Preparing for battle - a checklist of matters before attacking your competitors

Consider this: You have just been given the task of suing a competitor for infringement of your designs. Your company has spent a considerable amount of time preparing its designs and protecting them. Your shareholders are eager for a return on their investment. You can hear the cash registers ringing.

You now hit the market and sales are booming. You can feel a bonus coming on. And then, suddenly, a sales rep informs you that your competitor is selling an identical product to yours. You call an urgent board meeting. The initial view of the board is to sue. A thousand thoughts are running through your head. Overall at the forefront of your mind is the following - you do not want to "bet" the company on this matter. What do you do? These are questions that face company directors and legal counsel in almost all forms of litigation including intellectual property litigation. Common sense dictates that, before entering litigation, you undertake a bullet-proof analysis of your position. Let me take you through the process, adopting the above case study.

List company objectives
The first consideration is the company objectives. This will help determine the strategy. You need to consider whether the infringer is likely to make in roads into your market or not. That will help determine whether litigation is the right course. You may also wish to consider whether it is possible that you license the intellectual property to the infringer instead of suing - that could be a possibility? You also need to consider the company's resources - both financial and non-financial - that is imperative. You should assess the company's financial position and what it is expected to spend to enforce its rights. You also need to consider what costs it is likely to recover in the event of the litigation and potential damages.
Be also aware that you will need to estimate the resources required in your litigation which includes conferring with the designers, solicitors, barristers and the periods of time to be involved in collating the various documentation which can often be extensive.

Who to sue
With the board having determined that it wants to sue - the question is - whom? The representative has informed you that the infringing products are being manufactured in China and imported by an Australian distributor. At this point your head is spinning as there is a raft of potential defendants. There is the Australian distributor. There is the Chinese exporter - not to mention all the officers and directors of the above. You may need to consider whether the directors or officers of the infringer(s) are former employees or executives of your company which could of itself raise important considerations.

Preliminary investigations
As a priority, ensure that you obtain samples of the infringer's products to determine the nature of the infringing activity. Ensure that, in addition to any sample obtained, that a formal Statement is obtained from the vendor (if possible) to confirm where the sale originated.

Infringement analysis
First, ensure that you cast a veritable dragnet over the corporate information of the infringer. This should include full and comprehensive ASIC searches. Next, you need to determine your in-house team that will be working with your external team (i.e solicitors, barristers etc). Ensure that they have the necessary skills not only to do their respective jobs but also to work together on the litigation. Once that is done, you can undertake with your solicitors an infringement analysis to determine your prospects of success. I recommend you obtain that advice in percentage terms i.e you have a 60 per cent chance of success. You should also check your insurance policies to ensure that litigation costs are covered by your usual forms of insurance such as business protection insurance. It may be that your legal costs are covered which will be of some comfort to the board.

Potential counterclaims
You can expect that, if you sue, more often than not you will be met with some form of counterclaim. It may be that there is a potential counterclaim over the validity of your own design registrations? That should be an agenda item for your conference with your solicitors and barristers. That will involve an analysis of the merit of your design registrations.

Security Evidence
As the Fraud Squad say "documents talk witnesses walk", meaning there is no better evidence than hard evidence itself, for instance documents, photographs, invoices etc. In order to do that you may consider the merits of what is called an "Anton Pillar Order". This is a Court Order that allows you to search and seize any important evidence that might be housed by the infringers. Remember that if your solicitors advise you to seek such an Order then you should hold off sending a Demand Letter because that might put them on notice that an Anton Pillar Order might be "in the wind".

Commencing litigation
Ensure that your solicitors and barristers have expertise in the field of intellectual property disputes. Once prepared you should instruct your solicitors to send a Demand Letter seeking undertakings including undertakings that the infringer cease and desist from the infringing conduct, payment of your legal costs and damages.

Costs
Your board is now asking questions regarding costs which you should be prepared to answer - including, whether you can recover damages and costs against the infringing company in the event of being successful. In that analysis you should consider the relative size of your company and the infringing company. If the infringing company is a significant entity then you should be prepared for some drawn-out litigation including protracted document exchange (Discovery) and so on. If on the other hand the infringing company is a relatively small company then it is more likely that the litigation will not be protracted.

As with any litigation you should consider potential liability for costs, not only yours but the other sides. You should ensure that you obtain an accurate estimate of those from your solicitors as well as advice on the likely length of the proceeding, the amount of work involved and the time and expense involved in any settlement discussions and trial preparation.
With all the above in mind and having carried out the above steps, you are now armed with the relevant information, advice and research for undertaking the appropriate steps to protect your company. As Sun Tzu said in the Art of War, "to secure ourselves against defeat lies in our own hands". Good Luck!