How In-House Counsel Can Help Their Companies Prevail in Patent Litigation

For outside counsel in patent litigation, many discovery requests present problems similar to that described above. Some in-house attorneys seem to expect outside counsel to locate documents and ascertain the relevant facts, without much help from them. In response, I used to try to do it single-handedly. Now I tell in-house counsel what to look for and ask them to find it for me.

The fact is, any effort by in-house counsel to assist, but especially an energetic one, makes a big difference. It ensures proper preparation of the case, increases the chances of success, reduces the cost for outside attorneys, and gives the outside attorneys a real boost to both their efficiency and their ability to focus on the real issues presented by the case.

Don't Micro-Manage

Lyndon Johnson tried to run the Vietnam War from a sub-basement of the White House. Remote micro-management didn't work there, and it doesn't work in lawsuits either. The best in-house lawyers I have worked with let us do “our thing.” That doesn't mean that they are uninformed about what we do and when we do it: We discuss our strategy and tactics with them ' but they do not oversee every move we make and edit every draft of a filing. Companies retain external litigation attorneys because they can think and argue, are used to dealing with judges and juries and are competent legal drafters. As outside counsel, if I have to explain what I am doing to in-house counsel every step of the way, and must have every draft commented on and reviewed, then speed is the first casualty ' clarity in the resultant written document is the second.

Don't Assume a Big Firm is Your Answer

Leo Durocher managed the Chicago Cubs in the late 1960s. When they collapsed in 1969, he passed the buck for his team's performance. He told the sportswriters that he had put his best guys out there, but what he really meant was that it was the players' fault, not his.

Corporations often want to hire the big firm. After all, the in-house lawyer knows that his job security and the possibility of promotion could be influenced by the outcome of the case. Like Leo Durocher, in-house counsel wants to be able to tell management that he or she put the best people out there ' in case something goes wrong.

But be careful in hiring a big firm: You may be giving yourself a false sense of security. Big firms aren't good simply because they are big. I am not saying there are no good lawyers in large firms. I have seen some outstanding lawyers at big firms. At the same time, however, it is dangerous to assume that the big firm has quality simply because it is big. I have never seen a large firm succeed against a small firm only because the large firm was bigger.

On the contrary, I have seen big, high profile patent litigation firms make the type of mistakes one would expect from less capable firms, such as blown deadlines, poor preparation for depositions, shoddy expert reports, failing to be aggressive and work carried out in a disorganized fashion. Certainly, any attorney or team can make a mistake. It may be important to remember this, though, when dealing with larger firms, as you may expect them to be infallible. In other words, don't just hire a law firm ' if you are hiring a name, at least hire a lawyer because he or she is good.

For example, I remember a case in which our opponent hired a big firm. As an attorney at a smaller firm, I assumed they would be organized; that some would work on damages, some would work on infringement, and so forth. But from the way the matter proceeded, it appears that all they did was trip all over each other. When their client finally fired them, they did do one coordinated thing: Seven of them signed a motion to withdraw. I saved it.

It may also be easier to control costs through use of a smaller team. While this is possible with big firms, many large firms assign numerous attorneys to work on your case that you have never heard of before and may never have a chance to meet. The size of the team and the billing rates of these additional attorneys can add a significant and sometimes unnecessary expense to your litigation.

There may also be another way to control costs.

Consider Contingent Fee Litigation

Like a number of other firms, we do it, and we do it for corporate clients, not just individuals. It works. The first and most immediate advantage is that it eliminates or reduces the expense of the lawyers' time. Given what the American Intellectual Property Law Association's recent survey says about the cost of patent litigation ' that it costs about $2 million or more to get the average case through trial ' the potential savings to in-house counsel and their companies can be enormous. Contingent fee litigation enables some corporations to pursue patent infringement cases that they could not otherwise afford to do. Furthermore, contingent fee litigation is a cost-efficient way to give your patent portfolio some teeth, as enforcement expenses will be much lower, something an in-house counsel and corporate management will appreciate when the bill has to be approved.

