The 10 Biggest Litigation Mistakes Companies Make
Litigation is inevitable for some business owners. A study by the U.S. Chamber for Legal Reform found that 43 percent of small business owners reported having either been threatened with or involved in a civil lawsuit. Here are tips to avoid costly mistakes when facing litigation.
Litigation is complicated, expensive, time-consuming and, unfortunately, sometimes inevitable. Companies are often forced to protect intellectual property, defend themselves in lawsuits by former employees, and negotiate commercial contract disagreements, among other unexpected legal disputes. With so much time and money invested and so much at stake, it is important to avoid the following mistakes when litigating to make sure you are getting the most for your legal dollar.
1. Not being involved in the litigation
Some clients limit their participation in litigation to selecting an attorney. They believe their time or their employees’ time is too valuable to waste on litigation and rely solely on the expertise of the attorney they hired. This is misguided. To provide the best representation possible, an attorney needs to know the facts, the documents and the witnesses. Not only does the client have all of this information, they can provide valuable context for it. In addition, an attorney’s expertise is limited to the law, but the litigation will affect the business. You should be involved in developing the litigation strategy and decision-making to ensure they align with your business interests.
2. Keeping unnecessary documents
One golden rule is to never put anything in writing that you could not easily defend if used against you during litigation. With the onslaught of social media and other forms of quick, easy and everlasting written communication, it is virtually impossible to follow that rule. People routinely send informal emails, texts and tweets that can easily be taken out of context and twisted at a court hearing years later. Because people are not going to stop communicating in this way, the next best option is to make sure that these types of documents are routinely purged. If there is no legal reason to keep a document, don’t.
3. Destroying necessary documents
Some documents, however, you will want to keep. Formal documents that are self-contained (i.e., give context within the document) are less likely to be misconstrued and may be helpful. For example, documents detailing the start or history of a company, development of a product, or a significant business transaction are often crucial to litigation. Consider the potential value of such documents to litigation before eliminating them.
4. Not performing due diligence
It bears repeating that litigation is expensive. Some clients try to minimize costs by cutting corners in preparation, under the assumption that the litigation will resolve prior to any trial (as almost all do) or that they can prepare later if the case is not quickly resolved. However, you should take litigation seriously from the start, as it can have dire consequences. At the outset of any litigation, your business should perform its due diligence to ensure understanding of the relevant facts and law. This allows for informed decisions as to how to best proceed. If you are unprepared, the opposing side will figure that out quickly and use it to its advantage to seek a favorable resolution by the court or force a more advantageous settlement.
5. Not determining the worth of the case
Oftentimes, parties begin litigation without knowing what the likely remedies are. Is an injunction likely? Is this case worth $100 million or $1 million? Without knowing the risks and rewards, you cannot develop an efficient strategy for the litigation and may end up spending too many resources or too little, depending on the likely outcomes.
6. Thinking you don’t need an attorney or acting like one
Clients can get into trouble when they analyze the law without an attorney. Although the client can read a legal instrument such as a contract, statute or patent, they are not in a position to opine on its legal meaning. Searching the internet or being involved in a prior litigation is not sufficient background. The law is complicated, and attorneys spend years developing their expertise. Trying to apply the law without that expertise can be a recipe for disaster.
7. Letting emotions rule
There are situations that can invoke strong emotions. A company may be wronged by another company, or be subject to a frivolous suit. That does not mean that litigation or litigating to a ruling is the best approach. Sometimes the cost of litigation outweighs the potential benefit. A company should not let emotions influence its litigation decisions.
8. Not understanding privilege and immunities
When the CEO wants to send a confidential email without having to produce it in discovery in related litigation, they can copy their attorney to protect it, right? No, not right. Attorney-client privilege, work product doctrine and related immunities can be powerful tools, as they protect certain information from discovery. But whether information is protected from disclosure due to a privilege or immunity is complicated, because it depends on multiple factors, which vary from jurisdiction to jurisdiction. To benefit from privilege and immunity, you should consult with counsel to familiarize yourself with the rules of your jurisdiction before making any assumption as to what information might be protected from disclosure.
9. Being impatient
Litigation can take years to reach trial, but a trial might not be the end of the matter. The case may be stayed, appealed, retried and appealed again, among other outcomes, extending litigation for years. In some cases, litigation might be resolved with an early motion or early settlement, but you should not always expect a quick resolution. Indeed, the best strategy might involve letting the litigation proceed to trial or appeal. A client needs to understand that litigation takes time and should not let impatience affect strategy.
10. Treating every case the same
While cases might be similar, no two cases are the same. Parties, attorneys, facts, laws and judges may change from one case to another. What worked in one case may not work in another. Approaching every case the same way means making many of the mistakes identified above. Treating each case independently will help procure the best possible outcome.
I am an experienced patent litigator who also litigates other types of intellectual property matters including trademark, copyright, breach of contract, unfair competition and trade secret cases across the country, including in the ITC. In addition, I regularly counsel clients on intellectual property matters such as licensing, freedom to operate, IP enforcement, opinions of counsel, and patent and trademark procurement.