Patent Funding Info Central

What Is Patent Litigation Funding? The cost of patent infringement litigation can easily run into the millions of dollars, with the minimal cost of a patent infringement lawsuit starting at $300,000 to $500,000! Not many individuals – in fact, only a few businesses − can afford to enter into patent infringement litigation and fund the process on their own. To successfully prosecute patent infringement litigation, most plaintiffs need third-party funding.

Why Is Patent Infringement Litigation So Expensive? There are two separate cost centers to patent infringement litigation – legal fees and disbursements.
1. Legal Fees: Attorneys and law firms that specialize in patent infringement litigation charge hundreds of dollars an hour, and it takes from a few hundred to a thousand hours or more to prepare and prosecute patent infringement litigation. Despite what happens in television dramas and in the movies, attorneys do not spend most of their time in a courtroom, but in preparation – researching the facts and the law, filing and responding to briefs, deposing witnesses, identifying expert witnesses and developing trial demonstratives. Since most civil litigation does not end in a trial, but is settled out of court, attorneys usually spend more time in negotiations with the defense team than they spend in a courtroom! Without patent funding for your litigation, there is simply no way a patent owner who is not wealthy can afford the legal fees that patent infringement litigation will create!
2. Disbursements: In addition to the fees the attorney or law firm charges, patent infringement litigation creates out-of-pocket expenses or “disbursements.” These include expenses such as filing fees, stenographers or videographers to record depositions, researching the case, expert witness(es), travel expenses, and creating trial demonstratives, exhibits that illustrate exactly what the patented invention is, how it works and how it was infringed. Patent litigation funding covers all of these items that are critical to successful patent infringement litigation.

Why All This Work If Most Litigation Doesn’t Actually Go to Trial? While most civil litigation – including most patent infringement litigation – does not go to trial, but is settled out of court in a private agreement among the parties, the plaintiff’s legal team has to be ready to try the case before a judge and, possibly, a jury. Sometimes expert witnesses are hired, and they are even deposed, but they do not get to testify in court because the case is settled before going to trial. Attorneys on both sides have to be ready to go to trial should they not reach an out-of-court settlement. Patent litigation funding makes that level of preparedness possible.

Patent Litigation Funding Insures Strong Prosecution: Patent litigation funding can be an important element in a winning strategy for the attorney trying patent infringement litigation. Having patent litigation funding lined up ahead of time shows the defense team that the plaintiff’s team is confident, determined and prepared – emotionally, mentally and financially − to go to trial without fear of running out of money! The plaintiff’s legal team wants to convince the defense team that they have an excellent case, and they are ready to go to court and take their chances with a jury! In-place patent litigation funding emboldens the plaintiff’s legal team to aggressively prosecute the patent infringement litigation, and aggressive prosecution enables the plaintiff’s attorneys to negotiate from strength should they meet with the defendant’s attorneys to work out a settlement.

But Lack of Patent Litigation Funding Is Dangerous! In a perfect civil law world, the good guys would always win and the bad guys would always pay for their wrongdoings. But that’s not the way things are in the civil law real world. In the real world – and, especially in the patent infringement litigation world – totally righteous litigation is sometimes lost when a plaintiff has to walk away, but not at trial. Virtuous litigation is sometimes lost when plaintiff walks away from the case because he or she ran out of funding! Many a patent owner with an infringed patent filed totally legitimate patent infringement litigation, but had to abandon the claim because he or she ran out of funds to prosecute the litigation to a successful conclusion!

Patent Litigation Funding Options: When it comes to funding patent infringement litigation, there are five basic funding options.
1. Plaintiff Funding: The plaintiff self-funds the legal fees and disbursements. Of course, this is only an option if the plaintiff is wealthy or is a highly profitable business that can afford to spend millions of dollars over a two to five-year period.
2. Commercial Funding: Banks simply do not finance litigation of any kind, but there are specialty financial service companies that fund commercial litigation such as patent infringement litigation. They provide funding to plaintiffs in patent infringement litigation on a “contingency” basis (i.e., re-payment is “contingent” on the outcome of the litigation). Such funding is also “non-recourse” (i.e., if the litigation does not result in an award or a settlement, the funding company writes off their funding and has no “recourse” against the plaintiff). The limiting factor with commercial litigation funding is that these companies will cut off funding once they’ve invested $400,000 or $500,000 in a case, fearful of investing any more cash in a single claim. Commercial litigation funding only makes sense if the plaintiff can get a firm commitment from the litigation funding company to finance the litigation no matter how expensive it gets.
3. Partial Contingency Funding: There are attorneys and law firms that will represent patent infringement clients on a contingency basis. Some take both legal fees and disbursements on contingency; some take just fees on contingency. They will take a percentage of any award or settlement as their fee for trying the litigation, and only if they produce a return for their client. While legal fees are the larger part of the total cost of patent infringement litigation, disbursements can be tens of thousands or even hundreds of thousands of dollars, and funding of disbursements has to come from somewhere!
4. Hybrid Funding: Plaintiffs will sometimes combine options 2 and 3. They find a law firm to take their litigation on a legal-fees-on-contingency basis, then find a litigation funding company to finance the disbursements. That way, both the law firm and the litigation funding company are paid from any award or settlement produced by the patent infringement litigation. There are, however, two potential problems with such an arrangement. Many commercial litigation funding companies will not consider funding patent infringement litigation until an attorney has agreed to take the case, so the plaintiff must first find an attorney to take the litigation on a partial contingency basis, then hope he can also find funding for the disbursements, or he may have to abandon his claim. Also, once the law firm has taken its share of the award or settlement, and the litigation funding company has been re-paid for its funding of disbursements, how much will be left for the plaintiff?
5. 100% Contingency Funding: The clearly superior solution is to locate a patent enforcement firm that will fund your patent infringement litigation on a 100% contingency basis, covering legal fees and disbursements from any award or settlement produced by the litigation. A patent enforcement firm is not a law firm, so it will engage a law firm to actually try the litigation. The patent enforcement firm will also fund all disbursements. Some patent enforcement firms provide additional services, and the better patent enforcement firms set up a structure that reduces legal and financial risks for the patent owner. A patent enforcement firm offers a seamless, one-stop, turnkey patent litigation funding solution that relieves a patent owner of much of the work and anxiety that would otherwise come with prosecuting patent infringement litigation.

Patent Litigation Funding Is Key to a Winning Patent Infringement Litigation Strategy: A plaintiff must have a legitimate patent infringement claim, and that claim must be provable in a court of law, or the plaintiff will not prevail in any patent infringement litigation. The plaintiff must have a committed and competent legal team. However, those factors will not insure a successful outcome. Without funding for legal fees and disbursements, being right is simply not enough in the world of patent litigation.