Although contingent fee litigation can work for corporations, there are factors that a corporation should consider that an individual (without an underlying business) pursing contingent fee litigation might ignore. For example, the defendant you sue might file a counterclaim for your company's infringement of one of its patents. Since there isn't necessarily a financial recovery associated with defeating a counterclaim, it may not be feasible to handle such a matter on a contingent-fee basis.

However, even with this potential pitfall, there are some options. First, explore the possibility of a counter-claim before beginning litigation. You may be able to assure yourself that the risk is non-existent or minimal. Second, determine whether you are indemnified for such a claim by a supplier. If so, you can tender that defense. Third, if you believe a counter claim is possible, talk to your outside counsel, you may be able to structure the fee as a hybrid of contingent and hourly billable arrangements.

Finally, there is another tremendous advantage to contingent fee litigation that many in-house counsel have not considered: If the outside attorney only gets paid if there is a recovery, there is no incentive to keep the billable meter running, and if the case is not a good one, the lawyer has an incentive to tell you because only he or she is running the risk of increased costs with no possible recovery.

Conclusion

The role of an in-house counsel is to protect the corporation and its assets. When litigation becomes necessary, just follow this guide to achieving that goal and increasing your chances of a good result:

• Pick the lawyer, not the firm;
• Consider contingent fee litigation; then
• Support your litigation attorneys, but don't micro-manage.

You will increase your chances of a good result.

Joseph N. Hosteny is an intellectual property litigation attorney with the Chicago law firm of Niro, Scavone, Haller & Niro and a Board member and periodic contributor to this publication.

Over the years, I have worked with many in-house counsel as their outside litigation counsel. These experiences serve as the basis for this article, which discusses some of the things that in-house counsel can do with respect to their outside counsel to improve their company's chances of prevailing in patent litigation.

Support Your Outside Counsel

Although not a patent case, I remember a situation in which we were pursuing a software pirate whose attorney decided it would be a good strategy to depose a half-dozen or more employees of our large, and usually slow-moving, corporate client on short notice. We informed the company's employees of the opposing counsel's request, but they treated the request as just another ho-hum task on their schedules ' we had very little response. Finally, I asked the in-house counsel for his help. The next sound we heard was that of our corporate client being shaken upside-down. The following morning, there were six company employees sitting in our lobby, ready to prepare for their depositions. In-house counsel had done his job well: It was appreciated.

For outside counsel in patent litigation, many discovery requests present problems similar to that described above. Some in-house attorneys seem to expect outside counsel to locate documents and ascertain the relevant facts, without much help from them. In response, I used to try to do it single-handedly. Now I tell in-house counsel what to look for and ask them to find it for me.

The fact is, any effort by in-house counsel to assist, but especially an energetic one, makes a big difference. It ensures proper preparation of the case, increases the chances of success, reduces the cost for outside attorneys, and gives the outside attorneys a real boost to both their efficiency and their ability to focus on the real issues presented by the case.

Don't Micro-Manage

Lyndon Johnson tried to run the Vietnam War from a sub-basement of the White House. Remote micro-management didn't work there, and it doesn't work in lawsuits either. The best in-house lawyers I have worked with let us do “our thing.” That doesn't mean that they are uninformed about what we do and when we do it: We discuss our strategy and tactics with them ' but they do not oversee every move we make and edit every draft of a filing. Companies retain external litigation attorneys because they can think and argue, are used to dealing with judges and juries and are competent legal drafters. As outside counsel, if I have to explain what I am doing to in-house counsel every step of the way, and must have every draft commented on and reviewed, then speed is the first casualty ' clarity in the resultant written document is the second.

Don't Assume a Big Firm is Your Answer

Leo Durocher managed the Chicago Cubs in the late 1960s. When they collapsed in 1969, he passed the buck for his team's performance. He told the sportswriters that he had put his best guys out there, but what he really meant was that it was the players' fault, not his.

