Penny Wise: 8 ½ Tips to Reduce Patent Litigation Costs

Let us start by admitting that litigation is expensive. You are paying for the time of a specialist to do a custom job for you. And because you need and want an experienced practitioner, the cumulative cost of your lawyer’s time will be considerable. But there are ways that you can reduce the cost of enforcing your hard-earned patent or defending your actions while still getting the focused attention of an expert in the field. Although this article focuses on patent litigation costs, most of these suggestions apply to any type of litigation.

Before addressing specific tips, it is worth noting an overarching practice that will improve your chances of containing litigation costs: communication. From the beginning, ask for periodic case reviews. Depending on the case and your preference, these can be weekly, monthly, or quarterly. We suggest that these reviews start with an agenda that your lawyer prepares and include an in-person, phone, or video “meeting” to review that agenda. The point is that you and your lawyer are focusing on your litigation matter at a regular and prescribed time. In this way, you are better able to monitor the progress and cost of your matter.

1.Find a Specialist

Select an experienced and efficient lead lawyer. It is common sense that a person who does the same type of case repeatedly will gain experience and insight that a less experienced practitioner might not; it is also common sense that an experienced practitioner would be more efficient. So, your first task is to find someone who has handled a lot of patent litigation cases.

But let us be clear about what we mean by experience in this context. You want to find a lawyer who has a firm grasp of patent law, but even more important is to find someone who has extensive experience presenting legal issues to a judge and a jury. This is because the manner of presenting information in a patent trial is more important than what is presented. If I want a jury to understand the meaning of “lost motion member,” I could have the world’s foremost expert explain it. Yet if that expert fails to break down the concept of “lost motion” in a way that a juror can understand, then the expert will be speaking over the jurors’ heads, and all the doctorates in the world will not help.

So, your goal in finding a lawyer to lead your case is to find someone who has experience presenting complex ideas to the uninitiated – and who also has a deep grasp of patent issues.

2. Explore Fee Arrangements

Ask about alternative fee arrangements. Most lawyers bill on an hourly basis most of the time. That involves a set hourly rate multiplied by the amount of time spent on a matter. There is nothing intrinsically wrong with this approach, and it is often the best billing method. But not always. For example, an hourly approach does not encourage efficiency, as the value of one hour might be far greater than the value of another – yet they are billed the same. Ask about alternatives to an hourly fee arrangement. Here are three examples:

  • Fixed Fee: In this arrangement, the client and lawyer agree on a set amount for either the whole case or for the various segments of a case. So, for example, the two might agree that the pleadings will cost $3,000, fact discovery will cost $50,000, and expert discovery will cost $25,000; alternatively, they may agree on a fee of $X per month, regardless of the work performed that month. If the case settles midway through a segment, then the lawyer would get a pro rata share of that segment’s fixed fee.

Under this arrangement, a client knows in advance what he or she will need to pay for a case or for a case segment and so avoids surprises. The disadvantage is that the client might end up paying more or less than an hourly equivalent, which would favor either the client or the lawyer. The beauty of the fixed fee is that both client and lawyer are taking a risk of under- or overpayment.

  • Contingency: In this arrangement, the lawyer does not bill for time, but the client agrees to share a percentage of the recovery with the lawyer. In some cases, the lawyer will also advance out-of-pocket costs, but we typically see that arrangement more often in personal injury cases; in our experience, patent infringement costs are often handled by the client. The advantage of this arrangement is that the client does not pay legal fees — the largest expense of a case — and the lawyer stands to make more than he or she would have under an hourly arrangement. To compensate for the heightened risk, however, the lawyer will often ask for a relatively high percentage of the recovery, up to 50 percent.
  • Hybrid: In a hybrid arrangement, the client will pay a reduced hourly rate in exchange for a percentage of the award. The advantage of this is that both the client and lawyer have “skin in the game” from the beginning. The lawyer is betting on time and the client is betting the hourly fee payments. We like the hybrid model because both sides have risks and rewards. Our typical model is an hourly rate of $100 with a 30 percent recovery, with the client handling the out-of-pocket costs.

Whichever fee structure you choose, ask your lawyer if it is possible to cap your monthly costs. Under this arrangement, you would pay up to $X per month on the case. If the amount is greater than $X for a given month, the excess would flow into the following month. In this way, your monthly costs will be more predictable.

3. Limit Number of Attorneys

Emphasize your wish for contained litigation teams. Before you engage a law firm, ask how many lawyers will be handling the various aspects of your litigation. Although the number of lawyers on a file will depend on a variety of factors, we have found that even large patent cases can be handled by three designated lawyers, and some require only one. For this reason, we suggest that you not automatically opt for a large firm with a well-known name. Although many of these large firms have top-notch talent, a law firm is a collection of lawyers. Your lead lawyer, not the law firm, will be making the closing argument to the jury. Choose the lawyer whom you believe will best represent you, whether that attorney is part of a one- or one-thousand-lawyer firm. Ask that this lawyer be directly involved in the case. And ask that the firm not add additional lawyers to the team without good reason and without speaking to you in advance.

