IP Licensing Litigation

In litigation, the higher the stakes, the more vital creativity can be. Not always – litigation is a dispute, and disputes don’t always lend themselves to innovation. But in some situations, an experienced litigator can save clients time and money, and arrive at a good result, by really, truly, thinking outside the box.

Problem: A Farella Braun + Martel litigation team represented a major technology company in a lawsuit where our client was accused of breaching an IP license. Our client was interested, as many clients are, in finding some leverage points early in the case so that the parties could resolve the dispute without grinding through the prolonged, expensive process of going all the way through trial. Sometimes, of course, you must dig in and litigate. However, in this case, given the amount of money at issue, this didn’t make financial sense.

The problem, in short, was to find a way to significantly reduce liability without putting forth a full and lengthy defense of the case, including avoiding the expensive process of discovery.

Solution: The Farella team brainstormed, beginning with a theoretical exploration of all the immediate options. Arbitration. Counterclaims. Indemnification. What eventually emerged from this process was a creative, two-part solution that accomplished precisely what the client needed.

The approach they arrived at was to section off two strategic strengths in their position and pursue each individually. Think of it like demolishing a building. You can start at the top, and disassemble the structure brick by brick until it’s gone. Or, you can set off explosives at a few carefully selected spots, and the building will collapse into itself in seconds.

The first strength was an arbitration clause in the licensing agreement that, if applicable, would take the dispute out of court and present it in front of a single arbitrator. Arbitration was attractive because it moved faster, and it is a forum amenable to creative case schedules. It also promised absolute confidentiality, a trait often important to defendants. A potential downside could be the cost of the arbitration when compared to state court. The second was an ambiguous limitation of liability clause in the agreement that the team thought they could make a strong argument for substantially reducing the client’s potential liability.

Step One was to get the dispute into arbitration rather than arguing it in court. After presenting this strategy to the client and getting their approval, the Farella team was able to persuade its opponent that the arbitration clause in the agreement undeniably covered this dispute. The parties also agreed to stay the state court case and have the court order the case be sent into arbitration.

Once that was accomplished, the next step was to leverage another vulnerability in the plaintiff’s case that the Farella team discovered. The original license had been renewed. That license included an arguably ambiguous limitation of liability clause, which had been renewed with the license. The meaning and effect of that clause could be subject of an early motion which, if successful, would substantially reduce potential damages. If the Farella team could persuade the arbitrator to rule on the applicability of the limitation of liability clause and the maximum liability amount in an early motion, it would successfully avoid the costs and pitfalls of discovery while achieving the client’s objective.

Which is precisely what happened. The Farella lawyers were able to successfully argue that rather than being a triable issue, the effect of the limitation of liability clause was, instead, appropriate for motion practice. The arbitrator heard arguments, held in our favor, and as Forrest Gump would perhaps have put it, our client’s potential exposure was dramatically reduced… just like that. And the Farella team simultaneously asserted counterclaims that survived a motion to dismiss, thus adding another negotiation lever into its client’s quiver.

A creative approach, and the solution it propelled, kept a Farella client with a complex case out of court. At least as important, it also kept them out of discovery. And resulted in a (relatively) quick, highly-effective, and successful resolution that drastically reduced their potential liability.

Run-of-the-mill thinking and lawyering produce run-of-the-mill outcomes. Creative thinking produces superior outcomes. Just like that.