Corporations often want to hire the big firm. After all, the in-house lawyer knows that his job security and the possibility of promotion could be influenced by the outcome of the case. Like Leo Durocher, in-house counsel wants to be able to tell management that he or she put the best people out there ' in case something goes wrong.

But be careful in hiring a big firm: You may be giving yourself a false sense of security. Big firms aren't good simply because they are big. I am not saying there are no good lawyers in large firms. I have seen some outstanding lawyers at big firms. At the same time, however, it is dangerous to assume that the big firm has quality simply because it is big. I have never seen a large firm succeed against a small firm only because the large firm was bigger.

On the contrary, I have seen big, high profile patent litigation firms make the type of mistakes one would expect from less capable firms, such as blown deadlines, poor preparation for depositions, shoddy expert reports, failing to be aggressive and work carried out in a disorganized fashion. Certainly, any attorney or team can make a mistake. It may be important to remember this, though, when dealing with larger firms, as you may expect them to be infallible. In other words, don't just hire a law firm ' if you are hiring a name, at least hire a lawyer because he or she is good.

For example, I remember a case in which our opponent hired a big firm. As an attorney at a smaller firm, I assumed they would be organized; that some would work on damages, some would work on infringement, and so forth. But from the way the matter proceeded, it appears that all they did was trip all over each other. When their client finally fired them, they did do one coordinated thing: Seven of them signed a motion to withdraw. I saved it.

It may also be easier to control costs through use of a smaller team. While this is possible with big firms, many large firms assign numerous attorneys to work on your case that you have never heard of before and may never have a chance to meet. The size of the team and the billing rates of these additional attorneys can add a significant and sometimes unnecessary expense to your litigation.

There may also be another way to control costs.

Consider Contingent Fee Litigation

Like a number of other firms, we do it, and we do it for corporate clients, not just individuals. It works. The first and most immediate advantage is that it eliminates or reduces the expense of the lawyers' time. Given what the American Intellectual Property Law Association's recent survey says about the cost of patent litigation ' that it costs about $2 million or more to get the average case through trial ' the potential savings to in-house counsel and their companies can be enormous. Contingent fee litigation enables some corporations to pursue patent infringement cases that they could not otherwise afford to do. Furthermore, contingent fee litigation is a cost-efficient way to give your patent portfolio some teeth, as enforcement expenses will be much lower, something an in-house counsel and corporate management will appreciate when the bill has to be approved.

Although contingent fee litigation can work for corporations, there are factors that a corporation should consider that an individual (without an underlying business) pursing contingent fee litigation might ignore. For example, the defendant you sue might file a counterclaim for your company's infringement of one of its patents. Since there isn't necessarily a financial recovery associated with defeating a counterclaim, it may not be feasible to handle such a matter on a contingent-fee basis.

However, even with this potential pitfall, there are some options. First, explore the possibility of a counter-claim before beginning litigation. You may be able to assure yourself that the risk is non-existent or minimal. Second, determine whether you are indemnified for such a claim by a supplier. If so, you can tender that defense. Third, if you believe a counter claim is possible, talk to your outside counsel, you may be able to structure the fee as a hybrid of contingent and hourly billable arrangements.

Finally, there is another tremendous advantage to contingent fee litigation that many in-house counsel have not considered: If the outside attorney only gets paid if there is a recovery, there is no incentive to keep the billable meter running, and if the case is not a good one, the lawyer has an incentive to tell you because only he or she is running the risk of increased costs with no possible recovery.

Conclusion

The role of an in-house counsel is to protect the corporation and its assets. When litigation becomes necessary, just follow this guide to achieving that goal and increasing your chances of a good result:

• Pick the lawyer, not the firm;
• Consider contingent fee litigation; then
• Support your litigation attorneys, but don't micro-manage.

You will increase your chances of a good result.

Joseph N. Hosteny is an intellectual property litigation attorney with the Chicago law firm of Niro, Scavone, Haller & Niro and a Board member and periodic contributor to this publication.