Wednesday, March 08, 2017

Steamroller Litigation -- Part 1

By Sim Israeloff

You develop a pioneering product that works with a control system made by a company we will call Cumbersome Legacy Giant (“CLG”).  CLG controls 80% of the market but has become slow and has fallen behind in developing new technology.  The response to your product has been overwhelming and you have caught the eye of CLG.

On the eve of your largest installation so far, you and several of your current customers are served with a lawsuit and a Temporary Restraining Order issued by a court in CLG’s home state.  The restraining order bars all installations of your product into any CLG control system pending a further court hearing that will take place in 14 days.  At that hearing CLG will seek to extend the injunction until the case can be tried, which won’t happen for a year or more.  

Along with the Restraining Order the judge has signed an order allowing CLG to take immediate depositions of you and your chief designers.  The Order also forces you to produce thousands of pages of records revealing your proprietary technology, your sales figures and a list of all customers who are using your system, who will then also be sued by CLG.  

The lawsuit claims that your product infringes on CLG’s technology, that you have lied to and defrauded CLG and your customers and that your product is poorly designed and will harm the CLG control system if a customer installs it.  The claims are entirely false but will scare away customers.  You face the prospect of hiring lawyers in another state, preparing immediate responses to the restraining order, depositions and document demands, developing your case and defending yourself at a critical hearing in just two weeks.  In the meantime, you will have to notify customers and offer to defend them from CLG’s attacks.  If a further injunction is granted, it would put you out of business before the case is even tried.

CLG offers to stop the litigation if you halt production of your product, transfer and assign it to CLG for no money and pay CLG a huge sum in alleged damages and attorney fees.  CLG makes it clear that it will use its greater wealth and its army of lawyers to preserve its position and market dominance against competition of any kind.

CLG is engaging in a classic case of “steamroller litigation.” Steamroller litigation is designed to overwhelm the opposing party and make them give up before having a chance to fight back against bogus claims.  It takes many forms.  It commonly involves surprise claims with no prior warnings or demand letters.  As in the above example, it may involve hurry-up proceedings, suits in faraway locations, harmful publicity, claims against customers, wild accusations, personal attacks and the prospect that the defendant will have to pay large amounts in defense costs if it resists.

What to do?  How do you fight back against such a blitzkrieg?  In the next segment of this article some strategies will be offered by which a victim of steamroller litigation can fight back.  

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