United States: Patent Teamwork - Companies and Outside Counsel Can Manage Litigation Together to Minimize Cost and Disruption

With the recent proliferation of patent litigation, technology companies must come to terms with the fact that they are either currently a party in a patent case or likely to be a party in a future patent case—or perhaps both. While the number of patent cases filed has increased dramatically, the cases have also become larger, more complex, and substantially more expensive to litigate. The increasing frequency and higher cost of patent cases have made them more difficult for companies to manage. Paradoxically, the size and complexity of these cases has made it even more important for the people responsible for effectively managing them to maximize the possibility that the ultimate resolution fits within the company’s business goals, to control costs to the extent possible, and to minimize surprises as the case proceeds. Of course, talking about effective litigation management is one thing; actually doing it is quite another. So, how can outside counsel and corporate management better work together to administer a complex patent case?

The simple answer is through communication—and this communication needs to begin as early as possible. That means for a plaintiff, long before a suit is filed, and for a defendant, as soon as it becomes aware of a potential claim. Early on, management and litigation counsel must fully and frankly discuss the company’s litigation goals. Does the company want to aggressively litigate the case, or would it prefer reaching a quick settlement? Is the product at issue a critical one? Will a resolution of the case likely involve only a payment of money, or will other potential solutions be available, such as acquisition or a joint venture? It is absolutely critical that the company clearly have in mind what it would like to accomplish with the litigation, that it communicate its goals unambiguously to its counsel, and that counsel understand those goals.

A second topic for early discussion between management and outside counsel is the likelihood of succeeding on the various issues that will be decided in the lawsuit, and this discussion should shape the goals and desired strategy of the case. The analysis must frankly cover not only the issues on which the client may succeed but also potential pitfalls. Indeed, it may be even more important to thoroughly and realistically assess the weaknesses of the company’s position and formulate methods for dealing with those weaknesses. A litigator does not serve his or her client by avoiding problem areas, because the other side cannot be counted on to miss the client’s vulnerabilities. By the same token, management should not think of outside counsel as weak or not a team player simply because counsel wants to focus on what might go wrong. It is far better to understand and prepare for these problems early on than scramble to deal with them later in the case.

Evaluating the likelihood of success should begin with an identification of critical issues. The strengths and weaknesses of each one should be fully vetted, with counsel and management trying to reach a consensus on the likely outcome of each issue. Assigning a percentage to the chance of prevailing generally has little real value because such an assessment would be arbitrary. Certainly, a company wants to know whether it is more likely than not to prevail, but there is no meaningful difference between estimates of a 60 percent probability of winning and 70 percent, particularly because patent litigation involves many unquantifiable variables.

The company’s goals and assessment of the overall likelihood of success should shape the strategies it follows in conducting the litigation. The strategic decisions to be discussed and agreed on include the claims or defenses to raise, whether to request a jury, where to file the lawsuit (or, for a defendant, whether to attempt to transfer the case), and how aggressive a litigation posture to adopt. Again, management and litigation counsel should reach a consensus on all strategic issues.

Another topic that probably does not get as much attention as it should, because of its awkwardness, is cost. Nevertheless, this discussion has to take place early in any matter. Of course, attempting to develop any kind of realistic cost estimate for complex litigation is in some ways a fool’s errand because there are so many unknowns—particularly at the beginning of a case. But it is still a valuable exercise. The client, however, must recognize that a cost estimate is just that and should be aware that the actual costs will almost certainly deviate markedly—most likely upward—from the estimate.

In preparing a cost estimate, litigation counsel should try to be realistic. Patent litigation is expensive, and management needs to understand and accept that hard fact up front. It is far better to have a client face "sticker shock" at the beginning than to have it unpleasantly surprised by costs after it is well into the litigation. Additionally, if a company expresses concerns about costs early in a case, that presents an opportunity for management and counsel to work together to address those concerns by reassessing goals and strategies in light of the costs.

The level of management’s participation in some of the nuts-and-bolts aspects of litigation—from propounding and responding to discovery, to brief writing, to dealings with the other side—varies greatly from case to case and company to company. Some clients want to review all discovery, attend every deposition, edit every brief, and receive copies of all communications with opposing counsel. Others want to be informed only of significant events. Both approaches are reasonable. Outside counsel needs to understand the company’s expectations from the beginning and should work closely with his or her con-tact within the company to establish procedures enabling the client to participate in the case as much—or as little—as the client likes.

The company’s active participation is vital in two areas: the internal investigation into the issues raised by the litigation, and responding to discovery. Good practice—not to mention Rule 11 of the Federal Rules of Civil Procedure—calls for a company to conduct a thorough internal investigation before commencing or responding to a lawsuit. Typically, both management and outside counsel should work on this investigation, with management at the very least playing the critical role of acting as go-between for counsel’s dealing with company personnel. Similarly, management needs to provide hands-on assistance in responding to discovery by taking the lead in such tasks as identifying key employees, identifying and obtaining relevant files (including electronic files), and making employees available to outside counsel for interviews and, if necessary, depositions. Because most litigation is won or lost on the facts, the ability of management and litigation counsel to function as a team in these two crucial areas can make or break a case.

Though it is essential that management and counsel have comprehensive discussions on each of these subjects at the beginning of a matter, they should also revisit them periodically throughout the case. A patent case can go on for years and will frequently develop a life of its own. Issues that seemed important in the beginning may be replaced by others no one had considered before. Accordingly, the events of the litigation, as well as changes in the company’s business circumstances, can have a profound effect on the company’s goals, strategies, anticipated expenses, and approach to the litigation. Substantive conversations between lawyer and client should take place not only early but often, so that they are in sync at every stage of the case.

Patent cases can be a daunting experience for any company. They can be made less so by effective litigation management, which is largely a product of effective coordination between company management and outside counsel. Although this will not guarantee the result the company wants, it will greatly improve the chances of obtaining that result.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.