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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (71409)	5/1/2001 1:02:43 AM
From: Don Green	Read Replies (2) \| Respond to of 93625

The Cost of Suing ERIC J. SINROD (April 30, 2001) In the New Economy, intellectual property is often the corporate crown jewels, both for companies in the technology business and for those that simply use technology to make their own businesses more effective. It's vitally important for companies with any research-and-development activity to run periodic audits to identify their innovations as intellectual property to be protected. It's also important to get patents on those innovations and then police them to identify and prosecute other companies that infringe on patents or trademarks. Unpleasant as it may seem, litigation is often the only way to protect intellectual property. In some respects, litigation is a necessary evil. On the one hand, if a company doesn't protect its intellectual property, it will ultimately lose its exclusive rights of control over that intellectual property. On the other hand, a company's efforts to protect its rights through litigation can be very expensive. A recent example brings this latter point home. Rambus, a chip design company in Los Altos, Calif., recently reported earnings of $8.2 million for its second fiscal quarter, excluding one-time charges. Yet Rambus' legal fees during this same period were $7.3 million, stemming largely from litigation in different intellectual property cases involving Infineon Technologies, Micron Technology and Hyundai. Incredibly, Rambus' legal fees almost equaled its earnings during its second quarter. Obviously, while companies want to protect their intellectual property, they don't want their legal efforts to outstrip their ability to make decent earnings. My personal experience with intellectual property cases and clients has shown that it's vitally important that companies actively work with their legal advisers to pick the proper battles, create realistic litigation budgets and plans and keep legal costs under control once litigation has commenced. Where appropriate, some companies may also be able to negotiate creative billing arrangements with counsel. In some circumstances, the agreement could call for counsel to be paid a predetermined amount, plus a financial incentive if certain case results are achieved. In other circumstances, it could be agreed that counsel will be paid a hefty percentage of any ultimate recovery on a contingent basis. (Law firms must become quite convinced of the ultimate potential success of a case to choose this option.) Or a blended rate could be established, saving the client money by having both senior and junior lawyers on a case bill at the same rate. Finally, a law firm might be paid on a flat-fee basis, although this transfers quite a bit of risk to the firm. Where appropriate, when there is a true possibility of resolving an intellectual property case short of formal, full-scale litigation, an alternative means of dispute resolution, such as arbitration or mediation, should be considered. Those methods are much less formal than the process of going to court and involve fewer procedures and less discovery of facts, which can be costly. At times, core issues can be resolved fairly expeditiously and efficiently through these means. Still, some companies don't want to sacrifice their full day in court. In those instances, companies may opt for nonbinding dispute resolution. The problem is that nonbinding methods of dispute resolution can actually increase legal costs. While the process is informative and efficient, a party dissatisfied with the result can simply start the process over again in court. The bottom line is that intellectual property stakes are supremely high. To resolve them and keep them in check, companies must find counsel they can trust and work with them both productively and economically. idg.net