This document discusses various options for funding patent litigation. It notes that patent litigation is expensive and consistent in cost. For plaintiffs, the type of plaintiff, such as an operating company or non-practicing entity (NPE), and the nature of the defendant's potential strategy, the plaintiff's litigation strategy, and risk tolerance will impact the funding arrangement. Common arrangements include billable hours, contingency fees, partial contingency fees, fixed or flat fees, budgeting and capping fees, and success bonuses. The document also discusses considerations like the quality of pre-filing investigations, the possibility of early settlement, anticipated discovery needs, and the increased use of the International Trade Commission.

1. FUNDING PATENT LITIGATIONS
Chandran B. Iyer
Sughrue Mion, PLLC
cbiyer@sughrue.com
(202) 663-7466

2. CONUNDRUM – PART 1
• Need to innovate
• Need to protect innovation
• Seek patent protection
2

3. CONUNDRUM – PART 2
• Pace of Imitation is Accelerating
• Widespread imitation only takes months
• Protect your investment
• Lawsuit
• How to fund it
3

4. COST OF PATENT LITIGATION
• Expensive
• Fairly consistent cost
• No chance of decreasing
4

5. FUNDING A PATENT CASE
 Billable Hours Contingency
 Many other arrangements in-between
 Contingency cases play an important role
 It’s an equalizer
 Gives everyone a chance to redress an injury
 But, the funding arrangement ultimately depends on
 the type of plaintiff,
 defendants’ potential strategy,
 litigation strategy and
5

6. RISK TOLERANCE
More firms are willing to
take on contingency
cases.
Many of the big
companies are requiring
contingency
arrangements
But, what’s the
threshold?
6

7. NATURE OF PLAINTIFF
 Why is this relevant –
 because it impacts the fee arrangement
 Different types of patent holders
 Companies that make products
 All other than the largest companies should be exploring
alternative fee structures
 GE / Cisco
 NPES
 NPEs is a broad term – encompasses all types
7

8. NPES
 Entities that use their patents to license or bring a
law suit, without any intention of practicing the
technology of that patent.
8

9. TYPES OF NPES
 Non-manufacturing holding companies that acquire
patents from inventors
 Intellectual Ventures
 Acacia
 Companies or research group that develop
inventions for purpose of licensing and
enforcement, not manufacturing
 Universities
 Jerome Lemelson
 Thomas Edison
9

10. TYPES OF NPES
 Failed companies that developed patents initially
 Kodak
 Companies that acquire patents to bring suit
against competitors
 Broadcom
10

11. ANTICIPATING DEFENDANTS’ MOVES
 AIA has made it more difficult for NPE Plaintiffs
 Joinder rules
 Post-Grant Proceedings
11

12. ADDITIONAL CONSIDERATIONS
 Quality of Pre-Filing Investigation
 Possibility of Early Settlement
 Discovery Needed
 Increased use of the ITC
12

13. PRE-FILING INVESTIGATION
 Quality of pre-filing investigations
 More mature and experienced NPE’s have developed
thorough investigations over time.
 Newer NPE’s are less willing to invest in a thorough pre-
filing investigation.
 Need to satisfy Rule 11 obligations
 Could end up with motion practice in litigation
13

14. HOW QUICKLY CAN THE CASE SETTLE
 NPEs are holding out.
 Increasingly wanting to settle on their terms
14

15. DISCOVERY & PROOF
 Discovery increases cost of litigation
 What’s the technology of the patent
 Nature of the claims
 How much discovery is anticipated
 3rd party discovery – indirect infringement case?
 Spoliation issue
15

16. ITC AS AN OPTION
 ITC administrative hearings are becoming more
common as an alternative or lead in to NPE
litigation.
16

17. VARIOUS FUNDING OPTIONS
 Strict Billable Hours
 Law firm’s compensation is based on hourly rate for
each attorney working on a case.
 Only the largest companies should use this arrangement.
 Client is unsure on how much to budget for a case.
 Law firm’s interest and client’s interests are not fully
aligned.
 Client has all the risk of litigation
17

18. VARIOUS FUNDING OPTIONS
 Pure Contingency Fees
 Attorney’s compensation is contingent on settling or
winning a financial award
 Attorney is paid a percentage of the client’s recovery
 Percentage escalates depending on key events or as case
progresses.
 Client is generally responsible for expenses
 Client’s and law firm’s interests are fully aligned
 Sharing of risk and reward
18

19. VARIOUS FUNDING OPTIONS
 Partial Contingency Fees
 Attorney’s compensation is portion of hourly rate plus a
smaller percentage of any recoveries in the lawsuit
 Client is generally responsible for expenses
 Client’s and law firm’s interests are still somewhat
aligned.
 Structure can be used for defense
19

20. VARIOUS FUNDING OPTIONS
 Fixed or Flat Fee
 Law firm will handle a matter for a sum certain or for a
fixed amount per month
 Sum certain can be paid upfront
 Fixed amount does not need to have a cap
 Client’s and law firm’s interests are aligned.
 Structure can be used for defense
20

21. VARIOUS FUNDING OPTIONS
 Budgeting and Capping
 Each phase has a budget
 A cap on total amount spent
 Tough to estimate
 Many companies do this in defending suits
21

22. VARIOUS FUNDING OPTIONS
 Success Bonus
 Part of the money is paid up front, and a portion is
withheld if successful
 Have to define success
 Use when monetary damages are not high
 Can be used in defense context
 Invalidity
 Limiting damages
22

23. VARIOUS FUNDING OPTIONS
 Insurance
 Check if there is coverage for defense under CGL policy
 IP Abatement policies
 Will fund enforcement of patent
 Helps with settlement
 Defendants cannot run out the clock
 IP Defense policies
23

24. Questions?
24