Intellectual Property Litigation

Aug 10, 2005

Patents, trademarks, copyrights, and trade secrets constitute private intellectual property (IP), and the owners of such property, like owners of real property, are entitled to exclude trespassers.

Enforcing intellectual property (IP) rights need not involve litigation. Owners of IP who are not solely interested in exclusivity frequently work out private licenses with perceived infringers.1 Similarly, a carefully worded cease-and-desist letter might convince an infringer to halt the infringing activity without judicial intervention. Letters and licensing negotiations, however, often simply serve as preludes to litigation.

The opposite also is true. Because nothing seizes attention like a lawsuit, litigation frequently sets the stage for subsequent licensing negotiations. IP owners are not the only ones who file such suits. To the extent it has a reasonable apprehension of being sued, a potential infringer — perhaps seeking freedom to operate or assurances for potential investors — may file a "declaratory judgment" action attacking the validity of the IP right itself or seeking a judicial declaration of non-infringement. Organizations that fire off strongly worded threat letters, as opposed to gentle offers to license, easily can create such apprehension and find themselves embroiled in litigation on the defendant's "home turf." In any case, neither side may bring a frivolous claim for the purpose of stimulating licensing negotiations.

Aggressive enforcement of IP is essential for biopharmaceutical companies, which require massive research and development investments and years of work to bring products to market. Intellectual property is jealously protected, as it is the lifeblood of such organizations. In the biopharmaceutical industry, patents and to a lesser extent, trade secrets, are the primary subjects of IP litigation, although suits for trademark and copyright infringement arise periodically. For example, a biopharmaceutical company in Florida was recently sued for allegedly using trademarks to lure Internet traffic away from competitors.2 Most of this litigation takes place in federal court, but trade secrets also may be litigated in state court, and all four types of IP rights may be litigated in the International Trade Commission to prevent infringing imports.

Anatomy of IP Litigation in General

Any IP litigation in federal courts, whether involving patents, copyrights, trademarks, or trade secrets, officially begins with the filing of a complaint, setting forth a short statement of the legal claim. Before a complaint is filed, a plaintiff must complete an adequate pre-filing investigation. By filing a complaint, an attorney represents that the lawsuit is not being presented for any improper purpose (such as harassment), that the legal contentions in the complaint are warranted by existing law or a non-frivolous argument for the extension of existing law, and that all allegations in the complaint have evidentiary support or are likely to have evidentiary support after a reasonable opportunity for further investigation.3 Failure to complete an adequate pre-filing investigation can lead to sanctions.

Defendants are given the opportunity to answer the complaint or to move to dismiss the lawsuit on various grounds. Usually, an answer denies all allegations of wrongdoing and sets forth defenses. The answer may also contain a counterclaim brought by the defendant against the plaintiff.

Because litigation often takes years to resolve, IP plaintiffs sometimes file early motions seeking preliminary injunctions to prevent defendants from continuing the alleged infringement while the merits of the case are being decided. To prevail on a motion for preliminary injunction, the plaintiff generally must establish: (1) a likelihood of success on the merits of the case, including a strong showing with respect to any defenses, (2) that it is being irreparably harmed by the defendant's conduct, (3) that it would endure more hardship if the motion were denied than the defendant would endure if the motion were granted, and (4) that granting the preliminary injunction is in the public interest. Preliminary injunctions, though rarely granted, are powerful litigation tools. Indeed, they often lead to early resolution of a case. Although a preliminary injunction can be appealed immediately, its practical effect can be devastating because the defendant frequently cannot obtain a temporary stay and usually cannot afford to forbear from the relevant commercial activity for the 12 to 18 months an appeal will require. An unsuccessful motion for a preliminary injunction, however, often only strengthens the defense by forcing it to develop its case early, and might give the judge a negative view of the plaintiff's case that will persist throughout the litigation.

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