Introduction on How to Avoid Patent Infringement

Learning how to avoid patent infringement is crucial to an inventor, entrepreneur or small business. It is best to spend a little time and money avoiding patent infringement rather than defending a costly, time-consuming patent infringement lawsuit later. Considering that the concept of patent infringement can be complex and confusing to many, it is easy to understand why many choose to bury their head in the sand rather than investigate the potential infringement issues up-front – a path that can sometimes bankrupt even the healthiest small business. It is never too late to take the necessary steps to avoid patent infringement whether you are developing a product or have been manufacturing a product for many years.

Reasons to Avoid Patent Infringement Lawsuit

Below are some reasons to take investigate whether you have any patent infringement issues prior to producing a product (or continuing to produce a product):

Costly. A patent infringement lawsuit is extremely expensive compared to other types of lawsuits. A patent infringement lawsuit typically will cost $1 Million or more in legal fees alone. It is not uncommon for even simple patent infringement lawsuits to end up costing a company $2 – $5 Million. If you lose the lawsuit, you will then be responsible for paying damages to the patent owner along with the potential for treble damages and attorney’s fees. The attorneys’ fees alone can put many small businesses out of business when the lawsuit could have been avoided by spending $5,000 – $15,000 hiring a patent attorney to review a patent for patent infringement issues. Finally, many insurance policies do not cover patent infringement requiring you to pay the legal fees and damages yourself (speak with your insurance representative).
Injunction. A patent owner may be able to get a preliminary injunction early in a lawsuit that stops the manufacture and sale of the alleged infringing product. An injunction can be costly to defend against and the “unknown” of whether the injunction will be granted can be negative to your business planning (and your customers).
Time Consuming. A patent infringement lawsuit requires the officers and technical people of the company to participate heavily in litigation decisions. While one may believe that the lawyers will do most of the work, it is fair to say that the client will end up doing approximately 10-20% of the total work involved in a lawsuit. The time you spend on the lawsuit could be spent developing your business further or finding new customers.
Customers May be Sued. Some patent owners may sue your customers which can be very destructive to your business relationships. It can also be expensive for you since you may have an indemnification clause with your customer where you agree to pay their legal fees and any damages.
Identify Non-Infringing Alternatives. By identifying potential infringement issues up-front, you can then determine how to best design your product to avoid infringing upon one or more patents. The longer you wait in the product development process, the harder it will be to redesign your product when a patent infringement issue is identified.

Common Mistakes Made by Companies

We Know About All Patents in Our Industry. One of the most common mistakes a company makes is taking the attitude that they know all of the products that exist and their related patents. This fails to consider the technology that may be developed by a competitor that hasn’t been commercialized yet. It also fails to consider that a small company with limited geographic reach may have a patented product.
The Patent Owner Will Not Sue Us. Another mistake made is companies believing a smaller company will not sue them. This view fails to consider that a small company may be very tenacious in defending its intellectual property. This view also fails to consider that the patent owner may later sell the patent rights to a larger company that can afford a patent infringement lawsuit. Finally, there has been an increase in the number of infringement attorneys willing to take patent infringement lawsuits on a contingency arrangement.

Tips to Avoid Patent Infringement

A. Start Early and Keep Your Diligence

Do not delay one day with your efforts to avoid patent infringement. The best place to begin your infringement review is during the product concept stage (i.e. prior to developing a prototype). This is the stage when usually more than one alternative exists. By identifying potential infringement issues at this stage, you can weed out product designs which carry a high risk of liability.

B. Keep Your Head Above the Sand

Some people will intentionally avoid becoming aware of a patent of a competitor believing this will help them later. The fact is, ignoring a patent will not help you later in litigation and it can potentially result in a judgment finding that you have intentionally infringed upon a patent. It is best to respect the intellectual property rights of others by becoming aware of and understanding their rights.

C. Find Patent(s) You May Be Infringing Upon

You should identify what patent(s) exist that you could be infringing upon.

Online Patent Search. You can search for patents via the U.S. Patent Office or by using Michael Neustel’s software product titled PatentHunter (free 60 day trial). When doing your patent search, you will want to search for patents related to your technology using keywords describing your product and by also searching the assignee records for patents owned by specific competitors. Keep in mind that some smaller companies may not assign a patent to their company, so you will have to search by any known inventor names (e.g. often times the owner of a small company will be an inventor on the patent). In addition, some larger companies use separate intellectual property holding companies that own their patents so searching by company name may not result in the patent being found.
Review Competitor’s Product. In addition to performing a patent search for patents related to your new product, you should also review all known competitor products for any patent notices. Most companies that have a patent on a product will conspicuously mark the product with the patent number (e.g. U.S. Patent No. 6,854,555). If the competitor’s product does not have a patent number directly on it, check the packaging, marketing materials and website for any patent notices. After you have identified a patent number of interest, you can perform a patent number search to view the patent.
Contact Competitor. If you have reason to believe that a competitor has a patent on a related product but cannot find the patent via an online patent search or the competitor’s product, you may want to consider contacting the competitor to see if they have a patent. Keep in mind that by contacting a competitor you are immediately putting your company “on the radar” and they will diligently watch your future product developments (i.e. you should only contact them if you have a solid reason for believing they have a patent you cannot find). If they say the product is patented but refuse to provide you with a patent number, they are most likely not being truthful since patents are public knowledge and there is no reason to withhold such information if it is true.

