Protecting Your Business From Patent Infringement Lawsuits
Patent infringement is a serious concern for any business owner producing a new invention or product. The US Patent and Trade Office (PTO) has concluded that piracy, counterfeiting and theft of intellectual property costs American businesses $250 billion and 750,000 jobs per year.
While most business owners are understandably concerned about other companies infringing on their patents, far fewer entrepreneurs understand how easily they can be sued for infringing on the property rights of other businesses.
The average cost of a patent infringement lawsuit is $2.8 million, according to the American Intellectual Property Association. Even if you were unaware that the product you “invented” is already under patent, you can still be sued. Ignorance of the law is not protection from it.
Why Should You Be Concerned About Patent Infringement?
- Cost. Defending a patent infringement lawsuit will cost anywhere between $1 and $5 million. And if you lose, you will also be held liable for damages, which may be many millions more.
- Time. Patent litigation is time consuming. The average time to trial for a patent lawsuit is 2.5 years. Since an injunction is generally the first step in patent litigation, you will not be able to sell your product throughout that period.
- Customers. The patent-holder may be able to sue not only your business but your customers as well, since they are currently using a patented product. This would undoubtedly put an undue strain on your business relationships.
Common Mistakes Business Owners Make:
- Assuming You Know Your Industry Patents
Many entrepreneurs believe they are well aware of all the patented products within their industry. But the truth is that a patent-holder may never have brought the product to market, in which case no one knows about it. Or the patent-holder may be selling the product within a very limited geographic market, making it unlikely that the product is widely known.
- Assuming Patent-Holders Won’t Sue
Often, the only reason to go through the lengthy process of obtaining a patent is to sue someone for damages in the case of infringement. A patent doesn’t really protect an inventor, but it does allow for compensation. Many entrepreneurs assume that only wealthy patent-holders will sue, but this is a dangerous and misguided assumption. It also ignores the fact that a patent could be sold to a wealthy conglomerate with ample resources for long, expensive litigation.
How to Protect Your Company From Patent Infringement Lawsuits
Searching Existing Patents
The PTO keeps an online database of every US patents. Searches can be narrowed by Patent Number, Issue Date, Description/Specification, Applicant Name, Applicant State and City, and multiple other categories.
The PTO has created a Seven Step Strategy for searching through its patent database. It also offers a more detailed 7 Step Patent Search Strategy Guide handout.
Patent searching can be difficult work. It may not be obvious exactly how to conduct the search. For example, a larger company may own a patent under a subsidiary name that you are unfamiliar with, and thus patent searches under the main company name may turn up nothing.
Difficult though they may be, patent searches are free and may save you a lot of heartache down the road.
Know the Competition
While it is impossible to know every competitor and their products, this does not mean that you should ignore the competition altogether. Researching competitor products will allow you to determine which products are under patent and which products are not.
Researching the competition can also reveal invalid patents. For example, utility patents require maintenance fees. Your research may uncover that your competitor has failed to pay scheduled maintenance fees, which invalidates the patent.
Reviewing Patent Claims
Within every patent are the Patent Claims. Patent Claims define the particular “meets and bounds” of the patent. If your product exists within the boundaries of the claims, then it is likely eligible for a patent infringement lawsuit. If, however, it is clear that your product falls outside what the claims describe, then you may be off the hook.
It is important to note that only a court of law can determine whether or not your product has violated the claims of a particular patent.
When studying Patent Claims, be sure to take note of which product the claims apply to. When filing a patent, many inventors will disclose multiple inventions, but the claims sometimes apply to only one of those products.
Patent Infringement Insurance
There is insurance for everything it seems, and patent infringement is no different. You can purchase a patent infringement insurance policy to protect your business in the event that you are sued for infringement.
PI covers the legal costs associated with an accusation and trial. Given the enormous costs of litigating a legal suit, PI coverage should be viewed as a fair bargain.