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Q: Litigation Cost Control Strategies ( No Answer,   9 Comments )
Subject: Litigation Cost Control Strategies
Category: Business and Money > Small Businesses
Asked by: mindsponge-ga
List Price: $50.00
Posted: 04 Nov 2006 23:50 PST
Expires: 04 Dec 2006 23:50 PST
Question ID: 780212
Please consider the following hypotheticl situation.  A large, well
financed company decides to sue a small, not so well financed company
for something that the small company is clearly innocent of. In this
hypothetical case, let's assume the small company is accused of
infringing a patent of the large company.  The large company knows it
has no case, but tells the small company that it could come to
settlement terms (staying out of the market or providing a cross
license) to avoid potentially devastatingly high litigation costs for
defense.  The bid company does not even bother to assert that it is
right in its accusation, but just threatens the small company with the
thought of having to   spend heavily to defend against a future suit. 
 The large company's only threat is to force the small company to
spend itself to death in defending itself. The small company does not
deem it to be a life or death matter to actually win if a suit is
filed.  Given this hypothetical
situation, is there any practical way for the small company to just to
let the big company sue and procede to spend almost nothing on
defense, while delaying matters, or somehow move up the court date.
Or, does the small
company have to spend huge dollars just to show up on court?  A good
answer would contain a commentary and a listing of legal actions it
must respond to, and those which it does not have to respond to.

Request for Question Clarification by pafalafa-ga on 05 Nov 2006 09:45 PST
You've postulated a case which is totally frivolous, and where the
outcome of the lawsuit is a certainty.

Such a set of circumstances is exteremely unlikely to exist, though I
suppose it is in the realm of possibility.

If it occurs, my question would be...why does the small company want
to minimize litigation costs.  Perhaps they should maximize thier
costs, file a counter-suit built around the negligience and apparent
extortion of the original action,  and reach into the deep pockets of
the big company.

For a "sure thing" lawsuit, they should be able to find a law firm to
take the case on a contingency basis -- that is, the firm gets a large
percentage of the award, with little or no upfront costs to the small
company themselves.

However it works out, though, the small company doesn't really have
the option to ignore the suit.  There will be discoveries,
depositions, and other matters that the company will be obliged to
respond to.

Let us know a bit more about your thinking and your intent here...What
sort of information (beyond that just provided) are you looking for by
way of an answer to your question?


Clarification of Question by mindsponge-ga on 08 Nov 2006 20:56 PST
I will try to clarify a bit.  The question, as written, is
hypothetical so as to get some rough ideas as to figuring out a
response to a real situation.  The real situation is that the small
company developed a product and filed for its own patents.   The big
company is big from the perspective of the small company, but is
really not too big, but has over $100 million in sales per year and is
publically traded.  The big company has about half of its revenue from
one product. Clearly, it wishes to protect its turf by whatever means
it can.  The small company wishes to compete with what it is confident
of is a non patent infriging product.  The big company sent out a
cease and desist letter. The letter was very much threatening and
would be enough to qualify the small company to sue for a declative
judgement.  Going for such a judgement takes lots of time and money
and causes lots of distraction from getting a product on the marktet.
The big company's patent attorney states to the small company that it
could cost millions to defend against an infringement suit, and it
would be up to a judge to decide the matter.  Their attorney had no
interest in discussing the merits of the case, presumably because he
knows there is not merit.  He just  emphasized the cost of defense
from such an action.  This is clearly a bullying   tactic.  The small
company had its very high end patent firm respond, clearly showing
there is no infringment.  It was even pointed out that there was no
legal option to claim doctrine of equivalency, due to the poor
drafting of their claims.  The big company's current patent firm is
actaully using a poorly drafted patent which it acquired from yet
another small firm that used a second rate law firm for its
preparation. After getting the reply stating no infringement, the big
company invites the small company in for a face to face meeting on the
matter.  The small company declined, seeing no upside since it wishes
to compete in the marketplace and not sell out under threat of a bogus
suit.  The big company responded that they would escalate the matter
from a legal perspective, presumably to rachet up the small company's
legal costs.  No suit has been filed.  It probably never will be.

The point of the question is for the small company to contingency plan
and to decide if it should decide to finally accept an invitation for
a meeting after all.  To understand this, the small company needs to
figure out to what extent it can keep its legal costs in check.  We
also need to know if such a future case could be lost in the context
of not being able to respond to all of the legal formalities which the
large company may wish to throw at it just to bleed it to death in
legal costs.  I hope this clarifies matters a bit.  Yes, this is more
complicated than the hypothetical question, which is why I asked the
hypothetical question.  A good answer would state exactly with
litigation legal   niceties are 100% required of the small company,
and which, if any of these can be done passively, without a lawyer. 
Again, there is no concern at all that something could be found out in
any discovery process that would turn the big company's losing case
into a winning one.  A good answer would also state which legal
niceties could be ignored totally.

Request for Question Clarification by pafalafa-ga on 09 Nov 2006 05:26 PST
I understand your desire to deal with a seemingly meritless complaint
with a minimum amount of time, energy and resources.  But if the other
party is intent on suing, I'm afraid you're going to have to bite the
bullet to a certain extent.

