Lessons for David

“David v Goliath” is a much loved media term to describe legal battles between a deep pockets party (the Goliath) against a less financially equipped adversary (the David). It’s also a term loved by the Davids as it evokes the imagery of the little guy triumphing over the looming giant against seemingly insurmountable odds. Unfortunately, it’s not always that easy.

Last week, interim orders were made in the NSW Federal Court case of Domino’s Pizza Enterprises Pty Ltd (the Goliath) v Precision Tracking Pty Ltd (the David). Effectively, those Orders require Precision Tracking to pay into court a sum of $500,000 by the end of the month to cover the legal costs of Domino’s and the other Cross-Claimant (Navman Wireless Australia) or face their claim being stayed until they can come up with the money.

Precision’s claim against Domino’s and Navman centres around patented GPS tracking software that Precision had pitched to Domino’s for the creation of their pizza tracking app. Domino’s ultimately went with Navman’s GPS solution instead. Interestingly, it was Domino’s who instigated the litigation by seeking to challenge Precision’s software patent. That forced Precision’s hand to then cross-claim for breach of contract, breach of confidence and Copyright infringement of the software code which they claimed had been reverse engineered by Navman.
Having acted for quite a few Davids and Goliaths in IP disputes, here’s a few lessons I’ve learnt which might help you to become a better David.

Don’t litigate purely for money. If a massive pay day is the primary incentive for litigating, I’d suggest you may be better of betting your money on black at the casino. There are never any guarantees on how IP litigation might progress even if you think you have a seemingly strong claim, and battling against a Goliath is usually drawn out and stressful. Even if you win, there is then still the issue of assessing damages or accounts of profits (which can be a very subjective and again costly exercise), factoring in lawyer’s fees and who pays them, and recovering the judgment sum once an order is made. Those things need to be considered in detail and advised upon if monetary reward is the ultimate aim. Having said that, there are many non-monetary reasons to litigate. Those include protection of your IP assets, making life difficult for your competitors, sending out marketplace signals by establishing your reputation as a strong litigator, and of course, the free publicity that fighting a high profile legal battle can bring. On that note, don’t assume that publicity always favours the Davids. If the Goliath is generating advertising revenue for the news publisher, you can guess which way the story is likely to spin.

Pick your battles. When you are battling a Goliath, you will be hit by every interlocutory trick in the book. These are often designed to rack up your costs and to protract the matter. Some examples are over-reaching applications for discovery of documents (or the affectionately coined “fishing expedition”), requests for further and better particulars, notices to admit facts and many others. Often you will find that you will be threatened with further interlocutory hearings if Goliath doesn’t get what they are asking for in their terms. The natural temptation is to put up as much resistance as possible to those applications and if you have the financial means, you can and should. If you don’t have the means, it’s important to know which battles are worth fighting and will add value to your overall case and when to give the baby its bottle.

Ensure sufficient financial assets are available. An application for security for costs is a good example of an interlocutory application which can hit plaintiffs by surprise and stop a proceeding dead in its tracks. Effectively a security for costs is a payment by the initiator of the action made into court or some other form of security which is put aside to cover the other side’s legal costs in the event that they win the case. Accurately estimating legal costs up to trial is incredibly difficult and leaves plenty of room for inflation. In the Domino’s case, Domino’s estimate legal costs of $1 million up to trial and was awarded interim security of $200,000 with leave to apply for more. Therefore, it is important that Davids have sufficient assets to cover a security for costs if they are the instigator and what quantum of security is reasonable.

Consider the implication of cross-claims. If you are a defendant in proceedings, you ordinarily won’t be required to pay a security for costs. That’s because it would be unfair to penalise you for defending a case where you are not the instigator. That position however changes (as is the case in Domino’s) where you bring a cross-claim and become the instigator yourself. Cross-claims are an important part of IP cases as they can help to redress the balance between plaintiff and defendant and can be used to great strategic effect to bring about an early resolution. However, the benefits need to be weighed against the prospects of the claim and the financial implications of a security for costs, especially for asset poor cross-claimants. Regard also needs to be given as to who to join in the cross-claim. Cross-claiming against two or more cross-respondents (as in Precision’s case) exponentially increases the security payable as you may potentially need to cover two sets of legal fees from two different law firms (in addition to your own legal costs).

Know when to settle. Always bear in mind that the longer litigation goes on, the more difficult settlement becomes. When backed into a corner, settlement offers can often come down rather than go up, especially as legal costs continue to build up. Goliaths are aware that going to trial is expensive and that even if they lose, they can appeal. Therefore, it’s important to make serious and reasonable settlement offers as early as possible and throughout the litigation. Non-acceptance of a reasonable settlement offer can have serious costs implications for the rejector if that offer is not improved upon at trial so they need to be considered carefully by the receiver. Mediation is also a great opportunity to really get to the crux of what the dispute is about and put aside the legalities but it needs both parties to come to the table. It’s easy to miss out on a decent outcome by taking a my way or no way approach.

Choose the right forum. There are now a number of options open to parties in IP dispute resolution. On the litigation side, traditionally matters have been run through the Federal Court but there are now also the Fast Track List and Federal Magistrates Court to consider. There are pros and cons of each option which should be considered with your lawyer. Alternatively, it is worth exploring informal or more informal negotiation structures, including mediation or arbitration if both parties are open to it and particularly if both parties have something they are looking to gain from the other. For Trade Mark disputes, the Trade Marks Office opposition system can also often be used as a soft form of litigation to test the waters and to push for negotiated outcomes which go beyond mere registrability of a Trade Mark at a fraction of the cost of litigation and without the formality.

Andrew Petale is the Principal, Lawyer and Trade Marks Attorney of Y Intellectual Property. If you are a David or Goliath with an IP dispute, he can be contacted at info@yiplegal.com.au.