The high cost of patent procedures

 

The high cost of patent procedures

 

The high cost of patent litigation is one of the main factors behind the practice of contingency fees in the United States of America. According to a 2009 economic study commissioned by the American Intellectual Property Law Association (AIPLA), in patent infringement cases valued at between $ 1 million and $ 25 million, the total costs of procedure amounts to more than $ 3 million (of which approximately 60% related to the disclosure of evidence). When the amount involved exceeds $ 25 million, the costs of the proceedings are roughly doubled. And in smaller cases, where the amount involved is less than $ 1 million, the AIPLA survey indicates that the procedural costs are sometimes higher than the amount involved, the portion exposed until the end of the evidence disclosure procedure corresponding, again, to approximately 60% of the total.

 

Do contingency fees make the game fairer?

 

According to their supporters, contingency fee agreements protect the rights of inventors and help to make the fight with large companies, sometimes equated with that of “David and Goliath”, fair. inventors with limited financial means who try to enforce their rights in the face of powerful companies. Agreements subjecting fees to results can indeed level the playing field in such situations, which favors not only the interests of small inventors, but also those of the legal system and, arguably, of society at large.

 

 

A “patent troll” - a pejorative term for institutional investors whose business model consists of acquiring patent portfolios, not to develop marketable products and services, but for the sole purpose of asserting these patents in court . (Illustration: Bob MacNeil )

Outside of this situation, however, it is doubtful whether contingency fees are necessary to level the playing field in US patent litigation, and it is even questionable whether the practice of performance fee agreements may not, in some cases. situations, produce the opposite effect. Patent infringement actions are increasingly funded by non-traditional institutional investors, whose business model is to acquire patent portfolios, not to develop marketable products and services, but for the sole purpose of to assert these patents in court 3 . Patent trolls - a derogatory term for entities that acquire intellectual property rights for this purpose - are a good example. Contingency fee agreements favor the practice of this system, as they allow institutional investors to effectively spread the financial risk associated with patent litigation by establishing partnerships with their lawyers.

The idea that a wealthy applicant, holder of a patent and having spread the risks of his investment through a contingency fee agreement, is simply seeking to level the playing field is difficult for some to accept. Many companies attacked for patent infringement are in good financial shape, but not all defendant companies are large, powerful companies, and given the high cost of patent litigation, some would argue that contingency fee agreements are more effective. benefit to applicants. For obvious reasons, defendants cannot use a performance fee agreement as a means of leveling their chances, and a defendant who does not have the same means of risk allocation as his opponent and who is otherwise unable to bear the high costs of a patent proceeding can end up at a distinct disadvantage, regardless of the strength (or not) of the patent claims made against it.