Debunking an IPR myth - reviews have a nominal impact on the overall cost of litigation

There is no more controversial subject in the US patent world right now than the inter partes review (IPR) regime. The patent death squad or the killer of bad patents, you decide. But one thing everyone can agree on, surely, is that IPRs have saved companies billions of dollars. By wiping out patents in whole or in part before they are litigated to the end, both sides get to save great chunks of cash, right?

Well, maybe not. IP Edge managing director Gautham Bodepudi has been doing some calculaitons and, he claims, while some parties do indeed make big savings, overall the results are not particularly impressive. This is Gau’s view, not necessarily ours, so we’d be very keen to hear from anyone who thinks he may have missed something. Anyway, here is what he has to say.  

IPR advocates have loudly touted the success and impact.   

Some studies proclaim IPRs have saved billions in overall legal costs since their adoption. 

The problem is their reliance on the 80% litigation-stay rate for instituted IPRs.

When a court stays a litigation and an IPR results in a settlement, adverse judgement invalidating all claims, or a final decision invalidating all claims, then the IPR reduces overall costs, which are the total litigation and IPR costs for both plaintiffs and defendants to resolve the dispute. 

But if the PTAB denies the IPR petition or allows one or more challenged claims, then the IPR fails to resolve the disputes between the parties, and any imposed stay may be lifted.  In these instances, IPRs increase overall costs.

A closer look reveals that IPRs have a nominal impact to reduce overall costs—just 6%.

According to the Patent Progress article linked to above, the average NPE patent litigation costs $950,000; and, according to my estimates, lasts between one and two years.

This average cost does not account for IPR costs, to determine overall costs. 

It does, however, account for the existence of IPRs.  How have IPRs impacted average litigation costs?  Have they decreased them by helping resolve validity issues less expensively?  Have they increased them when patents survive IPRs?

I have yet to come across data that shows how IPRs impact litigation costs, because it would require isolating IPR impact from that of the AIA’s joinder laws, 101 Alice case law, venue law from TC Heartland, and other legislation and case law.

We can, however, conduct a delta analysis to determine how IPRs affect overall costs, when we take the $950,000 average litigation cost as a baseline. 

Source: Patexia

In 2017 there were 4,072 patent litigation filings.  Applying the average NPE litigation cost, total litigation costs for 2017 would be $3.86 billion.  How do IPRs impact litigation costs, and thereby overall costs, to resolve legal disputes between parties?


Some litigations have one asserted patent, while others have multiple patents.  If an IPR invalidates all claims, it results in multiple litigation settlements in single patent cases, but potentially none with multiple asserted patents. 

To account for this, in 2015 there was an approximate 1.5 litigation-to-one unique patent ratio (6,364 patent filings on 4,048 unique patents.  Applying that ratio to 2017 patent filings, this corresponds to 2,714 unique patents. 

In 2017, there were 1,725 IPR filings.  Patent Progress states that 70% of IPRs filed relate to patents in litigation and, of those,  approximately 80% map to unique patents. This means 966 patents in 2017 have an IPR associated with them.

On average, says Patent Progress, defendants spend $200,000 before an IPR is filed. The median cost for filing an IPR petition is $100,000, while for reaching a final decision it is $250,000 by each party ($500,000 total). 

To run the delta-cost analysis, let’s assume an IPR settlement results in a settlement of the associated litigation, an adverse judgement or invalidity of all claims results in a settlement of the associated litigation and other litigations pertaining to the invalidated patent, and that an IPR denial or allowance of one or more of the challenged claims does not resolve the litigation issues and, thus, does not result in a settlement.  Of course, individual litigation circumstances may vary, but they provide a baseline to determine how IPRs impact overall costs.

Source: USPTO


According to USPTO statistical data, of those 966 IPRs, 30% will result in a settlement, either before or after institution.  Assuming an IPR settlement results in a litigation settlement between the parties, this results in 289 litigation settlements.  The overall cost to reach the settlement would be $300,000 ($200,000 in litigation costs prior to IPR filing + $100,000 for petition filing).  This creates a savings of $650,000 from the average cost of litigation, resulting in +$187.8 million of overall-cost savings. 

Of the 966, 5% will result in an adverse judgment, thereby invalidating the challenged claims.  This will result in 48 litigation settlements between the respective parties.  It would cost $300,000 to reach this result ($200,000 in litigation costs prior to IPR filing + $100,000 for petition filing), saving $650,000 from the average cost of litigation.  Because the claims are invalidated, 24 other litigations will be resolved (applying the 1.5:1 litigation to unique patent ratio).  For these 24, taking the average cost of $200,000 in litigation costs prior to IPR filing, there will be a savings of $750,000 from the average cost of litigation.  The overall-cost savings are +$49.2 million for adverse judgments.    

Of those 966, 23% will result in all claims being unpatentable after final decision.  Assuming invalidating all claims results in a settlement, there will be 222 litigation settlements.  Applying the 80% litigation-stay rate, 177 cases will be stayed.  The average cost for the stayed litigations are $700,000 ($200,000 in litigation costs before IPR petition filing + $500,000 borne by plaintiffs and defendants to reach final IPR decision), resulting in $250,000 of savings from the average cost of litigation. 

For the 20% (44) in which there is no stay, litigation continues for at least 18 months (timing from IPR filing to final decision), which falls within the one to two year average for litigation.  Assuming average litigation costs apply to the non-stayed cases, these IPRs increases overall costs by $500,000 per litigation (cost by each party to reach final IPR decision).  This results in an overall-cost savings of +$22.2 million.

Because all claims are invalidated, 111 other litigations will be resolved (applying the 1.5:1 litigation to unique patent ratio).  Applying the 80% stay rate, 88 litigations will have an average cost of $200,000 (litigation costs before IPR petition filing), resulting in a savings of $750,000 from the average cost of litigation.  Similar to above, the non-stayed litigations will not have cost savings.  This results in an additional overall-cost savings of +$66 million. 

Of the 966, 29% will result in a denial of institution, meaning the IPR fails to resolve the issues between the parties.  For 280 litigations the IPR increases overall costs of the parties by $100,000 (cost to file IPR petition).  This increases overall costs by -$28 million. 

Of the 966, 1% will result in a dismissal.  For nine litigations, the IPR increases overall costs by $100,000 (cost to file IPR petition), which increases overall costs by -$900,000.  

Of the 966, 12% result in one or more claims being allowable.  For these 115 cases, the IPR increases overall costs by $500,000 (cost by each party to reach final IPR decision), because the IPR fails to resolve the legal issues.  Litigation continues, regardless of whether or not a stay was imposed.  This increases overall costs by -$57.5 million.

Taking the above scenarios into consideration, IPRs in 2017 result in overall-cost savings of +$238.8 million.

If the total litigation cost is $3.86 billion and IPRs save $238.8 million in overall costs, IPRs serve to reduce yearly overall costs by just 6%.

When discussing the impact of IPRs, we must consider instances when IPRs increase overall costs.  Doing so highlights their nominal impact to overall costs when resolving legal disputes.  

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