BulletProofBlog the blog on crisis communications

American Lawyer recently published an article asking if the intellectual property (IP) bubble had burst. According to the piece, the Stanford Law School IP Litigation Clearinghouse found that patent infringement case filings dropped by eight percent in 2008 - meaning that a significant source of corporate litigation in recent years may be on the decline.

But before all you general counsels out there let down your guard, consider the following:

Smart companies always need to stay vigilant about the possibility of IP litigation. It may be on the decline, but that fact alone doesn' t protect businesses from the potentially devastating effects a negative ruling could have on their reputation, stock price, and revenue forecasts - as was evidenced by the stock-withering ruling against Rambus, Inc. earlier this month.

In a related article on the Stanford report, National Law Journal made several points that could make a decrease in IP litigation look more like a fluke than a trend. Chief among them is the fact that patent infringement filings have shifted venue from federal district court to the U.S. International Trade Commission (ITC) - likely because it' s the faster route to judgment and the only jurisdiction that can issue an exclusion order, enforceable by the U.S. Customs Service, which restricts foreign companies from selling goods in the U.S. market.

On the flip side, however, recent key legal decisions on what is "patentable", as well as U.S. Patent and Trademark Office regulations that limit the number of claims an applicant can file, have raised the burden of proof and lessened plaintiffs' incentive. Pending legislation that would limit damages awarded in IP cases could also be making plaintiffs think twice before pursuing what are often long and costly legal battles.

But regardless of whether IP litigation is actually on the decline, companies should still be watching this space very closely. They need to be monitoring the blogs and other media outlets to see if their competitors are building relationships with company allies or suing others within the industry - because only then is it possible to make informed decisions about licensing agreements or co-development opportunities that can help inoculate a company against looming IP litigation threats.

And, most important, they need to be promoting their business models, the key benefits of their technology, and other elements that set them apart from competitors. So that if they are sued, they've already begun to build a foundation of good will and brand recognition that will help in the Court of Public Opinion, and in the courtroom as well.