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Litigation Costs, “Exponential Increases” in IP Cases and Cost Data Generally

Law departments ought to look at their litigation costs in terms of potential liability (or actual once a case closes).  Knowing that correlation might change defense strategy.

A recent Foley & Lardner web conference (July 2004) reported some data from the American Intellectual Property Law Association.  “The average cost of IP litigation increases exponentially depending on the amount at risk, i.e. (sic), cases in which over $25 million is stake, the average cost of litigation is approximately $6 million.”  Exponentially means to a power, so that if the amount at risk – damages sought – doubled, the litigation costs would rise four-fold.  I doubt that $50 million cases incur litigation costs of $24 million, so the Association probably means that the law firm costs rise linearly.  But I am being pedantic. 

Simply to offer some insights into the relationship between complexity (which has some relation to the amount at risk) and the cost of litigation gives us some value.  I have not seen data of this insight. 

The piece continues to say that “50-60 percent of the total cost for an IP litigation matter is discovery fees and costs…”  Surprises me, because I do not assume there are all that many documents in a patent infringement lawsuit.  Inventors’ reports, Patent Review Committee minutes, filings – what else?  Even in trademark cases, why such widespread discovery?  Perhaps expert witness fees are included, and those might skyrocket the costs.  I have seen figures like 60 or 70 percent of all commercial litigation costs consist of discovery, so perhaps IP sitting squarely in this range makes sense.