New Litigation-Cost Data Underscores Financial Logic of Defensive Patent Aggregation

A weak worldwide economy may be driving down prices in some sectors, but it hasn’t dampened the price of patent litigation. New figures compiled by theAmerican Intellectual Property Law Association (AIPLA) show an upward trend in legal expenses associated with responding to and defending against patent assertion.

After surveying approximately 430 attorneys involved in patent assertions with between $1 million and $25 million in potential damages at risk, the AIPLA determined that, for a single defendant in a case with only one patent at issue, legal costs through the discovery phase alone are averaging $1.8 million in 2009, up from $1.6 million in 2007. Total costs for such cases – including all outside counsel, paralegals, travel, analytics, expert witnesses, etc. – are averaging $3.1 million in 2009, almost 20% higher than the average of $2.6 million two years ago.

The numbers are even more striking for litigations with greater than $25 million in damages at risk. A survey of approximately 400 respondents showed that during 2009 average legal costs through discovery are averaging $3.7 million, and all-inclusive costs to fight such cases to conclusion exceed $6.2 million, up from $3.3 million and $5.5 million, respectively, in 2007.

Many in-house litigators focus more on license fees than on legal costs, in part because the latter are incurred via multiple comparatively small legal bills, versus single ‘lump sum’ payments to plaintiffs. However, as this data illustrates, unless a defendant’s counsel is highly confident that it will resolve the litigation well before discovery, the defendant should expect to spend anywhere from $2 million to over $6 million in total legal costs- in many cases more than the actual cost of the license.