You might want to consider getting this book, or something similar:
Patent Infringement Litigation: Step by Step from Dispute Through
Trial for Executives, Witnesses, and In-House Counsel

and from the same company:
Overcoming Patent Infringement Allegations - Key Insights into Patent
Licensing & Effective Strategies for Dealing with Alleged Breaches &

The descriptions includes a detailed table of contents that will walk
you through many of the steps in the process...what happens, and what
responses are needed.  You'll need to see the actual book(s), though,
to get the detailed write-ups.

You might also want to have a look at these resources that have some
interesting insights on declaratory judgements, among other things:
patent infringement
Infringement of a patent

Beyond these four items, what can we do for you to provide a full
answer to your question?

It seems to me that only a patent lawyer can give you a complete
overview of the process, and really describe the sort of minimalist
scenario that you've asked about, in terms of responding to
disclosure, etc.  As noted in the disclaimer below, Google Answers
researchers, as clever as we are, are no substitute for professional
legal advice, and there's a limit to how much we can offer in this

Let me know your thoughts on all this as to the best way to proceed.

And best of luck...

There is no answer at this time.

Subject: Re: Litigation Cost Control Strategies
From: probonopublico-ga on 04 Nov 2006 23:59 PST
Litigation is extremely costly and should be avoided wherever possible.

In the circumstances, the small company should try to do a deal on the
best terms available.

Very sad but very practical.
Subject: Re: Litigation Cost Control Strategies
From: mongolia-ga on 05 Nov 2006 09:32 PST
I agree with Bryan that the first step is to attempt to get a
reasonable settlement (notice i did not say a fair settlement)from the
(big) company.

If the company continues to be totally pig-headed i would look at going public.

Not sure exactly what this would involve but writing to the
newspapers, contacting local radio and TV, informing your elected
representatives as well as spreading the news in your business sector
all sound fair and reasonable actions.

Another action would be to summarize the issue in a concise manner on
1 to 3 pages of paper and hand it to every employee who exits or
enters their office.

I would of course get legal advice on the above and of course inform
the company. This also assumes that the big company REALLY has no

Subject: Re: Litigation Cost Control Strategies
From: daniel2d-ga on 05 Nov 2006 23:03 PST
It is your view that the suit is without merit.  What does your attorney say?
Subject: Re: Litigation Cost Control Strategies
From: frde-ga on 06 Nov 2006 04:59 PST
'A person who represents himself has a fool for a client'

However, it can be immensely enjoyable conducting a reasonable and
rational correspondence with sombody elses lawyers.

If I were in your hypothetical situation, I would be strongly tempted
to wing it without lawyers - but I would need to be very sure of my

My brother was taken to the UK Small Claims Court by a supplier who
was claiming non payment. My brother had requested, but not received,
proof of delivery.

In court the supplier produced proof of delivery, at which point my
brother said fine - I'll pay you, not a problem.  To the bemusement of
both my brother and the supplier ... the case continued - and found
against my brother.

What I am saying is that when you get into court, you are dealing with
with a runaway train.
Subject: Re: Litigation Cost Control Strategies
From: probonopublico-ga on 06 Nov 2006 23:29 PST
Interesting Comment, Jerry, but I suspect that your brother's case was
heard in the Court of Star Chamber.

These days, the Courts are supposed to urge the litigants to seek an
out-of-court settlement and, indeed, many cases are now resolved 'on
the courtroom steps'.

I suspect that, if your brother had had a lawyer, they would have got
their heads together for 'a conference'.

I've sat in on many a conference and found them very conducive to
getting a settlement.

Of course, there's now less courtroom drama, a la Perry Mason.
Subject: Re: Litigation Cost Control Strategies
From: frde-ga on 06 Nov 2006 23:39 PST
In my brother's case it was quite clear that the adjudicator had no
idea of normal commercial practise.

I have reservations about lawyers, I've met a few very good ones, and
a lot more total idiots.

One has to remember that their objective is to maximize their own income ...

Now ACAS is a different matter - if only the poster were in the UK.
Subject: Re: Litigation Cost Control Strategies
From: probonopublico-ga on 08 Nov 2006 22:04 PST
Patent infringement is a real murky area because many so-called
'strong' patents can often be broken.

Take IBM's PC BIOS - and IBM had some of the best patent attorneys
that money can buy.

Also, take the French patent on the 'Smart Card' which, as far as I
know, was never challenged but could have been because of 'prior art'
... The Japanese had previously filed patents - but only in Japan.

I would tread very warily because you never really know until all the
dirt comes out in court.
Subject: Re: Litigation Cost Control Strategies
From: frde-ga on 09 Nov 2006 14:53 PST
This reminds me of another case.

Possibly talk with the other company without lawyers present.

In the case I am thinking about, things were settled amicably.

Also check out whether the bombastic lawyer is in-house 

I can immediately recall three other cases where in-house lawyers got
a thorough kicking for incompetence.
Subject: Re: Litigation Cost Control Strategies
From: mindsponge-ga on 10 Nov 2006 08:59 PST
The big company lawyer referred to in the question is from their
outside patent law firm.  He was clearly not interested in hearing
about why the small company was not  infringing.  He did not reply to
the small company's lawyer when presented with a rebuttal letter which
clearly showed a rock solid case for non infrigement.

The point is not so much for the small company to "win", but to reduce
(or eliminate) legal costs, and to reduce business distractions, if
the big company decides not to back down.

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