The following article appears in the journal JOM, 44 (5) (1992), p. 66. JOM is a publication of The Minerals, Metals & Materials Society

Patent Infringement—Is It Better to Fight or Switch?

When one receives a cease-and-desist letter or a complaint filed in a federal court charging patent infringement, a major evaluation and decisions must be made. In general, this evaluation involves a team effort, including people having expertise in commercial, technical, and legal aspects of the claim.

One threshold question is whether there is a significant risk of a particular practice being held to violate a patent. The patent claims may cover a product, apparatus, process, composition of matter, or design (for simplicity, these categories of patentable subject matter are referred to here as "technology.") In evaluating an infringement claim, one generally determines two things:

• Whether the technology falls within the claims and thereby infringes.

• Whether the claim is valid.

A prior Materials Matters article (July 1990, page 46) dealt with evaluating patent validity. Additional considerations may include how meaningful the particular technology is to one's business and designing around the patent to avoid future infringement. Also, the possibility of obtaining a nonexclusive license should be considered.

The legal and technical evaluation will generally begin by comparing the technology with the patent. Particular emphasis should be placed on the claims. If the technology does not satisfy every recital of the patent claim, the claim is not literally infringed.

There remains the possibility that the patent could be infringed under the doctrine of equivalents. This occurs when one is employing essentially the same technology, in essentially the same way, to achieve essentially the same result. Such infringement can exist, therefore, where there is no satisfaction of every recital of a claim. In evaluating this issue, it is important to review the Patent and Trademark Office (PTO) prosecution file history, which contains the written communication between the applicant and the PTO that resulted in the issuance of the patent. This will provide some insight as to whether (while prosecuting the application) the applicant restricted the claims in such a manner as to preclude an effort to broaden the claims under the doctrine of equivalents in asserting infringement.

For example, if the applicant was initially seeking to obtain a claim for "metal vehicle wheels" but, as a result of a prior art rejection, amended the claim to "aluminum vehicle wheels," the applicant would be precluded from asserting the claim against steel wheels. One cannot tell the PTO that he or she desires coverage subject to certain specific limitations and, once having obtained the patent, seek to ignore such limitations when enforcing the patent.

Another aspect of determining if the doctrine of equivalents is available is to create a hypothetical claim that is a modified version of an actual patent claim and is broad enough to embrace the technology. One then determines if the hypothetical claim would be valid over the prior art. If not, there could be no violation of the patent.

Assuming that it is concluded that there is a reasonable likelihood of the technology being held to infringe a patent, either literally or under the doctrine of equivalents, the next step would be to investigate validity. If the patent is not valid, it cannot be infringed.

Another aspect of the evaluation includes what the potential exposure will be for prior infringement. The patent owner may demand compensation for past activities, even if one is willing to terminate use of the technology or to modify the same so as to avoid future infringement. With respect to past activities, if the technology is susceptible to marking with the appropriate patent notice identifying the patent number and the patent owner has so marked the product, apparatus, composition of matter, or design, the patent owner may collect damages from the date the marking was initiated. If not, the earliest date from which damages may be collected is the date the alleged infringer received actual notice of the claim of infringement.

If, as frequently occurs, one concludes that there are meaningful arguments on both sides of the issues of infringement and validity (and there is, therefore, a meaningful degree of risk of liability), a decision must be made as to whether to fight or not. This decision will be based, in part, upon the out-of-pocket costs involved in defending the litigation, the likelihood of success, the commercial importance of the technology to the alleged infringer, the amount of potential liability for past infringement, and the likelihood of avoiding infringement as to future activities by designing around the patent. Once decisions are made on this basis, the probability of amicably resolving the claim by a settlement which would, at minimum, extinguish claims for prior infringement and might also include a license for future activities—can be explored.

In considering exposure, one must also evaluate the potential remedies available to the patent owner. The owner might be seeking a preliminary injunction requiring the alleged infringer to stop making, using, and selling the technology pending litigation and a permanent injunction requiring such conduct after litigation. In addition, the patent owner might be seeking damages that, by statute, can be measured by the profits of the alleged infringer or the lost earnings of the patent owner. In any event, the damages would not be less than what a reasonable royalty would be if the technology had been licensed. In addition, if it were concluded that the infringement was willful, the court has the power to increase the damages up to treble the actual damages. In exceptional cases, the losing party may be required to pay the other side's attorney's fees. The court may also require payment of costs and interest.

It is also important to note that, with greater frequency, courts are holding corporate executives personally liable for patent infringement if they had active involvement in the decision to engage in an infringing activity.

If it is concluded that there is no liability as an infringer, it is desirable for the attorney to provide a comprehensive written opinion that recites the materials that were reviewed and contains a detailed analysis of the evaluation and the conclusions reached. It is important to bear in mind that such opinions must be thorough, as the courts are generally unwilling to permit one to assert a good faith reliance on the opinion of counsel when the opinion was superficial.