Every company involved with newer technologies should keep current on the intellectual property of their competitors.  It is almost always better to change a product than fight a lawsuit, and even if product change is not a realistic option, it is almost always less expensive to secure a license before the applicant has a product on the market than afterwards.  Monitoring a competitor's patents and patent application is fairly straightforward with modern databases.  Many firms rely on NERAC,  a searching and monitoring service that has electronic access to essentially all of the public patent databases, as well tens of thousands of journals.  They charge a fixed annual fee regardless of number of searches and concurrent TechTracks, so that the marginal out-of-pocket cost for additional services is substantially zero.  Other good choices are Delphion and STNeasy.

There are at least five potential actions that one can take upon discovering that a competitor filed an application that should not never be allowed.  All of these are described in detail in Strategic Patenting.

1. Try to license the patent.
2. Identify "killer" prior art, and submit it to the patent office using a "301 statement".
3. File a protest, but only if not published and before notice of allowance.
4. Initiate a public use proceeding.
5. Request an interference, which is a battle inside the patent office to determine which party invented first.

A 301 statement is essentially a letter filed with the patent office that submits prior art against a granted patent application. The statement must include an explanation of how the cited prior art impacts the patentability of the claims. The patent office will enter the prior art as an official part of the patent file in case the patent becomes part of a reexamination or a reissue. However, the patent office will not necessarily review the submitted materials at the time of submission. Prior art submitted as part of the 301 statement must consist of patents or printed publications. Any other types of non-printed prior art (e.g., offers to sale, video, audio, etc.) will not be accepted.

While it is possible to file an anonymous 301 statemetn while a patent is still pending, a 301 statement can only be properly file after a patent is issued. The proper preparation of a statement can often take several hours, depending upon the complexity of the patent. Interestingly, the 301 statement can be (1) filed anonymously, and (2) filed without a fee. 

A protest in patent law is a procedure under 37 CRF 1.1291 (MPEP 1900) where any entity can instigate a challenge to patentability a pending patent application.  The procedure is rarely used because the protest must be filed before the earlier of (a) publication of the application or (b) issuance of notice of allowance.

Protests can advantageously be filed where an inventor discloses his idea to a second person, and that second person fraudulently files an application as if the idea were his.   The process could also be used by an inventor or joint inventor to stop processing of an application that was filed without his knowledge or approval.

After issuance there are really only two ways to invalidate a patent: (1) instigate a re-examination proceeding; and (2) litigate the validity of the patent in federal court.  My preference is strongly in favor of filing for re-examination.   First, a re-examination likely costs $6,000 - 25,000, while litigation easily costs $1,000,000.  Second, reexamination can be over within a year, while a court battle can take at least five.  Third, the patent examiners are quite experience in technology and patent law, and the judges and juries are not.  Fourth, the patent office has strong pressure from the public to fix its own errors, but the courts don't care either way.  Fifth, there is no loss of appellate rights in re-examination. Sixth, the courts are likely to grant stay of any federal court litigation during the re-examination process, especially if the petitioner chose the inter-partes route.

Yes.  A re-examination is a petition to the patent office to consider propriety of an issued patent in view of additional prior art.  Re-examination petitions are not terribly difficult to prepare, and tend to be successful.  According to patent office statistics, 90 percent of reexamination petitions are granted, and 72 percent of granted petitions result in either revocation or narrowing of patent claims.  A recent study by Joseph Cohen found that 98% of reexamination petitions are granted.   Reexaminations can be prosecuted in either an ex parte manner, from which the petitioner is excluded, or in an inter partes manner, in which the petitioner can participate by observing and making comments on the proceedings.  The cost for the former is likely to run about $6,000 - $10,000, and the cost for the latter is likely to run US$ 20,000 to US$ 25,000, mostly because of higher filing fees.

No.  A re-issue is a proceeding filed by a patent holder to modify the scope of the claims.  Re-issues are sometimes filed to narrow claims that the patnet holder now realizes are invalid, but more commonly to secure broader claims than were originally issued.

Filing for re-issue is considered a dangerous move on the part of the patent holder.  In filing a petition for re-issue the patent holder must surrender his patent, and there is no guarantee that it will ever be re-issued.

Petitions for re-issue must be filed within 2 years of the issue date of the patent.

To a large extent the answer depends upon the stage of development of the potential infringer's product or service.  If the potentially infringing product/ service is at a fairly early stage of development, then it may be a very good idea to engage the patent holder in some sort of discussion regarding validity and infringement.  If changes need to be made to the product/service it is almost always less expensive to make them earlier rather than later.  Another timing factor is cash flow.  It may well be that the patent holder has a lot more monetary and other resources than the potential infringer, so that the latter may well want to gain strength in the marketplace, complete another round of funding, or achieve some other milestone before doing something that may trigger the expense of litigation.

Right-to-practice opinions, (also call non-infringement, or freedom to operate opinions), can save a lot of money that would otherwise be wasted by putting a product on the market and then having to withdrawn it in the face of a potential patent infringement litigation.

A good opinion can be extremely helpful in assessing the risk of rolling out a potentially infringing product, and in designing or modifying the product so that it avoids infringement. A third benefit is that a timely opinion letter can be used as a shield against enhanced damages for willful infringement.  On the flip side of the coin, the biggest downside of commissioning a formal right-to-practice opinion is that such opinion  typically cost US$ 5,000 to US$ 35,000 or more.