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Patent troll litigation has received some excellent media exposure this summer. First, Chicago’s Ira Glass and his This American Life team put together a phenomenal hour-long program dissecting the patent troll phenomenon – if you have not listened yet make the time, it is very well done. More recently, Santa Clara University Professor Colleen Chien wrote an article for Forbes discussing ideas for “turning the tables” on patent trolls. Chien calls trolls “modern-day robber barons” and troll investors “suckers.” Chien then points out that traditional patent trolls have found ways to overcome the traditional barriers to suit – legal fees and countersuits. It is generally difficult to file substantive counterclaims against trolls and trolls routinely use contingent fees to avoid up-front costs, while suing multiple entities to increase the size of recovery. Chien then suggests some strategies for defending against trolls and removing the defense-side barriers: a) alternative fees; b) shared defensive efforts; and c) creating non-profit trolls.
At a basic level, Chien makes good points, but she does not offer concrete proposals to advance your troll defense efforts. Here are four ways to defend against patent trolls more effectively and more cost efficiently:
- Partner With Counsel. Although Chien does not specifically say it, many of her suggestions point towards the need to align a corporation and its counsel. Many troll cases are not a significant exposure to the corporation in terms of damages. The cases are more an expensive distraction from business, than a threat to a core business or corporate solvency, as competitor cases often are. It is critical that both the corporation and its counsel understand where the case sits on this spectrum. Corporations have to treat bet the company cases differently than non-core, nuisance suits, and outside counsel need to also. Once counsel knows how you value the case, they can structure your defense based upon your business realities. This is the first step in aligning the interests of a corporation and its counsel.
- Align Fees With Corporate Goals. Once corporate and counsel interests are aligned, it will be far easier to identify the best fee structure for the case. I will discuss several alternative fee structures that I have used effectively in a future post. But at a high level, you can consider: a) success fees, with success defined both by winning the case and the monetary cost of the win; b) withholding a portion of fees to be paid plus a kicker, after a win; and capping or fixing fees by month, quarter or litigation phase – there are a variety of ways to fix or cap fees, but the key is creating the budgeting consistency that the corporation needs.
- Do Not Just Join the Joint Defense, Use it Strategically. Chien also suggests working with joint defense groups. Joint defense groups are common in patent litigation, but joining the group and riding its coattails is not enough. If you want to get real value out of a joint defense group, you must participate strategically. That may mean you want to lead the group or that you want to take a less active role. Whatever role you choose, the key is to make that a strategic decision, not just a decision by default. You should define goals for the joint defense, both individually and as part of the group. And whatever role you choose, make sure the group is meeting your goals.
- Create Cost Sharing. You can take some cases further by considering a joint representation, where one set of counsel represents multiple clients. This only works where the accused products or methods are identical or extremely similar. When it does work, you can generate significant cost savings. But you have to be careful, if your product is different from the groups’ in material ways you may begin to feel underrepresented. Also, if you enter a joint representation where you are not the key defendant, you should consider hiring shadow counsel to make sure your interests are fully protected.