Saving Legal Expenses in Tight Times

Most intellectual property lawsuits in the jewelry industry are conducted in federal courts, which have a long-standing tradition of independence from short-term societal issues. If your company is involved in litigation, don’t expect the judge to limit judicial process because of difficult economic times.

How should the jewelry industry respond to this challenge? Many in the industry walk away from any lawsuit as soon as an issue arises. In some cases, a person accused of infringement—even someone with valid legal rights and the likelihood of success—may give up because the financial impact of the accused item is insignificant or the potential legal expenses are high. But it isn’t always easy to back out without financial pain.

Cases involving patents, copy-rights, trade dress, and trade-marks are almost always litigated in the federal courts, where the judicial process is detailed, extensive, and, with the advent of electronic discovery, even more expensive than in the past. Although the jewelry industry does not widely employ excessive use of electronic communications, even the occasional e-mail user or BlackBerry enthusiast can have his or her files accessed to produce retrievable information in a federal lawsuit.

Product developers and companies often make quick decisions to respond to customer demands. They seek short-term answers to what could be problematic situations. Our office is frequently called in after a problem has arisen, such as a client adopting a trademark or product identification in order to respond to a customer demand. Before one knows it, advertising is produced, money is spent, and some adverse party claims trademark infringement.

Sometimes a company is asked to second source, and, in tight times, may find it hard to refuse. Second sourcing is not something companies are proud of, and most are unlikely to admit they’ve been asked to imitate a competitor’s product for a customer. The decision to proceed is often made without considering the ramifications.

Some companies are doing reasonably well in these tight times. With money to spend, they can sue competitors and use their financial advantage to ratchet up legal costs, leveraging a weak position into a winning strategy.

While no one is immune to being sued, lawsuits started in bad faith are not wise for the initiator. Courts can sanction bad faith lawsuits.

How does a retailer or manufacturer deal with these issues? Some have an intellectual property law firm on a fixed monthly or annual retainer so they can ask questions without being billed for every call. Most companies need no more than a dozen inquiries a year to check for problems before taking action. Without proper legal advice, a quick decision that was merely expensive on the sales and marketing side may become extraordinarily expensive if a third party’s rights are violated.

Clearing trademarks before investing in marketing and advertising is one area that’s quite obvious. Intellectual property lawyers can determine if there are potentially conflicting trademarks and also advise the client about which of the potential adversarial parties are likely to cause a problem. Does the lawyer have knowledge of the potential adverse party’s litigation conduct? There are many ways lawyers can avoid potential legal conflicts for their clients that can save the client lots of money.

Think about potential legal issues regarding trademarks and copyrights before they arise and before you commit. Make sure your lawyer understands the need for timely advice.

Prophylactic legal advice can be far less expensive than mounting a legal defense against potentially conflicting parties. Obtaining advice before making a decision that could result in a lawsuit may help a company avoid formal legal processes and thus more closely control legal costs while still solving potential problems. When litigation proceeds, lawyers’ hours mount quickly, and neither the lawyer nor the client can control the amount of time spent dealing with it. The complex nature of federal litigation, schedule requirements, and the lack of concern by the courts for the costs involved—even for those who did not commence the proceedings—are the controlling factors.

Consider investing money for regular early legal advice to ward off unwanted legal expenses that are not budgeted for and are usually far more extensive than most companies are prepared to meet.

Pberger@LLBL.com