The fact that IP litigation costs a lot is hardly going to come as news to your typical general counsel or chief financial officer. So the eye-watering amounts being spent by corporates revealed in a new survey from the law firm Morrison & Foerster may elicit something of a shrug from some.
The big takeaway is that it confirms that the disputes market is increasingly trending towards the largest law firms that can handle the most complex and international infringement suits. Again, no surprise there; but according to MoFo’s numbers, seven out of 10 new matters are being filed outside of the US. This does underline just how much the market is shifting.
The fact that patent litigation is trending away from the US has been clear for the last decade. The attraction of alternative jurisdictions such as Germany has increased in the face of what is widely perceived to have been a deterioration in market conditions for plaintiffs in the US. More recently, we have also seen the rise of Chinese courts. Their growing prominence in multi-national patent spats was underlined when Qualcomm won an injunction against Apple late last year as part of the pair’s epic courtroom battle. MoFo’s report suggests that trend is not going away.
The study also includes some interesting data on corporate spending on IP litigation in recent years. While the report does not break down average costs by jurisdiction it seems safe to assume that the US remains the principal driver of fees. In recent years there has been a steady drop in US litigation volumes and MoFo’s research picks up on a decline in matters being handled by respondents – companies reported that they’re handling an average of 11, down from 15 in 2015.
But, according to MoFo’s numbers, the total amount being spent on litigation has gone up by about $400 million in the last couple of years after plateauing between 2015 and 2017. Spending in 2019 is forecast by respondents to total $3.33 billion - up from $3.17 billion last year.
With the drop in cases but increase in overall spending, the price per matter is not surprisingly going up. The study reports that it is increasing at a current clip of 12% per year. Large companies now spend, on average, $1.5 million per matter and, according to the report, “median spending among large companies on IP litigation… is now more than four times what it was in 2015”.
While defendants have several tools they can use that can potentially help keep a lid on overall costs for a typical dispute, such as inter partes reviews, the numbers are on the rise, the report states, because of larger claims from plaintiffs and more complex suits: “In bet-the-company cases, the average exposure for large companies is over $1 billion, with the high end at $2 billion.”
In the US, at least, the current trend lines may well continue for the next several years. One reason for that is that the Federal Circuit’s 2018 decision in Berkheimer means that it has become harder for defendants to knock out infringement suits at summary judgment on invalidity grounds, before starting the costly discovery process.
That ruling could be overturned should the Supreme Court agree to take the case, but for the time being it doesn’t look like costs are about to drop markedly. That part you may want to keep from your GC or CFO.