Engine and R Street File Amicus Brief Urging Court to Prevent Gamesmanship in Patent Damages
Patent litigation is notoriously expensive and can last for years. For startups in particular, the high costs and risks of these lawsuits are difficult to cover. Startups already operate on thin margins, and do not have excess resources to spend on legal fees or settlements arising from frivolous patent assertions. The mere existence of litigation (or a patent demand) also forces startups to divert attention from R&D, makes it difficult for startups to attract customers and investors, and can cause drops in valuation.
Abusive patent plaintiffs know that lengthy and costly litigation creates substantial problems for innovators and startups. If those litigants can find ways to make cases last longer and cost more, it increases their leverage. For patent assertion entities—organizations that use infringement allegations to extract nuisance value settlements—prolonging litigation creates more pressure on defendants to settle frivolous cases. For incumbent companies seeking to use patent litigation to slow down new market entrants, the longer the litigation lasts, the harder it is for new competitors to gain a foothold. If it lasts long enough or costs too much, a competitor can use a meritless patent case to put a startup out of business.
One tactic plaintiffs use to achieve these goals is to delay disclosing information about their damages theory. Such delays conceal what a case is worth, and allow parties to put forward exaggerated damages claims late in a case. Courts and defendants do not know what a case is worth, causing uncertainty and creating inefficiency.
But courts have tools to mitigate this behavior. Federal rules of procedure and evidence, standards for expert testimony, and the discovery process require parties to provide and supplement information about damages throughout a case. If a party fails to abide by those rules, then their late-breaking damages positions are rightfully excluded.
Engine and the R Street Institute recently filed an amicus brief to the U.S. Court of Appeals for the Federal Circuit, encouraging the court to affirm that trial courts can enforce these rules and require parties to make early and accurate disclosure about damages throughout patent cases. This will help reduce the burden of abusive patent litigation on startups and innovation.
As we say in our brief: “Affirming the district court’s power to enforce early disclosure obligations will help safeguard innovators and innovation against the costs and burdens of abusive litigation. Startups and small entrepreneurs, collectively the nation’s greatest job creators, are particularly poorly equipped to absorb the risks and costs of artificially high settlement demands and prolonged and unpredictable litigation.”
You can read our full brief here.
