US jurisdiction report: COVID-19’s impact on US patent practices

17-08-2020

Paul J Sutton

US jurisdiction report: COVID-19’s impact on US patent practices

Viacheslav Lopatin / Shutterstock.com

US patent and IP law practices, like other practices, have been suddenly and profoundly affected in many ways by the spreading COVID-19 pandemic. This article attempts to provide insights into and examples of the challenges facing patent companies and their patent attorneys as they cope with the inter-related combination of health and financial onslaughts.

Pharmaceutical researchers across the country are desperately seeking an effective vaccine against COVID-19. Manufacturers that are seeking to serve the public interest by retooling their facilities to produce masks, gloves, and products needed to help combat the pandemic may face the risk of patent infringement liability.

This risk may expose them to sanctions due to wilful infringement, and such sanctions may include money damages as well as injunctions. This environment will undoubtedly give rise to claims and lawsuits filed by practising and non-practising entities, the latter commonly referred to as “patent trolls”.

Avoiding liability

Potential liability for patent infringement may be avoided by making products for the US government, which will mitigate risk. Title 28 of the US Code section 1498 provides the government with a powerful weapon to counteract outrageous pricing and other practices resulting from the pandemic. Under this federal statute, a manufacturer, without permission, cannot be held liable for patent infringement where it produces a patented product for the US government, provided it grants reasonable compensation to the patent owner.

Other ways to avoid such patent infringement risk are to seek a licence from a patent owner, or to arrange for indemnification from purchasers. Some states have indemnification provisions that protect manufacturers. There is also the wise but costly option of obtaining a well-reasoned freedom-to-operate opinion from competent patent counsel.

"Financial hardships have also led to an increase in settlements, coupled with a tendency to be represented by less costly, less experienced counsel."

Another risk to a company’s loss of its attorney-client privilege may be triggered by the transmission of otherwise privileged information using a third-party server or email account that is accessible to others.

Leaders of patent practices may lose the very nature of their practices. It is not exaggerating to state that the professional growth of current and the next generations of IP lawyers may be stunted. The pandemic has upended the entire legal industry—firms of all sizes have been forced to cut salaries and to lay off attorneys and entire associate programmes have been eliminated.

Equity partners have seen their draws significantly reduced or eliminated entirely. Staffs who support attorneys have been laid off or given reduced hours. Young attorneys and interns who have been promised positions are being notified that their offers are being either postponed or rescinded entirely.

Inexperienced lawyers who have chosen to specialise in patent litigation, for example, are being deprived of the type of apprenticeship and mentoring that would normally facilitate the honing of skills. There are fewer experienced partners and mentors available to educate and guide them.

Courts

Federal judges overseeing patent litigation have decided to eliminate in-person hearings and will decide motions based solely upon briefings. Parties in IP litigation are minimising the role of technical experts in order to save money. Financial hardships have also led to an increase in settlements, coupled with a tendency to be represented by less costly, less experienced counsel.

In some courts, judges are adjourning trials indefinitely. This will leave parties with uncertainty and the feeling that justice delayed is justice denied. Older witnesses and jurors wish to minimise or avoid entirely travel to avoid exposure. Where litigating parties can agree, bench trials, as opposed to jury trials, are being consented to. However, even with bench trials, there will now be an ongoing role for videoconferencing.

Elite boutique patent law firms are, however, tending to thrive in this pandemic environment. Even when new work may be harder to come by, patent and IP departments in larger law firms who face a business or legal conflict of interest will have a tendency to refer work to boutiques, rather than to other larger firms who they consider to be a competitors.

Suffice to say, we are facing a financial pandemic, as well as a COVID-19 pandemic.

Paul J Sutton is a founding partner of IP boutique law firm Sutton Magidoff Barkume and is adjunct professor at NYU’s Tandon School of Engineering. He can be contacted at: paul@smb.law

Sutton Magidoff Barkume, COVID-19, patent infringement, injunction, patent trolls, IP litigation, boutique law firms, settlement, Federal judges, pandemic

WIPR