4. Select Key Issues

Ask your lawyer to limit the focus issues of the case. Most litigation matters have many possibly relevant issues. We suggest that you speak with your chosen lead lawyer about the scope of the case before you finalize the firm’s retention. When you do, discuss all the possible issues that you could raise and then decide on the key issues that you will pursue, which should be a subset of all possible issues. Let us use a simple example. Assume that you have three patents that are part of the same family of patents, meaning that they share a common description of the invention. One of those patents is particularly strong, and the other two are good but susceptible to more challenges. It often makes sense to jettison the second-tier patents and focus your attention on your best patent. Indeed, we have seen cases where a lawyer admits infringement and only fights on invalidity.

This is not always easy for lawyers to do; after all, lawyers become lawyers instead of entrepreneurs because they are risk-averse by nature. But it is important to be able to make hard choices at the beginning of a case, even if those choices come with risks. Without a clear focus, your case could easily take on a life of its own – with the attendant costs.

5. Police Motions

Discuss motions with your lawyer before they are started. Motions are expensive because of the time it takes to prepare and argue them. Ask your lawyer to alert you in advance if he or she wants to file a motion. In this way, you and your lawyer can jointly decide whether the cost is worth the possible benefit.

There are two types of motions that deserve additional scrutiny: motions to dismiss and discovery motions. Motions to dismiss are filed by a defendant instead of an answer to the complaint. They are difficult to win because a judge is instructed to assume the plaintiff’s allegations are correct, and most judges wish to give a plaintiff the chance to develop its case. And a loss at the beginning of a case can be demoralizing. Also, a motion to dismiss might alert the plaintiff to defendant’s case strategy before the defendant would otherwise have to disclose it. Unless you have the proverbial “slam dunk,” it is usually best to avoid these motions.

Another type of avoidable motion is a motion to compel discovery. Sometimes these are necessary, but they can often be avoided if you are forthcoming with your discovery. Although there is a natural aversion to sharing sensitive documents with your adversary, it is usually better to err on the side of over-production than under-production. When you produce everything that is reasonably requested, you can help immunize your side from motions to compel and put pressure on your adversary to follow your lead and produce everything that was reasonably requested. This is a better and less expensive way to induce your adversary to make a reasonable discovery production in return. As for the concern about disclosing your sensitive information, it is usually possible to limit the scope of disclosure by agreeing that certain documents cannot be disclosed to the public and other documents can be disclosed to your adversary’s lawyer but not your adversary.

6. Ask for Budgets

At the beginning of the case, ask for a case budget. Although it is difficult for your lawyer to prepare an accurate budget with so many intangibles about how the case will proceed, it is a good exercise for both you and your lawyer to think about the cost attached to your actions. As the case proceeds, ask that this budget be updated at regular intervals. We tend to think that monthly is too often and yearly not often enough; a quarterly budget update might be a good compromise.

Although we rarely see an accurate litigation budget – they usually understate the expense – they force both sides to consider the cost of their actions. In this way, they act as a subtle but effective constraint on expenditures.

7. Use Technology

Exploit available programs to decrease human hours. When we began to practice law, it was not unusual to have to review the contents of dozens of bankers’ boxes, each filled with thousands of pages of documents. Today, there are legal document management tools that can perform sophisticated word searches for specific text within those thousands of documents. This allows an efficient lawyer to focus on the terms most likely to pull the relevant information and leave the other documents alone. Encourage your lawyer to use one of these tools to do targeted document searches. Choose a lawyer who understands that it is not necessary to have eyes on every single page of every single produced document to effectively litigate a case.

8. Third-Party Help

Consider whether you want third-party help to reduce expenses. There are third parties who will help defray patent litigation expenses, both on the plaintiff and defendant side. For the plaintiff, there are companies that engage in litigation financing. Litigation financers will give a non-recourse loan of money toward the prosecution of a patent litigation matter in exchange for a percentage of the recovery. The lender will, of course, analyze the case and decide whether it wants to make the loan and on which terms.

On the defense side, insurers offer patent litigation insurance which will generally cover the costs of defense, including legal fees and the damages incurred.

The decision to explore third-party help rests with the client and is generally based on a risk/reward analysis. But some caution should be exercised in the process of deciding whether to use third-party aid. First, insurer or lender involvement often must be disclosed to the court. Second, there are conflict of interest risks as far as who gives direction to the lawyers. Third, there can be a risk of waiving the attorney-client privilege as to communications between client, lawyer, and insurer/lender.

There are many considerations that go into the decision to obtain patent litigation insurance or seek the aid of a litigation financing company. This subject is beyond the scope of this article. In general, however, we suggest using caution when deciding on these approaches and engaging professionals to help with the decision. We have found in our practices that many clients find insurance and third-party lending to be expensive but the cost may well vary depending on the type of case and other factors.  

8.5. The cornerstone of a long healthy attorney-client relationship is trust, and this is directly connected to reasonable billing practices. Read Chris’s article, “Over-Billing is Bad Business,” for his observations on practices to avoid and ethics to adhere to.

By: Steven Susser and Christopher Quinn

Steven is a trial lawyer who has litigated intellectual property and contract cases in 18 states and Washington, D.C. over the past 30 years. His approach is to make the complex simple by carefully selecting his key issues and presenting them in a way that is accessible to those without specialized knowledge.

Christopher Quinn is the founder and managing shareholder of Quinn IP Law and a faculty member with the University of Michigan’s Center for Entrepreneurship. His early career work includes research and engineering work at the U-M Physics Department, General Motors and Ford. He has also worked for the Wisconsin Supreme Court, Ford Global Technologies Inc, and multiple law firms prior to launching Quinn IP law in 2002.