It’s a big step starting legal proceedings against your competitor (we will call them the IP Infringer). Before reaching this stage, you should have already received clear advice on the strength and risks of your case against the IP Infringer. Importantly you should have also received a very clear outline of costs for each of the stages of the litigation (we provide Fixed Fee Litigation Structures). You would have already explored with your legal adviser a number of strategies aimed at reaching a favourable settlement, but for a numberof reasons were unable to. Having a good understanding of the 5 steps below will enable you to navigate your way through the next phase – legal proceedings. Executed in the right way you will also increase your prospects of achieving a favourable settlement before trial.
1. Commence legal proceedings
Sometimes starting legal proceedings against the IP Infringer is a necessary next step. As the aggressor you have the benefit of being in the driver’s seat and controlling the proceedings. Put another way the IP Infringer can’t simply walk away from the proceedings. If the IP Infringer wants out of the proceedings early the reality is that they will need to reach a settlement with you. If that happens you hold the upper hand. The majority of IP proceedings are filed in the Federal Court of Australia or the Federal Circuit Court. At this stage of the proceeding a specialist IP barrister will also be engaged to work alongside your IP lawyer. A barrister is a specialist in court advocacy and he or she appears before the judge at various stages during the proceedings. A good fit between your IP lawyer and barrister is essential. The IP lawyer will do the majority of the leg work to brief the barrister, communicate with the IP Infringer’s lawyers throughout the proceedings and importantly ensure that the litigation strategy remains in sync with your commercial objectives. To start the legal proceedings in the Federal Court, three key documents are prepared and filed with the court. They are the Application, the Statement of Claim and your Genuine Steps Statement. The first two documents set out the conduct of the IP Infringer, the claim you have against them and what orders (including monetary compensation) you want the court to make in your favour. The Genuine Steps Statement sets out what steps you and your IP lawyer took to attempt the settle the dispute before filing these documents. Once filed and stamped by the court, these documents are then served by your IP Lawyer on the IP Infringer. Once served, the IP Infringer will have an opportunity to prepare and file, in a similar format, their Defence/Response to your claim. Depending on the type of IP infringement case being run, the IP Infringer may also file a cross claim. For example if you commenced patent infringement proceedings, the IP Infringer might cross claim arguing that your patent is invalid. Setting out clearly and accurately your claim in these documents sets the framework and tone for the rest of the proceedings. So it’s important you get these right.
2. Scheduling Conference/Directions Hearing & Mediation
In the early stages of the proceedings, both parties will appear before the judge at a Scheduling Conference or Directions Hearing. At this hearing the judge will set out a timetable of events and actions for the proceeding. In some cases attending the hearing can be avoided if the parties can agree beforehand on an agreed timetable and the judge agrees. In the majority of proceedings the judge will also at this first hearing order that you and the IP Infringer attend a mediation. The mediation is usually scheduled within 3 to 6 months from when you first filed the court documents. A Court Registrar is the appointed mediator and his or her role is to facilitate a settlement between the parties. In our experience, it is at this juncture you have the highest prospects of achieving a commercially favourable settlement. This is because the IP Infringer will know that its legal costs to defend the proceedings through to trial in the event of an unsuccessful mediation will escalate. Also if you have run your case strongly up until that point, you will have also planted seeds of doubt in the mind of the IP Infringer as to whether they can in fact successfully defend the proceedings or whether it is commercially worth them to do so. A typical settlement you might seek at this juncture would be that the IP Infringer stops the infringing conduct, pays your legal costs to date and pay an amount representative of damages suffered by your business because of their unauthorised conduct. Taking the litigation in stages and focusing on getting to mediation in a strong position is key to increasing chances of achieving a favourable settlement.
3. Discovery & Evidence
Discovery ordered by the judge requires each party to provide relevant documents to the other. These only relate to documents which are necessary to determine the issues in legal proceedings. The rationale behind discovery is that it will then facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible. Often some limited discovery (usually relating to the sales of the IP Infringer) is ordered by the judge before the mediation. If the dispute does not settle at mediation both parties will need to begin preparing their evidence. This takes the form of affidavits given by persons / witnesses relevant to each of parties’ arguments. Your evidence, known as Evidence in Chief, will often come from one of the business owners / directors. If your claim is a patent or design infringement case an independent expert is usually also needed. The IP Infringer will prepare their corresponding Evidence in Answer also in affidavit form. If it is needed, you will then have an opportunity to file responding affidavit evidence known as Evidence in Reply. This a critical phase of the litigation, as the evidence you file is what will be relied on at trial and supports your case against the IP Infringer. It is the cornerstone of your case.
4. Trial & Judgment
The length of the trial will vary depending on the nature of the dispute but often can range between 3 to 7 days. After opening submissions by both parties, your legal team will outline / ‘lead” your evidence first. Some of the witnesses that provided evidence in support of your case will then usually be “cross-examined”. This involves those witnesses answering appropriate questions put to them by the IP Infringer’s barrister. Once this phase is concluded, the IP Infringer will typically also then outline / lead its own evidence. Your legal team has the corresponding opportunity to cross examine their witnesses with the aim being to scrutinise, find holes and inconsistencies in their evidence. Once this evidence round is completed, closing submissions will be delivered by both parties. The timing of a decision being made by the judge is dependent on their own case loads but is usually between 3 to 6 months.
5. Payment of your legal costs and your damages
If the decision goes your way, the court will typically then order an ‘inquiry as to damages or an account of profits’. It is essentially a separate mini-trial to determine what damage has been suffered by you as a result of the IP Infringer’s conduct or alternatively what attributable profit was made by the IP Infringer. The IP Infringer will also be ordered to pay of portion of your your legal costs incurred from the time of filing the court documents. This portion is calculated to a court scale and typically amounts to 40% to 60% of your legal spend. This legal cost amount could vary depending on the effect of any strategically made offers during the proceeding (a subject for an upcoming article in this series!).
TAKE AWAY POINTS
- Go into litigation ‘eyes wide open’ – know your legal position, risks and most importantly costs to run the case
- Before making a decision undertake a careful and objective cost / benefit analysis on whether to start legal proceedings. Put another way, will it benefit your business?
- Take the litigation in stages and reassess progress regularly to ensure the litigation is still in line with your original strategy and commercial objectives.
- Always keep one eye on achieving a commercially favourable settlement. A strongly run litigation should still be designed to create potential settlement opportunities along the way. Don’t just blindly barrel on straight through to trial.