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Be smart about entering a joint defense arrangement

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Your company and a dozen others were just sued for patent infringement. Having already received pitch packages from law firms throughout the country, you're ready to decide which firm to retain and whether to join a joint defense group.

Based on our experience representing joint defense groups in several patent infringement matters, we offer a few things to consider right from the start.

Should you even join?

When several companies face essentially the same infringement accusations from the same plaintiff, one of the first decisions is whether to form a joint defense group. Oftentimes, these companies have been cooperating on certain levels even before litigation begins because they received similar "notice of infringement" letters from the patentee. But a joint defense group is definitely a step up in terms of cooperation.

One factor to consider is the potential expense of the litigation. Sharing expenses with other companies may dramatically reduce your overall fees and costs. But should invoices be divided equally? Or based on each company's revenue? Is there a better, more creative metric? And should document collection costs be shared or paid for individually?

Another consideration is your settlement strategy. If you intend to settle quickly, and can resolve the dispute one-on-one with the plaintiff in the near term, there is no reason to spend hours negotiating a relationship with your fellow defendants.

A third consideration is your level of experience with patent litigation. If this is the company's first foray into this complicated area of the law, joining a defense group may be an excellent way to bring yourself up to speed by drawing on the knowledge of more experienced defendants.

What should a formal written agreement cover?

To be protected by privilege, communications within the group must relate to areas in which the defendants truly share a "common interest." For example, invalidity defenses that focus on the patent's weakness are common to the group in that each defendant's arguments are aligned with the others. But if the accused products or systems differ in such a way that claim construction and noninfringement arguments may diverge, such communications could ultimately be discoverable.

Although a formal written agreement cannot itself create privilege, it can strengthen privilege arguments. Important are statements that (1) the parties recognize they share a "common interest" in pursuing defenses and counterclaims; (2) communications in furtherance of the common interest are privileged; and (3) communications that may have occurred prior to the agreement are also subject to the common-interest privilege.

The agreement should also state that (4) each party retains complete and independent discretion to settle the litigation and (5) there are specific steps for withdrawing from the agreement. Responsibility for fees and costs upon withdrawal should likewise be outlined.

One risk of a signed written agreement is that in several states (California and Texas, for example), the agreement is discoverable over any claim of privilege. Production of the agreement is not necessarily a problem, but it may give the plaintiff some insights into the alignment of certain defendants and the communications network.

Give serious consideration to a joint defense group. The benefits can be many, but only if the company's interests are carefully protected.

Condensed from original article, published in Legal Times' IP Section April 23, 2007. Used by permission.

Submitted by M. Elizabeth Day and Edward H. Sikorski of DLA Piper

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