How much does patent litigation cost?

Costs of a patent infringement lawsuit can easily add up to more than $4MM

Before filing a complaint for infringement, it is important for patent owners to understand the potential costs of litigation. Although, these costs can be quite high, there are litigation funding options that mitigate risk.

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Inter Partes Review (IPR) Impact on Patent Litigation Costs

Patent litigation can get very costly, especially if you are asserting multiple patents and claims. If you are going after a defendant with abundant resources, chances are high that they will submit your patents for an Inter Partes Review (IPR) with the United States Patent and Trademark Office (USPTO). The purpose of IPR is to invalidate your patents and thereby end the case against the defendant. Even if the entire patent is not invalidated, the IPR may result in a small number of narrower claims that will be more difficult to assert in litigation. The IPR process typically takes 18 months but could take 2 years since it can be extended by 6 months by the Patent Trial and Appeal Board (PTAB) at the USPTO.[1] During this time, there is quite a bit of work done by the attorneys and the expert witnesses on both sides. In addition, there could be more time and money needed for any appeals. 

Your attorney will need to prepare the IPR responses, conduct discovery, file motions, manage depositions, work with an expert witness, attend oral hearings, and communicate with the opposing counsel and the PTAB. At $450-750 per hour for attorneys and experts, the price really adds up. A reasonable estimate per patent is about $350k – $500k.

Not surprisingly, the number of IPRs currently pending versus the total number of patents out there is miniscule. According to the USPTO[2], the number of pending IPR’s as of 9/30/19 was 1,286. This compares with a volume of about 3M total patents in force[3].  The cost and risk of invalidity prevents many patent owners from moving forward with their infringement litigation and protecting their rights. 

Cost for Patent Litigation Phase

Now, let’s assume you get passed the IPR phase, but there still is no settlement on the table that is sufficient for you. Your next step is to go to trial. A patent litigation trial with technical and damages experts, documents, paralegals and of course your attorney’s fees can easily add up to multiple millions. Even with a contingency fee arrangement with the attorneys, you will still need to cover expenses which may be near, or even exceed, $1M.

The total cost depends on how much is at stake as lower damages amounts would tend to get settled before going to trial. According to an article IPWatchdog[4] that references the 2019 American Intellectual Property Law Association “Report of Economic Survey,” the average litigation cost is about $2.8M for cases with <$25M risk. For cases with over $25M at risk, the cost for litigation is about $4M.

Estimated Cost for Patent Infringement Litigation

Amount At-Risk$1-25M<$25M
Est. Cost of IPR*$500K$500K
Est. Cost of Litigation$2.8M$4M
Est. Total Litigation Cost$3.3M$4.5M
*Assumes 1 IPR and no appeal

Litigation Funding to Cover Costs

Most inventors and small businesses do not have this type of cash laying around. And if they did, they probably are not keen on risking it. Large defendants are hoping that this high cost to litigate will prevent individual patent owners and small businesses from filing a suit. As you can imagine, infringing on a small start-up with few resources is low risk for large companies. With litigation funding, these small business owners now have a fighting chance to defend their patent ownership rights. To learn more about the options for funding, contact Protego, LLC

This article is based on opinions of the Protego, LLC team. Nothing here should be taken as legal, financial or tax advice.