Legal strategy: The driver of legal change

Patent reform is back in the news as both the House and Senate have proposed their own versions of legislation in this complex legal area. The aim of patent reform is to further curtail the activities of the so-called patent trolls, which are companies that own patents, do not make any products and use patent law to sue large companies to collect jury verdicts or settlements. 

Since technology and innovation are growing in importance as drivers of wealth creation, it is natural that patent law would rise in importance. Since the economic stakes have increased, so have the stakes in the political and legal arenas. This could all be predicted by anyone who observes how powerful parties try to alter the legal and political system for their own advantage. From an academic standpoint, this was marvelously theorized and explained by the pioneers in the field of non-market strategy, who deduced the importance of engaging the legal, regulatory and legislative system as a form of strategic behavior. 

My recent writings in legal strategy support the view that law can be used to achieve competitive advantage. My most recent work addresses the abusive aspects of this practice and ways that can limit what I call “strategic legal bullying.”

What’s fascinating to me is that legal strategy is indirectly driving some important political wrangling in the current iteration of patent reform. From press accounts I’ve read, a hedge fund manager is using a transformative legal strategy to exploit a process to challenge drug patents while betting against the drug companies’ stock. Now, the drug companies want a legislative carve-out in place that would shield them from these administrative challenges. Their reaction to the hedge fund manager’s legal strategy is to change the law as it applies to their industry. 

What I’m starting to realize is that legal strategy has often been the agent of legal change, for better or worse. Think of Sony, Napster, Aerio, Uber, Tesla and the “patent trolls.” Their business models are closely tied to legal strategy. In some cases they successfully enacted legal change, and in other cases the status quo prevailed. The systems where this strategic behavior takes place is complex, consisting of companies, courts, administrative agencies, the media, and the legislature. Legal strategy lies at the core of the process and helps parties re-write the rules of the game, or at least try to do that.