Q: I'm being sued by a larger competitor. Should I settle, or is it worth the fight?

A: While it's human nature to want to fight to protect your company's reputation, it often makes better business sense to settle the case and try to work things out with the company suing you. That's because the cost of hiring a lawyer to defend your case can easily run into the tens of thousands of dollars, even if your company is eventually found to be blameless by a judge or jury. And that's after all the nasty allegations have already hit the press.

What's more, defending a lawsuit takes time--hours spent sitting in a lawyer's office answering questions from the opposing party's attorney (a process called "deposition") and many more hours assembling large quantities of documents requested by the opposing counsel (a process known as "discovery"). That's why it usually makes sense for both parties to settle the case long before it goes to court.

Yet there are times when a small company needs to gear up for battle and defend itself, says Raymond R. "Rick" Castello, a litigation partner in the New York City office of Fish & Richardson P.C. "The decision whether to settle depends in large part on what the big company wants in a settlement," says Castello. "If the big company wants too much--for example, a permanent injunction that prevents the small company from doing business--the small company has to seek affordable counsel and fight for its life."