Litigation Alternatives

Part Three: Controlling the Costs of Patent Litigation.

This is Part Three of a four-part series about controlling patent litigation costs. In Part One I discussed how the choice of counsel can impact costs, and in Part Two I discussed how strategic decisions early in litigation can increase the likelihood of an early settlement. In this part I discuss two potentially less expensive alternatives to U.S. patent litigation.

As described in Parts One and Two, U.S. patent litigation is expensive, with an average cost through trial, per party, usually reaching well into the millions of dollars:

Amount in Controversy End of Discovery Through Trial
< $1M $350k $700k
$1M – $10M $1.0M $2.0M
$10M – $25M $2.0M $3.3M
> $25M $3.0M $5.5M

2013 median patent litigation costs per party (source: AIPLA)

Here I discuss two much less expensive alternatives – one for defendants and one for plaintiffs – that can be used to avoid full-fledged U.S. patent litigation and therefore potentially reduce the cost of resolving the dispute.

For Defendants: Inter Partes Review (IPR)

Inter partes review, or IPR, is a USPTO procedure made available by the America Invents Act, and which together with post-grant review essentially replaces the older USPTO procedure of inter partes reexamination. IPR is a trial proceeding conducted before the Patent Trial and Appeal Board (PTAB) to review the patentability of claims based on novelty and nonobviousness. During IPR, the Board can consider the impact of any issued patent or other printed publication on claim validity.

A potential patent infringement defendant must file an IPR request before filing a declaratory judgment action seeking a declaration of invalidity in federal district court, and an actual patent infringement defendant must file a request within one year of being served with a complaint, in which case the district court will in many situations stay the litigation until the conclusion of IPR. In fact, early indications are that district courts grant more than 80% of motions to stay in patent suits proceeding in parallel with IPR.[1] In other words, IPR can be used to fend off prospective district court litigation, or to limit if not stay current district court litigation while PTAB evaluates patent validity.

In IPR, the challenger must prove invalidity to a preponderance of the evidence, meaning that the claims at issue are more likely invalid than not. This is more favorable to the challenger than the clear and convincing evidence required in the district court, where the patent owner enjoys a presumption of validity.

IPR discovery is limited, and the Board issues a final decision within 12 months after the proceeding is instituted, with up to a 6-month extension for good cause. If the claims are found invalid, then barring a successful Federal Circuit appeal, district courts are bound by this finding in concurrent and future litigation. On the other hand, if the validity of the claims is upheld, the petitioner is estopped from asserting invalidity in the district court with regard to the printed publications the challenger “raised or reasonably could have raised” during IPR. However, a defendant still may raise an invalidity defense on other grounds, such as an on-sale bar, claim indefiniteness, lack of enablement, etc.

Perhaps most importantly, as of August 31, 2015, according to the USPTO petitioners successfully invalidated all of the challenged claims in a remarkable 68% of completed IPR trials (327 out of 482).

Finally, the total cost of IPR is typically only around $300k, which is typically spread over 15 months (including three months for PTAB to respond to the initial IPR petition):

Typical IPR Budget (source: AIPLA)

For Plaintiffs: Foreign Patent Litigation

Frequently, the owner of a U.S. patent also owns analogous patents in other countries, and in many situations an allegation of infringement is likely to extend beyond the borders of the United States. When this is the case, a plaintiff should consider foreign patent litigation as a precursor or a replacement for U.S. litigation.

Compared with U.S. patent litigation, in foreign patent litigation the timeline is typically much shorter and the costs are typically much less. Furthermore, the loser often pays some or all of the winner’s attorney’s fees, making this a particularly attractive option when the plaintiff’s position on the merits seems very strong. In many countries, injunctive relief is just as powerful as in the U.S.

As an example, in our experience the total cost of patent litigation through trial in the United Kingdom or Germany averages only around $200k. The outcome in both countries can include monetary damages and injunctive relief for a prevailing plaintiff, findings of noninfringement and/or invalidity for a prevailing defendant, and the bulk of the attorney’s fees for either prevailing party. The results on the merits of the case can often be viewed as a predictor for the likely outcome of similar U.S. litigation, and therefore can prompt a global settlement of the dispute at a fraction of the cost of U.S. patent litigation.

About Us

Kolisch Hartwell has successfully represented clients in hundreds of federal district court cases around the country, including at least 35 appearances before the U.S. Circuit Courts of Appeal and three appearances before the U.S. Supreme Court. We also represent companies of all sizes in patent and trademark prosecution matters, general intellectual property counseling, and all other IP-related matters. Learn more about our services or contact us to make a specific inquiry.

 

[1] Inter Partes Review: An Early Look at the Numbers, Brian J. Love and Shawn Ambwani, 81 U. Chi. L. Rev. Dialogue 93 (2014).