1. ©2006 Sutherland Asbill & Brennan LLP Looking Both Ways Before You Cross the Street: How to Leverage Outside Patent Counsel 2006 APPA LEGAL SEMINAR October 9, 2006 Griff Griffin, Partner griff.griffin@sablaw.com Sutherland Asbill & Brennan LLP

2. ©2006 Sutherland Asbill & Brennan LLP What is a Patent Attorney? –An attorney with a special license to practice before the United States Patent and Trademark Office (“USPTO”)  Prepare and file patent applications  Prosecute patent applications  Appeal final rejections to the Board of Patent Appeals and Interferences –Requirements include a science or engineering degree and passing the Patent Bar examination administered by the USPTOIntroduction

3. ©2006 Sutherland Asbill & Brennan LLP Services Provided By Outside Patent Counsel If you’ve implemented or are planning to implement an on-line bill payment system, why talk to a patent attorney? Looking left…Patent protection for innovative features  Patentability opinion  Patent application  Foreign patent protection Looking right…Clearance opinion to identify potential infringement risk And in the unfortunate case of an accident… Counseling and analysis of “offers to license”

4. ©2006 Sutherland Asbill & Brennan LLP Clearance Opinion  Clearance Opinion Aliases –Freedom to Operate (FTO) Opinion and Freedom to Use Opinion  Purpose –Review of patents and published applications that may be enforceable against a product or service to identify potential infringement issues  Two Steps –Search issued patents and published applications, and –Analyze search results to determine if any of the issued patents raise a material risk of infringement

5. ©2006 Sutherland Asbill & Brennan LLP Clearance Opinion (Cont’d)  Constraints –Limited to Effectiveness of Search Strategy  Concern over that “needle in the haystack” patent –Unpublished Applications  Requests for non-publication  18 month pendency from earliest priority date  Watch Services for Issued Patent / Published Application  Conflicts of Interest –Counsel cannot opine on the scope of another client’s patent  Distinguish From: –Non-infringement Opinion, Patentability Opinion, and Invalidity Opinion

6. ©2006 Sutherland Asbill & Brennan LLP Clearance Opinion (Cont’d)  May Trigger Duty of Due Care by Actual Notice of a Prior Art Patent, Which May Result in a Claim of Willful Infringement –May provide for treble damages and an award of attorney fees in cases of “willful” patent infringement (35 U.S.C. § § 284-285) –Duty of care to avoid infringement is triggered upon receiving actual notice of a patentee’s rights (Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp, 343 F.3d 1337 (Fed. Cir. 2004))  Low threshold for actual notice - triggered by knowledge of the patent  Knowledge may come from acts of patentee, potential infringer, or a third party –Clearance Opinion generally not sufficient by itself as a defense to a charge of willful infringement

7. ©2006 Sutherland Asbill & Brennan LLP “Offers to License”  Assessing the Risk of Infringement –Sarbanes-Oxley concerns  Responding to the Patent Owner  Mitigating Potential Liability –Establishing a defense against potential claims of willful infringement  Willful infringement requires proof by clear and convincing evidence that the infringer did not have a reasonable basis for believing that it had a right to engage in the infringing acts (Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp, 343 F.3d 1337 (Fed. Cir. 2004)  Willful Infringement determined by the totality of the circumstances (Read Corp. v. Protec, Inc., 970 F.2d 816 (Fed. Cir. 1992))  Exemplary factors that are considered in a willful infringement analysis (“Read factors”) –Whether infringer, when he knew of other’s patent, investigated the scope of the patent and formed a good faith belief that it was invalid or not infringed –Whether infringer deliberately copied ideas or designs –Defendant’s size and financial condition –Remedial action by defendant

8. ©2006 Sutherland Asbill & Brennan LLP “Offers to License” (Cont’d)  Mitigating Potential Liability (Cont’d) –Exculpatory Opinions  Non-infringement opinion  Invalidity opinion based on prior art  Requirements for Opinions (Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983)) –Timely –Well-reasoned and accurate –Written –Competent outside counsel –Reasonably relied upon by the potential infringer  Selection of counsel for opinions –Waiver and disqualification issues (litigation counsel v. opinion counsel)

9. ©2006 Sutherland Asbill & Brennan LLP  Mitigating Potential Liability (Cont’d) –Design-around  Change system to avoid infringement  Liability limited to past infringement up to the point the change is implemented –License/cross-license  May leverage your own patent portfolio, non-infringement position, invalidating prior art –Indemnification  Option if system is provided by third party or licensed/leased from a third party –Stop allegedly infringing activity,  Liability limited to past infringement up to the point the activity is stopped “Offers to License” (Cont’d)

10. ©2006 Sutherland Asbill & Brennan LLP Why all the Fuss? The Cost of Patent Litigation (Legal Fees Only) ($000’s) 200120032005 Less than $1 Million at Risk End of discovery$250$290$445 Inclusive, all costs $499$500$770 $1-25 Million At Risk End of Discovery $797$1,001$1,495 Inclusive, all costs$1,499$2,000$2,637 More Than $25 Million At Risk End of Discovery $1,508$2,500$3,239 Inclusive, all costs $2,992$3,995$5,176

11. ©2006 Sutherland Asbill & Brennan LLP Patent Litigation Involves High Stakes Some sample verdicts:  Polaroid v. Eastman Kodak (D. Mass. 1991) -- $873M (instant cameras)  IGEN Int’l v. Roche (D. Md. 2002) -- $505M (pharmaceuticals)  Intergraph Corp. v. Intel (E.D. Tex. 2002) -- $150M (microprocessor technology)  Immersion Corporation v. Sony Computer (N.D. Cal. 9/21/04) -- $82M (video game controllers)  Symbol Tech. v. Proxim, Inc. (D. Del. 7/30/04) -- $26M (wireless LAN technology)  NTP, Inc. v. RIM, Inc. (E.D. Va 3/06) -- $612.5M (Blackberry device) Why all the Fuss?

12. ©2006 Sutherland Asbill & Brennan LLP High Stakes of Patent Litigation  In addition to monetary damages, the patent owner can receive injunctive relief, either through a preliminary injunction, a temporary restraining order, and, once a verdict has been reached, a permanent injunction.  The Fed. Cir. has expressed an inclination to granting an automatic permanent injunction whenever a case has been decided for the patent owner.  Ebay v. Mercexchange (2006) changed the Fed. Cir.’s inclination. Now, patentees who get a verdict of infringement against defendant(s) must prove: –Patentee has suffered an irreparable injury –Monetary damages are insufficient to redress the injury –Considering the balance of hardships between the patentee and the defendant, an injunction is warranted –The public interest would not be disserved by a permanent injunction. Why all the Fuss?

13. ©2006 Sutherland Asbill & Brennan LLPConclusion Questions?