Startups are increasingly vulnerable to demand letters and lawsuits from “patent trolls” looking for opportunities to extract quick settlements from small companies with limited resources to defend against claims of patent infringement. To protect your business, developing a thoughtful approach for responding to such non-practicing entities is essential. Here are 5 tips for moving forward:
1. Don’t Panic. When confronted with a patent demand letter or infringement lawsuit from a non-practicing entity, it is perfectly understandable to be upset. You have likely invested substantial sums of money into your business and/or product, and now feel that the investment is under attack. Maintaining your calm, however, will better enable you to think clearly and strategically about next steps.
2. Call An Experienced Attorney. Patent laws are complex and ever changing, so hiring experienced patent counsel is often critical to moving forward. While legal fees associated with a claim of patent infringement may not be a welcomed cost for a new startup, experienced counsel may be able to recommend low-cost strategies for quickly resolving the matter.
3. If You Choose To Settle, Go For Broke. Even if your gut instinct is to fight back, for small startups with limited resources, a quick settlement is sometimes the better decision in order to avoid the uncertainty of litigation and overall business disruption. Experienced patent counsel may decide that it is better to inform the patent troll upfront that you simply cannot afford a massive settlement, but that you are willing to work with them to reach a resolution that makes the most sense for your company.
4. If You Choose To Fight, Find Strength (And Savings) In Numbers. The good news is that you are likely not the only company out there receiving such a demand letter or being sued by the non-practicing entity. Patent trolls often assert the same patents against numerous entities. Pooling resources to form a joint defense strategy or sharing invalidity analysis with similarly situated companies is often better than shouldering the financial burden alone and may substantially reduce the time and cost to defend the litigation.
5. Think About Challenging The Validity Of The Patent In The U.S. Patent and Trademark Office. As an alternative to litigation, consider challenging the validity of the asserted patent in light of prior art (such as prior patents and printed publications) in a post-grant proceeding before the U.S. Patent and Trademark Office. Such proceedings typically cost less and are resolved more quickly than federal court litigation, and may possibly result in a stay of any pending federal court litigation involving the same patent.
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