Are You in Good Hands When IP Mayhem Strikes?

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Some quick Internet research, along with anecdotal evidence from any law firm or corporate legal department, confirms what DiscoverReady has been saying for a long time — it is growing increasingly expensive to litigate patent cases.

2011 Report of the Economic Survey by AIPLA

Recent economic analysis by the American Intellectual Property Law Association suggests that:

  • the cost of litigating a patent case has increased 48 percent since 2001;
  • taking even a relatively small patent case (less than $1 million at risk) to trial in 2011 averaged more than $600,000 in legal fees;
  • litigants could expect to spend an average of $5 million to protect their intellectual-property rights in “bet-the-company” litigation (defined as litigation with potential exposure in excess of $25 million); and
  • discovery expenses are the primary driver of litigation costs, representing between 55 percent and 60 percent of overall legal costs.

In a variety of industries, these skyrocketing costs pose a growing problem as intellectual-property rights replace material goods and services as the corporate lifeblood. Specifically, the costs of patent litigation and discovery in particular can discourage — or even prevent — corporations from asserting or defending their intellectual-property rights in either individual or serial litigation. As Federal Circuit Chef Judge Randall Rader noted last October:

Our courts are in danger of already becoming an intolerably expensive way to protect innovation or prove freedom to operate. These vast expenses can force accused infringers to acquiesce to non-meritorious claims. This only serves as an unhealthy tax on innovation and open competition.

As we have previously blogged about Predictive Coding Tipping Point? and Texas Court Builds on Judge Rader’s Model Order on E-Discovery, both the Federal Circuit and the Eastern District of Texas have responded to Judge Rader’s concerns by proposing limitations that would significantly streamline the process and reduce the cost of discovery in patent cases. However, I recently came across an Inside Counsel article that suggests the federal judiciary has gained a unlikely ally in its battle to make patent litigation financially feasible — the private insurance industry.

As the article noted, the insurance industry traditionally has offered protection for companies that must defend themselves against intellectual-property claims. However, at least one insurance provider recently began offering what they call “intellectual property abatement/enforcement insurance,” which allows an intellectual-property owner to assert a claim against an alleged infringer. Proponents of abatement/enforcement insurance say it allows companies to pursue their claims against likely infringers without the hefty cost of litigation. And lest the insurance give rise to unwarranted patent disputes, a patent holder must satisfy several requirements before asserting a claim, including:

  • the intellectual property at issue must be registered with the USPTO;
  • to qualify for benefits, the insurer will require an expert opinion from a neutral IP attorney approved by the insurer that the patent holder’s rights are being infringed; and
  • as with most insurance policies these days, there is a co-pay requirement and coverage limits.

So at this point, you may be thinking, “OK, but why has this devolved into an insurance discussion on an e-discovery blog?” Here’s why: The very existence of abatement/enforcement insurance suggests that parties in intellectual-property disputes continue to take a broad — and ultimately wasteful — view of discovery in patent matters. Rather than unilaterally or collaboratively conducting focused, efficient discovery, parties are spending on average over half of their total litigation costs on identifying and reviewing documents that ultimately have very little to do with the merits of their case.

At DiscoverReady, we help our IP clients reduce these costs by tailoring discovery to the key issues in dispute, and then using services, software and analysis to ensure that the results are both efficient and defensible. This thorough, proven approach allows parties to control the costs of their outbound document productions, but even more importantly, provides an avenue to effectively and efficiently deal with inbound productions that may contain huge volumes of irrelevant information.

DiscoverReady can dramatically decrease the cost of evaluating, analyzing and categorizing inbound productions using a wide variety of tools including our proprietary i-Decision automated review service. These tools, controls and expertise ultimately provide the best insurance against rising patent litigation costs — without taking out an insurance policy.

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