Joseph Hosteny Intellectual Property Case Studies

Contingent Fee Litigation Saves Physician's Important Invention

The following case is unique in that it shows how contingent fee intellectual property litigation can help an inventor who has an extremely complex case.

This physician/inventor came to our firm in 1987, after being sued by a large company seeking to invalidate his patents on his hemodialysis catheter. When our lawyers looked at the facts of the case, they discovered that our physician/client was in an extremely weak position in several areas and set out to win many points for him, which put him (and his invention) in a much stronger position.

For example:

Although he was not aware of it, the licensing agreement our client had signed with his licensee was not favorable to him, so we remedied the situation by putting a more advantageous agreement into place, which increased his royalty rate and broadened his royalty base.

In addition, we:

--negotiated with other companies for licenses so that the catheter could be sold by several companies -- each one in a different field of use: i.e., one for hemodialysis and others for the administration of various medications.

--won the original lawsuit brought by the larger company. This included winning a reexamination that the larger company had provoked in the US Patent Office, thinking it would work to their advantage.

--handled litigation regarding several other companies, which resulted in multi-district litigation under Title 28 USC Section 1407. The physician/inventor settled with all parties except for one, and prevailed against that party at trial. During the course of the litigation, we had to take an appeal, which we won, over whether utility patent applications could constitute continuations from design patent applications. We prevailed on a second appeal following the trial of the lone remaining infringer.

As can be seen from the above description, this was an extremely complex case because it involved multiple accused infringers -- companies with substantial resources, as well as the ability to staff and defend patent litigation. In addition, the case involved many substantive aspects of intellectual property law that arose during the course of the trial.

Although this was an extremely complex contingent fee case, it was "winnable" because it was a good, straightforward case with substantial monetary damages, and infringers who had dealt blatantly and unfairly with our client. For instance, one infringer had gotten a disclosure from our client, and promised to handle it properly; then turned around and copied his ideas and used them for themselves. Our client was always available to his attorneys with input and ideas. In addition, because of the original license, our client's licensee was obligated to pay part of the litigation costs, thus taking part of the responsibility for expenses.

Contingent Fee Trade Secret and Copyright Settlement

Another of our contingent fee cases illustrates how different legal theories can be used to win on behalf of a wronged client.

This time, our client was a solo engineer/inventor from Indiana who had formed his own consulting company and entered into an agreement with a Japanese company to provide it with technical ideas and innovations for creating high-speed scanning radios capable of scanning faster than any others on the market.

Our client came to us because he had fulfilled his part of the bargain by creating the high speed scanner radio, which he had shared with the Japanese company. However, he had been paid no royalties or any other money that had been spelled out in the written agreement both parties had signed.

Naturally, we first tried to see if the Japanese company had infringed our client's patent. But a careful analysis revealed that the patent licensed to them could not be enforced under the agreement since proving infringement would be difficult, if not impossible. The Japanese company's product did not infringe our client's product, and so we needed another theory.

We didn't give up, and began looking for other enforcement strategies. We found two.

First, the Japanese company had failed to secure ownership of the software, written by our client, that was used in the high-speed scanning radios. So we copyrighted the software, which meant that the Japanese company had no right to duplicate or distribute it. This allowed us to sue for copyright Infringement.

Second, we turned to trade secret theory, since the Japanese company had misappropriated our client's trade secrets, by failing to keep confidential certain technical information our client had provided to them. The defendant had gone so far as to use our client's confidential information in their scanner radios and service manuals -- again in direct conflict with the agreement.

The result? Our client sued the Japanese company. On the eve of trial, the case settled for three million dollars.

Even though we represented our client under a contingent fee agreement, his recovery under the settlement was substantial, since we had taken steps to minimize the cost of the litigation.

For instance, we used our client as an expert wherever possible; and we used local experts on damages and other technical issues. In addition, we had no legal expert.

We cut discovery to the minimum, deposing no third parties, and using only one lawyer per deposition. Document requests were specific and relatively few in number.

Why did we settle the case rather than go through a trial? Because we and our client knew we had achieved an excellent result through settlement, and saw little reason to risk a trial that might produce a higher verdict, but which also could result in an appeal, judgment enforcement proceedings, or even an adverse jury verdict.

The lesson here: Know when to quit when you're ahead!