This is a patent case that is being appealed. We have our own attorney and the corporation that sells our product hired another law firm (at about 3 times the price) to represent them. We have asked them numerous times to use our attorneys but the...
1. If the case is on appeal to the Court of Appeals for the Federal Circuit, it's too late to introduce new evidence of invalidity of the patent in suit (at least in the district court; you could try challenging the patent in front of the USPTO, but even if you are successful, that is not going to get your attorneys' fees back and won't affect what the Federal Circuit has to say.) You are basically asserting that "both sets of attorneys" (including one set who was not representing you in the case?) committed malpractice in failing to make the prior art of record. You claim that the prior art will invalidate the patent. Sounds like a pretty steep uphill climb to me; others may have different opinions about how good this prior art is or whether the defense really was remiss in not introducing it.
2. It sounds like you signed a contract with the defendant by which, in exchange for selling your product, they got you to say that you would "indemnify, hold harmless and defend" them; AND, that they got to choose defense counsel. I find this combination a little strange. More usually, the person paying the defense bill is the person who hires the attorneys. Or, possibly, the plaintiff just sued both of you (the manufacturer and distributor).
3. Did you know about the patent in suit when you signed that contract? I always resist extending a blanket warranty of no third party patent infringement for patents the client knows nothing about. I try to limit the warranty/indemnity to patents that the client knows about. There are about 3 million US patents out there that are still in force, and doing a product clearance search through all of them takes a lot of money. Anyway, it is too late to renegotiate this contract term. There is also a disclaimer under the Uniform Commercial Code which should have been in this contract, but maybe wasn't. Or maybe there was no written contract at all, in which case you may have extended an implied warranty of no third party patent infringment to your customer, whether you knew it or not.
4. Not putting the correct patent number on plaintiff's product would prohibit the plaintiff from collecting any damages from you or your customer, for sales made prior to actual notice of infringement. There is also a statute on false marking, but the 2011 America Invents Act makes it almost impossible for anyone to recover damages for it -- you would have to show that the false marking was intentional and that you were damaged by it.
5. If this case was taken all the way through a jury trial, you and/or your customer have spent a lot of money, seven figures being typical. That also suggests that the amount of damages recoverable by the plaintiff is at least in this range, otherwise the litigation makes no sense. Something isn't adding up here.
6. Without knowing more, I can't honestly recommend changing counsel or taking action other than prosecuting the appeal.See question