Patent disputes are on the rise. 101 patent infringement actions were filed in in the Federal Court in 2013 as compared with 48 patent infringement cases in 2012. As we explained previously, part of that increase is due to an increase in oil and gas patent litigation. This raises the question; what do you do when you discover that your patent has been infringed?
On April 23, we met with in-house counsel and other industry leaders at our new Calgary office to discuss the eleven steps that a patent holder in the oil and gas sector should consider once it discovers that its patented technology has been infringed. By taking the 11 steps outlined below, a potential plaintiff will put itself in the best position to deal with infringers.
1. Investigate Patent Portfolio
Your first step is to understand which patents you own, and which patents you may acquire, that are likely infringed. This step can be challenging since the infringer’s infringing activities may be poorly understood as they may be located underground. Public filings to investors (e.g. corporate filings) or the general public (e.g. websites, patent applications) may provide sufficient insight to commence and sustain an action through the discovery phase when detailed information may be produced.
Acquiring rights to a patent, with the intention of asserting it in a lawsuit, is a seldom used but available strategy. The plethora of patents in the oil and gas sector, including similar patents relating to similar technology, makes this a viable option worth considering, especially if the alternative means asserting patents that are likely weak.
2. Infringement Opinion
Is it worth commencing a patent infringement lawsuit? To fully understand the answer to that question it is necessary to understand your chances of success, and to understand your chances of success you need an infringement opinion.
Infringement opinions may not be standard, but they are common. Many patent litigators and patents agents prepare infringement opinions. Such opinions typically involve a preliminary analysis of the likely construction of the claims, a comparison of the claims properly construed to the impugned activity to determine infringement, and an analysis of the validity of the patent based on its internal structure and the prior art that preceded it.
Market realities can render this step irrelevant, for instance if money is not a rate-limiting step for the patentee. But for close calls, an infringement opinion can provide valuable information upon which to base your opinion.
3. Business Considerations
Before you send a demand letter or commence a lawsuit against a company, consider your current or potential future business relationships with that company. If you have a business relationship worth preserving, a lawsuit, threatened or initiated, may not be the best strategy to resolving the conflict. When considering how you will respond to an infringer, consider how the infringer will respond to your action.
In short, where business relationships exist, business solutions may be superior to legal solutions.
4. Demand Letter
A demand letter puts the opposing company on notice of your rights and typically threatens litigation if certain actions are not taken.
There is no requirement that you send a demand letter prior to commencing litigation, and it is questionable whether a demand letter will assist with achieving elevated costs or damages should you be successful at trial. The primary value of a demand letter is to create a dialogue with your opponent that may result in a resolution that avoids litigation. Accordingly, a demand letter should typically be worded to achieve that objective.
Be cautious before sending a demand letter. Receipt of a demand letter allows the infringer to prepare for impending litigation, including by retaining counsel, retaining experts, and to put its company in the best position to respond to litigation if/when commenced.
Patents are territorial. If you own a Canadian patent and wish to enforce it you must sue in Canada. Two options are available: the Federal Court and Provincial Courts. How do you decide which forum to select?
Patentees typically file in the Federal Court because of the familiarity of patent counsel with the Court, the expertise of the Court for dealing with patent matters and the speed with which actions can be prosecuted (potentially two years, which is less than typical in Provincial Courts). Also, injunctive relief, should it be granted by the Federal Court, would have Canada-wide scope without the need to bring an application in multiple Provinces to enforce a Provincial order.
That said, Provincial Courts have inherent jurisdiction over patent disputes, and in the right dispute where the infringing activity is localized in a Province a provincial proceeding may be advisable.
6. Canada vs. US
If you own both Canadian and US patents you may commence two litigations, or, select the forum which best suits the dispute. If the infringing activity takes place in Canada a Canadian lawsuit may be desirable, particularly since Canadian litigation can be much less costly and a successful result north of the border may achieve benefits south of the border.
The issue of forum in US litigation is notable since various jurisdictions are regarded as being more patent friendly than others. Experienced US practitioners are familiar with such distinctions and should be consulted.
7. Patent Counsel vs. Litigation Counsel
Typically, firms that prosecute patent applications do not also litigate such patents once issued, even where they have litigation expertise at their firm. The reason for this discrepancy may lie in concerns relating to privilege and liability exposure if litigation is unsuccessful.
Whatever the reason, you must retain a patent litigator if your objective is to commence a lawsuit. Patent agents are typically skilled at obtaining patents through their correspondence with CIPO but have less experience moving litigation forward in the Courts to a successful resolution.
8. Benefits / Drawbacks of Commencing Litigation
There are numerous advantages to commencing litigation. The primary advantage is the potential for injunctive relief which can help you maintain or re-establish market dominance. Even where significant sums of money are at stake, injunctive relief is often the primary objective.
Downsides to commencing litigation involve the time, effort and expense required to successfully manage litigation, the diversion of focus from the core of the business and the resources that are diverted to resolve the litigation. Some of these concerns can be addressed by experienced patent counsel. However, it is important for the business to commit itself to seeing litigation through to the end before it decides to commence a lawsuit.
9. Lawsuit Timeline
Quick resolutions to litigation are the exception, not the rule. Most lawsuits continue through the discovery stage which can take a minimum of a year. For cases that proceed to trial a reasonable estimate for the duration of litigation in the Federal Court is presently two years. Be ready to support the litigation for at least two years when you decide to commence the action.
Provincial Courts are typically slower, particularly where uncooperative counsel are retained to represent the alleged infringer. The Federal Court is better equipped to deal with intransigence and keep litigation on a path towards resolution.
10. Retention of Experts
Finding the best expert for the technology at issue can be an important factor in the successful resolution of your case. Especially in a field where there are a limited number of properly qualified experts, as is the case in some areas of oil and gas technology, consider retaining an expert before you give your opponent notice that you may be commencing litigation. Your expert may also be able to assist in determining whether or not you should commence litigation at all.
Because retaining an expert and paying an expert are different things, there is no downside to retaining more experts than you will likely require at trial. Such steps may limit the pool of experts for your opponent to draw from. Note, however, that some experts may demand minimum guarantees in terms of remuneration in order to accept a retainer, making this an expensive proposition.
The likely remedies available to a patentee who successfully litigates his or her patent are:
- Damages or an accounting of profits
- Injunction (permanent and temporary)
- Destruction of goods (“delivery up”)
- Declaratory relief (infringement / validity)
As mentioned above, the key relief sought is often, though not always, injunctive relief.
Deciding to commence a patent infringement action is a serious, but sometimes necessary step for a business. Consider the steps above before filing your Statement of Claim and you will likely place your company in a better position.