Let's face it - patent litigation has become unaffordable for most patent owners. That means that most patent owners are denied access to the courts to enforce their patents, denied their First Amendment Right to seek redress for patent infringement.

A few years back, the AIPLA Economic Survey provided that when potential damages are less than $1 million for a patent infringement lawsuit, the costs of the suit, per patent, for simple technologies is $300,000 through discovery and claim construction, and another $600,000 per patent to take the case through trial and appeal.^[1]  When the damages are between $1 million and $10 million, those numbers increase to $600,000 and $1 million per patent, respectively.  Where the damages alleged are between $10 million and $25 million, those numbers increase to $1.5 million and $3 million per patent, respectively.  Where damages alleged exceed $25 million, those numbers further increase to $1.5 and $3.625 million per patent.  The report adds that for complex technologies, these reported costs can increase by up to 50%.^[2] It is easy to see that only large well capitalized entities can afford these costs.  Unfortunately, most entities are not large well capitalized entities.  These high costs make patent litigation unavailable to most patent owners.

A question that must be asked is why patent litigation is so expensive?  The most logical answer is that the large entities, like Big Tech, make it that way, to keep those entities with fewer resources out of court.  In fact, when most patent owners discover their patent is being infringed by one of these large entities, they often run for the hills. Who can blame them? Patent lawsuits are unpredictable money drains that can sink otherwise promising companies and technologies, from the PTAB to § 101, patent owners have an uphill battle.

While the costs for a personal injury (“PI”) lawsuit may only be a few thousand dollars to get to trial, an intellectual property (“IP”) patent case is a million dollars to get to the same place.  These costs necessarily reduce the funding of new technologies as it is no longer possible to secure your technology without undue costs.  This fear of legal battles means less funding for innovative projects, essentially putting the brakes on the technological progress that does not come out of Big Tech.

A patent lawsuit is a David vs. Goliath story.  Big tech companies can throw millions at patent lawsuits without breaking a sweat. But for smaller players, one lawsuit could mean game over. We're seeing more cases of large corporations using their deep pockets to intimidate smaller competitors through patent threats. It's not just unfair - it's killing competition and innovation.  I personally had a Google lawyer admit to a court that his client had no problem spending money to raise the costs of litigation.

On the flip side, the courts have routinely provided that there is no minimum damages requirement before a patent infringement lawsuit can be filed.^[3]Likewise, settlement offers or settlements with defendants for less than the cost of litigation are not improper.^[4] In Thermolife, the Federal Circuit recognized that a patent plaintiff is able to make patent litigation more affordable by distributing common costs over many suits, thus making each suit worthwhile on lower terms.^[5]  Moreover, as for settlement amounts, a low figure might simply reflect the small size of an individual defendant's potential liability. Indeed, the figure may result from what the Supreme Court has recognized as the normal, legitimate settlement calculus, which includes consideration of litigation costs: specified as a prediction of the amount of liability, discounted by its probability, plus the transaction costs of further litigation.^[6] Thus,  low settlement offer, or an offer less than the cost of defense, is not improper.

So why then do courts routinely refer to settlement offers that are less than the cost of defense as being somehow improper?  Alone, they are not.  Further, cost of defense should never be a calculus as no plaintiff solely controls how much Big Tech's lawyers charge them. 

Some argue that expensive patent litigation makes companies think twice before filing frivolous patent lawsuits. And yes, that may be true, but mechanisms exist for identifying a frivolous claim.  Frivolous cases are the exceptions, not the rule. However, Big Tech accuses all lawsuits with a settlement demand less than Big Tech's cost of defense as being frivolous when in almost all cases it is the cost of prosecuting the patent infringement lawsuit coupled with the potential damages that require a low settlement offer.  It is almost impossible to afford patent litigation.

We need smarter policies to fix this mess. Streamlining the patent enforcement and encouraging alternatives to litigation could help level the playing field. Perhaps it is time to reconsider a patent court for smaller cases?  If potential damages may only be a couple of $100,000.00 dollars, the courthouse is closed to that patent owner where it costs several multiples of that to get to trial.

The bottom line? Patent litigation costs are throwing a wrench in the innovation machine. Until we find better ways to protect intellectual property without bankrupting inventors, we're holding back progress. It's time to build a system that protects ideas while keeping the doors open for innovation from companies of all sizes.