What It Costs To Sue

by Adam Philipp on April 26, 2012

IP law survey
Finds patent litigation
Costly for both sides

A survey conducted by the American Intellectual Property Law Association has revealed the median litigation costs of patents infringement suits:

· For claims worth less than $1 million, costs are $650,000.

· For claims worth $1 million to $25 million, costs are $2.5 million.

· For claims worth over $25 million, costs are $5 million.

These costs are for 2011. Costs for the smallest suits have stayed flat since 2005, costs for the medium-sized suits have increased 25%, and costs for the largest suits have increased 11%.

These figures are for attorneys’ fees and associated costs, and don’t include the damages a defendant would pay if found guilty of infringing a plaintiff’s patent rights.

For example, in the suit between Oracle and Google now being tried in the Northern District of California, estimates of potential damages against Google were originally as high as $6.1 billion. However, Google has narrowed Oracle’s claims to only two out of the original seven patents, reducing the possible award. Oracle is also seeking about $1 billion in copyright damages in that case.

About 54-60% of patent litigation expenses are incurred during the discovery phase, when both sides request and analyze documents and other information from opposing parties, and conduct depositions. The remainder of the budget is spent on trial.

Patent trials are often expensive because they require the testimony of experts in technical fields, and because elaborate exhibits (including animations) are often required to explain scientific and technical concepts to lay jurors.

Most patent cases (and most lawsuits of all kinds) settle before they go to trial. The high costs of patent suits – roughly double the costs of copyright and trademark cases – encourage early settlements, creating business opportunities for patent trolls.

To reduce the risks of patent litigation, some companies engage experts to conduct “freedom to operate” searches to learn whether a technology under development might be infringing known patents. Such surveys typically cost in the range of $100,000 for a comprehensive review and analysis – a fraction of the cost of litigation. Even lower cost options may be available my leveraging off-shored analytics groups.

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