D. Preliminary Patent Infringement “Screening” of Patents by You

After you identify one or more patents related to your product, you will want to do a preliminary patent infringement “screening” before sending the patents to your patent lawyer for review. Sending all of the patents you found can be very costly as a formal patent infringement review by a patent attorney can cost between $5,000 – $15,000+ per patent reviewed. To perform a preliminary screening of a patent, do the following steps: Step 1. Determine if Patent Term Expired. In the United States, a utility patent automatically expires 20 years after the earliest effective filing date. A design patent automatically expires 14 years after the issue date. To determine if a patent term is expired, you will need to determine the earliest effective filing date and then calculate the expiration date from there. You can use www.PatentCalculator.com to determine the expiration date for a patent. Step 2. Maintenance Fees Paid? If the patent term has not expired, you will then want to check with the USPTO to see if the required maintenance fees have been paid. There are three maintenance fees due for utility patents (design patents do not have maintenance fees): 3 years, 7 years and 11 years. If the patent owner has failed to pay a required maintenance fee, the patent is no longer valid and you can practice the invention without infringing upon the patent. Step 3. Self-Review of Patent Claims. If the patent has not expired (see previous two steps), then you will want to review the patent claims which define the “meets and bounds” of the patent protection. The patent claims are located at the end of the patent and are consecutively numbered starting with 1 and continuing so forth. It is important to note that while a patent may disclose Invention A, Invention B and Invention C, if the patent claims only protect Invention B you will not have to worry about infringement if your product relates only to Invention A or C. Reviewing patent claims can be difficult, but with the assistance of a patent attorney you should be able to grasp the concept of what to look for.

IMPORTANT NOTE: Keep in mind that any internal communications regarding the patent and the patent claims are most likely not covered by the attorney-client work privileged – i.e. if a patent infringement lawsuit is filed the patent owner will be able to discover all e-mails, notes, letters and conversations relating to the patent not involving your patent attorney. Hence, it is important to be extremely careful as to what is said within internal communications and preferably keep communications to a minimum. For example, while it may seem obvious some people will make statements such as “This patent looks very close to our product” when they do not truly know if the patent is close. When in doubt, it is always best to retain a patent attorney to assist you with the infringement review.

E. Infringement Review by Your Patent Attorney

If your your self-review of the patent indicates there may be some potential infringement issues, you should immediately contact your patent attorney who can help you determine if you do in fact have patent infringement issues. Below is a recommended approach of working with your patent attorney to determine if you have infringement issues involving three phases. Phase 1. Preliminary Infringement Review by a Patent Attorney. If you believe there may be any potential infringement issues with a patent, you should immediately have your patent attorney perform a preliminary patent infringement review of the patent to see if they believe there are reasonable arguments for patent infringement by the patent owner. This is not a formal legal opinion and is simply a way to keep your up-front legal fees down prior to doing a complete patent infringement review. The legal fees for a preliminary patent infringement review can range anywhere form $600 to $2,500 typically. Phase 2. Formal Infringement Review by a Patent Attorney. If your patent attorney believes the patent should be investigated closer, then you will want to retain your patent attorney to perform a formal patent infringement review which involves reviewing the USPTO file history for the patent and possibly considering validity issues. While a formal patent infringement review can be costly (e.g. $5,000 to $15,000+), it is still significantly cheaper than the legal fees you would be paying to defend yourself if a patent infringement lawsuit is threatened or filed by a patent owner. Phase 3. Patent Invalidity Review. If the formal review by your patent attorney reveals that there may be patent infringement issues for your product, you will then want to determine if the patent is valid or not. Some patents are invalid because the technology was used or known years prior to the filing of the patent application. You will want to bring any known patents, products or publications that existed prior to the patent owner filing their patent application which could help invalidate the patent.

How Neustel Law Offices Can Help

Patent infringement can be an intimidating concept for entrepreneurs and small businesses. However, with a little education by your patent attorney and following the steps indicated above, you should significantly reduce your potential risk for infringing upon another company’s patent. Neustel Law Offices provides cost effective patent infringement review services for its clients including helping clients perform their own preliminary patent infringement screenings. If you are interested in our patent infringement review services, contact us at 1-701-281-8822 or info@neustel.com. You can also request a free information packet to learn more about our law firm.