What makes the cost of patent litigation so high?
What would you think if I told you that the average patent litigation cost exceeds well over $1 million? To put it another way, how would you feel knowing that one million dollars might not get you halfway through a patent lawsuit? For many small businesses, the price tag of an infringement lawsuit is cost prohibitive. What makes the cost of a patent infringement lawsuit so high? Actually, several factors contribute to the overall cost of patent infringement litigation. Let’s explore some of the bigger factors as well as more affordable alternatives.
What factors make patent litigation so costly?
Infringement litigation costs tend to be extremely high for several reasons. Instead of exhaustively listing all the reasons, let’s focus on a few key factors that contribute to the high cost of patent litigation:
- the amount at stake
- high probability of IPR counterattack by defendants
- wide-ranging discovery phase of US litigation cases having little to no limits
- the number of patents at issue
The amount at stake will certainly drive decisions on patent litigation spending. For example, if the potential recovery is less than $100,000, both sides will likely seek an early settlement. Since attorney’s fees for a few months of litigation can easily get into six figures, the high cost of litigation will motivate parties to find a cheaper solution.
When the amount at stake exceeds a million dollars, expect more rigorous fighting between the patent owner and accused infringers. That leads to the second factor of challenging the validity of the patent in suit.
A defendant sued for infringement may request an Inter Partes Review (IPR) of the asserted patent by the USPTO. If granted, the USPTO will reexamine the claims of the patent in light of any prior art references and associated arguments submitted by the IPR petitioner.
US litigation is unlike litigation in foreign countries. In many foreign countries, a patent lawsuit will have limits on the scope of discovery that each party can undertake. As a result, the costs of foreign patent lawsuits are typically much lower than those of US lawsuits. In a typical US federal court case, the scope of available discovery is very wide while the barrier is very low. Accordingly, parties can abuse this process by easily driving up costs, such as sending overly burdensome discovery requests, etc.
Would more patents lead to lower patent litigation costs?
Could asserting more patents in an infringement lawsuit lead to lower costs? It seems counterintuitive, but it begins to make sense when you think about it from the defendant’s perspective. When only one patent is being asserted, a defendant may feel more emboldened to challenge the sole patent. The accused infringer might put up a more vigorous defense, arguing both invalidity and noninfringement.
Instead of asserting only one patent, assume that you file a patent infringement lawsuit asserting a patent family. What would be the morale of defendants being accused of infringing a patent portfolio? Would accused infringers find it less financially feasible to file IPR requests against multiple patents?
Will a cheap patent lead to higher enforcement costs?
Astute readers may recognize a dichotomy in patent costs. Patent filing costs, which were already relatively lower, have decreased in price while patent litigation costs, which are orders of magnitude higher, have remained high and even increased. In recent years, an increasingly higher number of service providers have driven filing costs to even lower prices, with the quality of such issued patents being questionable.
By cheap patents, I’m referring not only to the initial filing cost, but also to the ongoing costs after initial filing. A patent with broader claims typically requires more back-and-forth rejections and responses with the USPTO. You have to fight for a stronger utility patent.
If you were one of the fortunate few who received allowable claims in a first Office Action or allowance, consider filing a continuation before your patent is granted.
The problem with a cheap patent is that the claims may or may not cover the products you seek to block. Filing a continuation application can alleviate this problem and give you a second opportunity to pursue broader claims.
How to Stop Patent Infringement Without Breaking Your Budget
I’ve written about cost-effective ways to enforce patents here. Not every infringement dispute needs to be litigated. You can explore a strategy with your patent counsel that might involve litigation and non-litigation options.
At times, litigation may make the most sense to stop infringement or recover a substantial amount of money. If the amount at stake is more than a million dollars, then consider patent litigation funding. You might also consider licensing your patent to an exclusive licensee. Another option may be a patent sale where you enter into an assignment and license-back. In other words, you sell your patent to an acquirer but take a royalty-free license so that you can continue selling your patented product.
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