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. Have some questions? Let’s talk. 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