees in comparison to the value you assign to the patents at issue;
--Assess the fundamental importance of the patents at issue to your overall business and technology strategy.

Confront Litigation Wisely
If licensing discussions fail, leading to the threat of litigation, it is critical for the target company to thoroughly assess its strategic options and accurately quantify risk. Especially where emerging technologies are involved, this can be a complicated endeavor, requiring experts with specialized knowledge of the industry sector, including products, pricing, and market dynamics; of the legal issues associated with intellectual property; and of the economic issues involved in settling and/or litigating. At a minimum, this response will entail three elements:
--Assessing the fundamental importance of the patents at issue to your overall business and technology strategy (a "pay or fight" decision);
--Determining the validity of the patents and whether your/your client’s products and services infringe those patents;
--Weighing the costs of litigation versus settlement (again, in comparison to the value you assign to the patents at issue).

A rigorous economic analysis can help you make an informed decision at the start of the evaluation process, based on a thorough assessment of the business and economic implications of each available option. Conducted either in advance of any potential litigation or in connection with an active lawsuit, such an analysis would focus on economic as well as technical issues: competitive market conditions, the value of the patents at issue to sales and profits, the likelihood and amount of damages, alternative technologies to those allegedly infringed, and technical differences between your technology and the technology you allegedly infringe.

Focusing on the Economic Issues
Given the increasing frequency and potentially huge costs of IP litigation, companies considering the threat of patent trolls would be well-advised not to get enmeshed in debates on fairness or morality issues regarding patent trolls, or any other patent litigation, at the expense of preserving their business. Instead, they should address infringement allegations by a patent troll as an economic issue and work with knowledgeable legal counsel to minimize exposure during product development and prepare thoroughly for litigation. Companies such as Acacia or MercExchange will likely continue to be centrally involved in multiple patent infringement claims. These firms and their business models are driving change in the way courts evaluate claims, relief, and patent validity. The result is a challenging new landscape that target companies must address with a rigorous, proactive attitude toward presenting or defending the claims.

To learn about the latest developments on the Acacia DMT patents, visit StreamingMedia.com’s Acacia Research Patent Education Page.

For the footnotes to this article, see the next page.