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Key Patent Issues for Foreign Companies to Consider Before Entry into the U.S. Market
Despite the current upheaval in international trade and the uncertainty of U.S. tariff policy, for many foreign companies, the U.S. consumer market still offers an attractive opportunity for growth. But any company planning to enter the U.S. market must consider the U.S. patent landscape for its product and services, both in terms of avoiding costly infringement battles and in terms of maximizing the value of its own intellectual property.
This series provides a set of patent-related best practices for foreign companies planning to enter the U.S. market.
Part I: Minimizing the Risk of a Patent Infringement Suit
Enforcement and litigation are more common in the U.S. than in many other countries, and patent holders are more attuned to the potential upside of asserting their patents against potential infringers. Many see patent enforcement as a key strategy for protecting their market share and building a moat around their business. Moreover, many patents are held by nonpracticing entities whose entire revenue model is based on monetizing their patent portfolio through licensing – either by negotiation or by litigation.
It is common for U.S. patentees to keep a close eye on new market entrants and compare these products and services to their patent portfolio. If the product or service is similar to a patent’s claimed invention, the foreign company can expect a cease-and-desist letter, an offer to take a license, or even a lawsuit without any warning.
In view of the enforcement and litigation environment in the U.S., it is prudent for foreign companies to take steps to minimize the risk of a costly and protracted legal dispute over a U.S. patent. Two actions can provide significant protection.
- Freedom-to-operate opinion
Prior to launching a product or service in the U.S., it is highly advisable to seek a written opinion of U.S. patent counsel, based on a thorough review of potentially assertable patents, about whether there are any blocking patents that could be asserted against the new offering.
These opinions help in three different ways. First, they can flag any problematic patents and give the foreign company an opportunity to design around the claims of those patents so that it no longer infringes. Second, they may scare off patentees from going forward with aggressive demands through negotiation or litigation, especially if the opinion shows that any claim of patent infringement is baseless. Third, if the foreign company is sued, a clean freedom-to-operate opinion can be evidence that the foreign company did not knowingly infringe, thus foreclosing the possibility of the patentee being awarded treble damages for willful infringement.
Sure, these opinions can be costly, especially if the field is crowded or if the attorney is tasked not only with identifying potentially problematic patents but also exploring those patents’ validity. But such opinions are orders of magnitude cheaper than litigation – even if it is ultimately unsuccessful.
- Non-infringement and invalidity opinion
If a foreign company is approached by a U.S. patentee with patents that have not been reviewed for a freedom-to-operate opinion, it is important not to rush into negotiations with the patentee without a thorough review of the patentee’s assertions. Often, the patentee’s infringement read is shaky, glossing over major differences between the claims of its patents and the accused product or service. Patentees also often have an overly broad reading of what their claims cover. Finally, the asserted patents may be vulnerable to a validity attack – and an invalid patent cannot be asserted for infringement.
Obtaining a non-infringement and invalidity opinion is the most cost-effective approach to patent disputes for two reasons, First, such an opinion will often resolve the dispute without any expensive escalation. Second, if the patentee persists in litigating its case, the work that has gone into the opinion will be very useful in formulating a defense against the patentee’s attacks.
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In Part II of these series, we will examine steps that a foreign company must take to maximize the value of its U.S. patent portfolio.
If you have questions about how to access U.S. capital markets and set up a U.S. corporate entity, read our prior article on this topic here.
If you are considering expansion into the U.S. and would like more information about the U.S. patent landscape, we can help. Reach out to Kate Cassidy, Katie Rubino, or Maria Granovsky to discuss your company’s specific situation.
