An essential component of the patent system is the capacity of patent holders to enforce their intangible property rights when such rights are violated. If patent holders are unable to enforce their patent rights, the value of patents will decline.
It's no secret that patent litigation is expensive. The cost of an average patent case, where $1 million to $25 million is at stake, is $1.6 million through the completion of discovery and $2.8 million through final disposition, according to the American Intellectual Property Law Association. To add insult to injury, non-practicing entities (NPEs) that do not manufacture products and rely on litigation as a fundamental part of their business model file more than 60% of all patent disputes.
Patent Litigation Statistics in General
• Each year, between 5,000 and 6,000 patent cases are filed in the United States.
• Patent applications increased by 4% in 2020, despite the COVID-19 epidemic.
• During the year 2020, US courts awarded $4.67 billion in patent damages.
• Patent litigation costs between $2.3 million and $4 million on average.
• It takes one to three years for a patent case to reach trial.
• Patent infringement lawsuits are settled in 95 percent to 97 percent of cases.
• Patent troll cases have increased by 500 percent in the last ten years.
How Much Does Patent Litigation Cost Around the World?
According to patent litigation statistics, patent lawsuits can extend for years and cost millions of dollars, and cost between $2.3 million and $4 million on average.
While the American judicial system is known for its high fees, patent litigation is one of the more expensive methods. Patent litigation processes are not only expensive, but they also award hefty damages. According to US patent litigation costs, the claim construction part of cases with less than $1 million at stake costs at least $250,000. For cases involving $25 million or more, the fee rises to $2.375 million. For instances with smaller potential damages, the full trial will cost each party roughly $700,000, and for high-value cases, it will cost around $1 million.
The typical phases of patent litigation may be more or less similar across all continents.
Stage | Time | Description |
Complaint and Answer | 20 days after service of the complaint | To start litigation, the patentee files a complaint (a document that asserts claims) with the court. A copy of the complaint is served on the defendant by the plaintiff. The defendant has 20 days from the date of service to respond. The deadline for responses is frequently extended by 1–2 months. |
Case Management Conference (CMC) | Depends on Court’s Schedule | The court will set a CMC when the defendant responds. The parties must coordinate and submit a consensual schedule order prior to the conference. |
Fact Discovery | Approximately 9 months from the answer deadline and 11 months from the filing of the lawsuit | The parties exchange initial information and document releases. Fact witnesses are called to testify. Sometimes discovery is split into two parts, with invalidity/infringement discovery coming first and damages discovery coming second (following expert discovery). |
Claim Construction | Approximately 2 months, usually during the latter months of fact discovery (can be later); approximately 10 months after the filing of the lawsuit | a) The parties choose and exchange patent claim construction words. (a) The parties provide definitions for all terminology that has been exchanged. (c) The parties work together to reach an agreement on definitions.(d) The parties file joint claim construction charts with the court, detailing agreed-upon claim definitions and terms that need to be defined (together with each side's proposed definitions and supporting citations/evidence). (e) The court interprets claim phrases for which the parties were unable to agree on a definition. |
Expert Discovery | Approximately 2 months after receipt of the court’s claim construction or 14 months after the filing of the lawsuit | Expert witnesses provide expert testimony on complex technological, accounting, and economic topics. After expert discovery, either party may question the qualifications or methods of the other's experts. |
Summary Judgement | Approximately 3 – 4 months after receipt of the court’s claim construction or 16 months after the filing of the lawsuit | Summary judgment motions on patent invalidity (typically anticipation) and non-infringement are filed by the defendant. If the plaintiff's case is extremely strong, it may file a motion for summary judgment on infringement. |
Pretrial | Approximately 3 – 4 months after the close of expert discovery or 18 months after the filing of the lawsuit | The parties exchange witness and exhibit lists, as well as in limine motions specifying the types of evidence that can be presented at trial. |
Trial | At the end of pretrial filings or approximately 19 months after the filing of the lawsuit | Jury selection. Opening statements. Fact and expert witness testimony. Closing statements. |
Appeal | Approximately 2 years after the fi ling of the lawsuit to submit briefs to the Federal Circuit | Notice of appeal is filed 30 days after the final judgment is rendered. Federal Circuit sets briefing schedule. |
Patent litigation costs differ significantly depending on the jurisdiction. For example, cost estimates for each party in France range from USD 60,000 to USD 250,000, while they range from USD 90,000 to USD 250,000 in Germany. In comparison to other jurisdictions, such as the United Kingdom or the United States, where fees are frequently well above USD 1 million, these expenditures are modest. A number of factors, including the quantity of pre-trial discovery, the role of expert witnesses, and the duration and complexity of the trials themselves, explain such enormous disparities.
Countries | Average Patent Litigation Cost |
US | US $ 2 million to US $ 4 million |
EU (Germany, France, UK) | US $ 60,000 to US $ 250,000 |
Africa | US $ 300,000 to US $ 350,000 |
Japan | US $ 550,000 to US $ 850,000 |
China | RMB 300,000 to RMB 1,000,000 |
In various countries, patent litigation attorneys can use a range of fee models to fit the economics of each case to the client's demands and reality. Attorney fees make up the majority of patent litigation costs, but they also include expert witness fees, travel expenses, and document management and production costs. Importantly, time spent in-house by company counsel and workers supporting the action is not included in these costs. Whether representing a plaintiff or defendant, a manufacturer or a non-practicing entity, there are steps that can be taken to help limit costs. Some general guidelines are listed below.
