Goodwin Gaming
May 3, 2013

Playing the Patent Game: How to Respond to and Avoid Patent Threats

When a patent threat arrives, it will often take one of two forms.  In some circumstances, an operator may receive a letter asking if “you might be interested in discussing a patent license.”  In other circumstances, the operator finds its inbox filled with e-mails from law firms across the country offering to represent the operator in the patent infringement case that was filed against it that morning.

The first task for the operator is to determine whether the infringement threat is the operator’s problem, or a problem for a game developer or supplier to resolve.  As a general rule, if the threat concerns a product or service that the operator has developed on its own, then the threat is one that the operator will have to address.  If, however, the threat concerns a product or service that someone else was hired to develop, or was procured from a third-party game developer, then the operator will need to consult its commercial agreements to determine whether the operator or the commercial partner is on the hook for those liabilities.  The operator should begin this analysis as soon as is practical – some agreements provide that liability can only be shifted if notice of the infringement is “promptly” given.

Once that issue has been addressed, the operator should develop a better understanding of the threat.  Is the threat coming from a competitor that wants to hinder the operator’s business?  Or is the operator one of a dozen parties to a lawsuit or a threat letter from a company that is in the business of licensing patents?  Strategic litigation involving competitors deserves more attention and resources than a threat from a “non-practicing entity” or “patent holding company” that may go away in exchange for a modest payment.

If the threat is truly strategic, then the operator should identify and retain counsel that is not only experienced with patent litigation but also experienced with the particular technology at issue.  Similarly, a license offer from a non-practicing entity should be addressed by counsel that has experience with those types of matters.  Although the operator may be tempted to handle this matter internally, or to refer it to generalist counsel, patent law is a specialized and esoteric field, and missteps can be costly.

These basic guidelines for responding to a patent threat also suggest several steps that an operator can take to reduce its exposure to such threats.  First, if the operator is offering someone else’s products and services in the course of its business, then the operator should make sure that its agreements make its game developers and suppliers bear responsibility for any infringement claims concerning their products, and that its commercial partners have the resources to provide a meaningful defense in the event that a patent threat materializes.  If the operator offers its own products and services, and the operator has competitors with patent portfolios and a history of patent litigation, then it may make sense to have patent counsel analyze the operator’s offerings against the competitor’s patents and offer advice as to how to avoid those patents.  Finally, sometimes the best offense is a good defense, and an operator should consider whether it makes sense to develop a patent portfolio of its own for licensing and litigation purposes.