Due Diligence Checklist–Prior Notice (Part 4 of 5)

Part 4 of 5:

When purchasing a patent asset, always ask whether the seller or any previous owners put any third parties on notice of infringement and, if so, ask for any and all documentation evidencing such notice (e.g., letters sent to potential licensees).

Providing third parties of notice infringement is a double-edged sword.  On the one hand, if a previous owner provided notice of infringement to a potential licensee, but the potential licensee continued to infringe, you (the new patent owner) now have a willful infringement claim against the licensee.  This significantly enhances the patent asset’s monetization potential, because a willful infringement claim enables you to earn treble damages against the licensee.

On the other hand, if the seller or any previous owner provided notice of infringement to a third party, but waited an unreasonable amount of time before bringing suit and such a delay prejudiced the potential licensee, then the licensee may raise the equitable defense of laches.  If the potential licensee prevails on its claim of laches, then you may only be entitled to post-suit damages–i.e., you may lose your six-year lookback period of damages.  This serves to undermine the patent’s monetization potential.

By way of background, a presumption of laches exists when more than six years pass between the time a patent owner knew or should have known of its infringement claim against a defendant (e.g., providing notice of infringement to a third party) and the time a suit is filed.  This presumption may be rebutted if you can show the delay was reasonable or the potential licensee was not prejudiced.

Notwithstanding the above, willful infringement and laches are defendant-specific issues.  Put another way, if a willful infringement claim or laches defense exists between you a given licensee, this has no bearing regarding the issues between you and another licensee.

Hence, pay particular attention regarding whether a prior owner provided notice of infringement to a  tier I target–this can cause the asset’s monetization potential to significantly swing one way or the other.

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