Tag Archives: Countersuit

How Do You Protect Your IP from Infringement? Six Suggestions

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Situation:  A company has a competitor who is infringing their key intellectual property. Legal counsel tells the CEO that his company has a case, but to expect the process to take 2-3 years and to cost $2 million minimum to defend. The CEO is concerned that if the company starts down this path, it will drain the company of both time and cash. How do you protect your IP from infringement?

Advice from the CEOs:

  • The risk here isn’t just the company’s IP; it’s the value of the company! For example: if the company’s current valuation based on their IP is a 5x multiple of revenue, and if 60% of this IP is at risk, 60% or more of the company’s valuation may be at risk. Under this scenario, the company cannot allow the infringement to go unchallenged.
  • The hard reality is this: can the company withstand, in time and of money, a large and distracting suit? If the infringer is larger than the company is, they may be gambling that the company won’t sue. Remember, the loser pays the winner’s out of pocket costs, plus damages. If the company’s case is good, it may be possible to get a lawyer to represent the company on a contingency basis.
  • If the company decides to sue, it must be a surprise. If not, the infringer may outmaneuver the company by setting venue, etc. through countersuit.
  • Get a second opinion, and as much independent advice as possible without showing your hand.
  • A key Question: Can the company show its IP and research predates the competitor’s? If the company can clearly demonstrate that it is the true developer of the IP, then this provides an important edge.
  • Is there a middle ground or a settlement scenario that makes more sense than an all-out suit?

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How Do You Respond To A Frivolous Lawsuit? Four Suggestions

Situation: A company sued a customer for non-payment. The customer had a long history of slow payment or payment only on threat of denial of service. The customer countersued and has offered to settle for a $7,000 payment. How would you advise the CEO to respond to this frivolous lawsuit?

Advice from the CEOs:

  • One option is to let the countersuit go to trial. The challenge is that if this ends up before a jury the outcome is a crapshoot and can be very stressful. You may win, but at a higher cost than to settle, and if the other party declares insolvency you may never recover your costs. You also have to deal with the distraction of the suit.
  • Another option is to respond very aggressively through your lawyer. This sends a message to the other party and may prompt them to lower or drop the settlement demands. If this doesn’t work and you aren’t a gambler, give up the $7K and walk away. However, if there is a way to make this the most expensive $7K that the other party ever collected, go for it.
  • You may decide on principal to prosecute the case to send a strong message to the market that others should not fool around with your company.
  • To prevent this situation in the future, assure that you have clauses in all your agreements to prevent future repetitions of this situation. Specify binding arbitration in the case of payment or performance disputes. Arbitration can be more effective and timely than litigation.

Key Words: Suit, Countersuit, Jury, Arbitration, Cost, Opportunity, Delinquency, Payment, Settlement, Clause

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