Patent litigation can be very expensive, and the costs of litigation go up considerably with the amount of money at risk.
The American Intellectual Property Lawyers Association publishes a bi-annual Economic Survey, which is the most comprehensive source of patent costs.
There are two stages of litigation: claim construction and the trial.
US patent litigation has two main parts: claim construction and the trail. Claim construction, sometimes known as the Markman hearing, is a mini-trial where the claims of the patent are defined. Once the claims are defined, there is a trial for infringement and damages.
In many cases, once the claim construction is complete, the parties kind of know who is going to win and who is going to lose. At this stage, there is very often a negotiation and settlement. However, sometimes the litigation goes to the next step, which is the full trial to figure out if the infringement really happened and, if so, how much money to award.
Most patent litigation matters never reach the courts. A cease-and-desist letter often will start up a dialog and companies will negotiate some kind of deal. Sometimes, the deal is to stop producing an allegedly infringing product, or to redesign the product to get around the patent. Other times, the alleged infringer might pay a license fee, either a one-time fee or a recurring license as products are sold.
Costs of getting to the claim construction phase:
- For less than $1M at risk: $250,000
- For $1-10M at risk: $600,000
- For $10-25M at risk: $1.225M
- For more than $25M at risk: $2.375M
Costs of going through the whole trial:
- For less than $1M at risk: $700,000
- For $1-10M at risk: $1.5M
- For $10-25M at risk: $2.7M
- For more than $25M at risk: $4M
In the last major change to the patent laws (the one that touted the “first to file” changes), the biggest change was not “first-to-file” but Post-Grant Review, sometimes called Inter-Partes Review (IPR).
This was a mechanism to challenge a patent at the USPTO without going to court. The sales pitch for this system was that it would be cheaper and more efficient than going to court, and rather than having non-technical judges and juries decide complex patent matters, a trio of Administrative Law Judges who were patent attorneys would decide.
Patent attorneys must have an engineering or science degree, and – in theory – would better understand the technology. Further, these judges are typically very familiar with all of the patent laws and conventions.
Like with conventional litigation in the courts, IPR proceedings have some milestones. At each of the milestones, the patent owner and the challenger might discuss a settlement.
Costs for IPR or Post-Grant Review (approximate mean):
- Through filing petition: $120,000.
- Through end of motion practice: $300,000.
- Through PTAB hearing: $400,000.
- Through appeal: $600,000
Can You Afford Patent Litigation?
Patent enforcement and defense insurance are pre-paid legal services that are covered by insurance policies.
Patent enforcement means you are going to go after a competitor who infringes your patent. This coverage is critical when you are in a space where there are big players who could out-spend smaller competitors.
Big Tech has slowly and consistently whittled away patent owner’s rights, making patent enforcement a big game of chicken. Big Tech is comfortable letting litigation drag on and on – often for a decade – hoping that you run out of money.
By having enforcement insurance, you have the ability to go the distance. Also, since it is on an insurance policy, your attorney’s fees, expenses, and settlement costs are all covered.
Patent defense policies are similar, but protect you from being sued by a competitor or a non-practicing entity, sometimes referred to as a patent troll.
One company that had insurance was Octane Fitness, who was sued by a troll. Rather than settling for $500,000, they used their insurance policy to sue the troll and invalidate their patent. The case went to the Supreme Court and back down – and Octane Fitness survived to be acquired by Nautilus Fitness for several hundred million dollars.
BlueIron can guide you through the patent insurance process. We are patent attorneys and know this space intimately.