Patent Funding: Patent Infringement Litigation Is Very Expensive!
If you own a patent, and it is being infringed upon, your only course of action is to sue the infringing party for patent infringement. However, that can be a lengthy, complicated, risky and VERY expensive ordeal! There is, however, light at the end of the tunnel. There are more than a few patent owners who launched patent infringement litigation and won multi-million dollar awards or reached multi-million dollar out-of-court settlements against the infringing party as a result of filing patent infringement litigation.
The challenge is getting from here to there. Finding the patent funding, funds necessary to finance a patent infringement lawsuit, is the first and most crucial step in beginning this process. There are two major cost elements in a patent infringement lawsuit.
There are a few main areas that are extremely costly and would require one to need to secure patent funding to help offset these dramatic costs. Below are some of the major reasons why one would need to think carefully about how a lawsuit of this magnitude can affect their financial structure. At the end you will surely see the pertinent nature in obtaining solid patent funding.
Legal Fees: Attorneys who try IP (intellectual property) litigation charge hundreds of dollars an hour. Due to the complex issues involved, it takes thousands of hours of high-priced legal talent to prepare and try an IP lawsuit. At $200 an hour, a lawsuit consuming just 1,000 hours of work on the part of the attorneys trying the case creates a $200,000 legal tab. That is typically where securing patent funding comes into play.
Disbursements: In addition fees paid directly to attorneys, there are numerous litigation and support services expenses. There are known as “disbursements” and include filing fees, travel expenses and the cost of hiring court reporters to create transcripts of depositions. Sometimes depositions are videotaped, so videographers must be hired, Experts are often brought in to research the claim and, possibly, to appear as expert witnesses at trial. Sometimes displays, charts and models (these are called “demonstratives”) have to be created that will demonstrate to the jury how the patented invention works and how it is being infringed. Many law firms use jury consultants to make sure they select favorable jurors and to help them fine tune and improve their presentation to the jury that hears the case.
Bottom Line: Legal fees and disbursements for a patent infringement lawsuit can easily add up to $1 million or more. As a result, patent infringement litigation tends to be a David-versus-Goliath battle. The patent owner is typically an individual or a small business seeking justice from a large corporation with almost unlimited financial resources. It is not a big deal for a multi-billion dollar corporation to spend a few million dollars defending its own self against patent infringement claims. It is quite a big deal for an individual or a small business to come up with several hundred thousand dollars – or a million dollars or more – to pursue the infringing party of its patent.
Two Solutions: A new type of business, the patent enforcement firm, was created to address just this issue, and a new financial service, litigation funding, was created to provide funding for exactly this type of litigation.
Patent Enforcement Firms: There are just a handful of these, but they fill a real need by helping the patent owner whose patent has been infringed, but cannot afford to fund patent infringement litigation himself (or herself it itself). Patent enforcement firms both fund the litigation and manage the entire process in exchange for a share of any award or settlement that results from the lawsuit. They work on a “contingency” basis. That is, payment to them for their services and re-payment of the money they expended on behalf of the patent owner is “contingent” on the outcome of the litigation. They only get repaid for the money they spend on the case, and they only earn a fee, if they are successful at realizing an award of settlement for their client!
Patent Litigation Funders: There are also just a handful of these businesses. They are specialized finance companies that advance funds to plaintiffs in commercial litigation such as patent infringement. They do not make “loans” but make advances that are both “contingent” (re-payment of the advance is contingent on the outcome of the lawsuit) and “non-recourse” (the company has no recourse to collect the money they advanced if the plaintiff loses the lawsuit.
They Pick Their Fights: Needless to say, patent enforcement firms and patent litigation funding companies are very selective in as to which clients they chose to provide their services since they each make a significant investment, and only make back their investment if the plaintiff prevails and realizes an award at trial or negotiates an out-of-court settlement.