Should I avoid examining our competitors’ patents?

QUESTION:

I know that my competitors have been granted patents in our space. Should I avoid examining these patents? I’ve heard that if I do, I may be committing willful infringement and have to pay 3 times damages.

ANSWER:

by Joshua Masur at Turner Boyd LLP

The answer is that, unfortunately, there’s no easy answer other than the old saw: Consult your lawyer. But it’s really going to come down to a risk-reward analysis.

On the risk side, as you point out, a willful infringer can be liable for up to treble actual damages and an “exceptional case” finding, which typically shifts the patentee’s attorneys’ fees to the infringer. The law used to require that once the infringer actually knew about the infringed patent, that infringer had a duty of due care to avoid infringement. The conventional wisdom at the time was to avoid knowledge of competitors’ patents to avoid triggering the duty.

But a few years back, the Federal Circuit — the appeals court that hears all patent cases — abolished that duty of due care. Today, to find infringement willful, the patentee has to prove both (a) that, viewed from the perspective of an objective observer, rather than the accused infringer, there was “an objectively high likelihood that [the infringer’s] actions constituted infringement of a valid patent”; and (b) “that the infringer knew or should have known of this objectively high likelihood.” Trading Technologies Intern., Inc. v. eSpeed, Inc., 595 F.3d 1340, 1357 (Fed. Cir. 2010)) (quoting In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc). That means it’s now more difficult for a patentee to prove willful infringement.

Unfortunately, those changes are relatively recent, legally speaking, and haven’t been fully hashed out by the courts. I’m not aware of any case under the new standards that conclusively resolves the question of whether an infringer who’d examined the patent on his own initiative was liable for willful infringement. But remember that a court would only perform this analysis after finding that the infringer was, indeed, an infringer, which means by definition that it’s considerably more likely that an objective observer — the court — would consider there to be an objectively high likelihood that the infringer infringed. So the risk is still there, even if it’s not as harsh as it once was.

So that’s the risk side of the equation. How does it balance against reward? YMMV, of course, but typically, the potential reward is the ability to avoid infringement, whether by doing something differently or negotiating a license. And unfortunately, this is where you really need your own lawyer.

As a practical matter, determining whether a patent is in the same general space as your product or service is often deceptively easy. But since there are probably hundreds, even thousands, of patents in your space, that information isn’t usually terribly useful. By contrast, determining whether your product or service actually falls within the claims — the numbered paragraphs at the end of the document, which set the scope of the patentee’s legal rights — requires understanding how to interpret those claims. And more often than not, that process is anything but simple and straightforward, and requires at least some arguable objectivity that the accused infringer really can’t claim. That means that there isn’t usually much upside to you from examining your competitor’s patents.

Bottom line: Talk to your lawyer. But ordinarily, even if the amount of risk involved in looking at your competitors’ patents has diminished in recent years, the potential reward doesn’t justify that risk.