How to Cut Down Patent Litigation Costs?
It all starts with safeguarding! When creating new products, a corporation should research the patent landscape and consider developing its own patent portfolio that can be asserted defensively in the event of competition proceedings. It should develop a sound document retention policy, keeping papers only for as long as they are reasonably necessary or required by law, then discarding them to save future litigation costs of gathering, evaluating, and delivering them. It should take demand letters seriously and reply with extreme caution.
To avoid meritless claims and wasteful motions, a patent owner or its representative should thoroughly inspect the defendant's products, produce precise claim charts, research the defendant's sales, and check that jurisdiction is valid before initiating a suit.
Balance Your Budget
Budgeting and billing procedures must be followed carefully. The client and counsel should collaborate to create a realistic budget with firm estimates for each step of the proceedings; then, as the case progresses, they should review it together on a regular basis to adjust it as needed and ensure there are no surprises.
Evaluate Your Litigation Strategies
A complete case evaluation should be conducted, with a strategy developed early and updated on a regular basis. In order to evaluate settlement or litigation strategies, establish themes and priorities, and narrow the dispute, the client and counsel should review patents and other documents, interview witnesses, investigate related lawsuits and licenses, investigate infringement, validity, and damages, and calculate potential exposure, the client and counsel should review patents and other documents, interview witnesses, investigate related lawsuits and licenses, investigate infringement, validity, and damages, and calculate potential exposure.
Read our article "Why is Copperpod IP the Best Patent Research Firm?"
Developing Amicable Relations
In order to avoid costly motions and disagreements, attorneys should strive to develop cooperative relationships with opposing counsel and seek to reach an agreement whenever possible, from granting extensions of time and establishing discovery parameters to good faith settlement discussions and stipulations at trial.
Initially and during the lawsuit, both parties should seriously consider the possibility of a settlement. Sharing evidence about legitimacy, infringement, and damages could assist the parties to rethink the case's worth and concluding that litigation isn't worth the money. Claim construction hearings should be held as soon as possible, as claim construction typically helps settlement. Furthermore, holding such hearings prior to the exchange of expert reports may save money by avoiding the need for experts to create alternate reports (in the event of alternate judgments) or update reports based on a rejected construction.
Decide an Optimal Fee Structure
The optimal fee structure for any specific client will be determined by the client's objectives and the case's economics. If cost control and predictability are the main objectives, a flat charge structure may be the best option. If the client cannot afford an hourly or flat cost structure, a results-based model may be the only alternative. Risk tolerance is also important. Customizing the fee structure of representation to the details of the patent litigation case can effectively incentivize and share risk and reward while providing parties with the representation they require to prevail.
Some Common Fee Structures are as follows:
Structure of Hourly Fees
The most straightforward and usual fee structure for patent litigation costs is an hourly fee arrangement. The patent litigation attorney records the time spent working on the patent litigation subject and bills it at the counsel's hourly fee under this arrangement.
Capped Fee Structure
A patent litigation attorney may agree to a fee cap if budgets do not provide enough assurance for the client. Each step of litigation can be allotted a not-to-exceed budget in one form of a capped fee agreement.
Counsel bills hourly until the budget cap is met and does not bill for any time spent over the budget limit.
Contingency Fee Structure
The client does not pay anything out of pocket for attorney's fees in a pure contingency fee arrangement. Instead, the lawyer or legal firm will be paid a share of any funds obtained in the case (whether by verdict or settlement). The percentage might be stable % throughout the case, or it can start at a smaller percentage early in the case and increase as the case proceeds and more resources are spent, depending on the type of case.
Defense Fee Structure Based on Results (No win – No fee)
A patent litigation attorney for the defendant may agree to represent the client on an hourly basis in exchange for a bonus if the firm achieves a favorable outcome. Depending on the case stage where the lawsuit is dismissed, or settled, or a judgment is issued in the defendant's favour, various bonuses can be paid.
Conclusion
Although patent litigation is costly, there are numerous strategies to significantly cut costs. The two basic concepts of cost reduction are to plan ahead rather than react to future litigation involvement and educate yourself on the patent litigation process and remain involved in litigation strategy and judgments. Reacting to litigation rather than planning for it is significantly more difficult and costly. Clients frequently wait until they are served with a complaint before considering litigation. Clients also frequently hire outside counsel to handle their legal matters. Clients delegate litigation to lawyers so that they can concentrate on their business. However, patent litigation is inextricably linked to a client's business. Patent litigation is usually expensive, especially when at least one party prefers aggressiveness or believes the stakes are particularly high. Even in such difficult circumstances, the attentive client or counsel can achieve some predictability and keep expenses down by doing the types of measures mentioned above – planning, preparing, assessing, narrowing, and focusing. Copperpod IP specializes in dealing with all aspects related to Patent Litigation all over the world. We help clients scrutinize litigation costs and effectively manage their patent portfolios.
The effective utilization of your litigation budget might be the difference between meeting and failing to fulfill your company objectives. Make sure you're working with a team that prioritizes efficiency and has taken steps to ensure that your resources are directed toward the most important tasks. Please contact us if you are facing patent or other difficult lawsuits.
