Contingent Fee Patent Litigation

Contingent-Fee Patent Litigation

The contingent-fee agreement, while well established in areas such as personal injury litigation, is a relative newcomer to patent infringement law. Yet it is rapidly growing in popularity, due to a number of distinct advantages such agreements have over conventional hourly billing.

Considerably Lower Out-of-Pocket Costs

Patent litigation can be very expensive. Even in smaller cases, attorney fees for litigated matters can run into hundreds of thousands – even millions – of dollars. Individual inventors and small companies rarely have the resources to fund such a campaign. A contingent-fee agreement does away with attorney fees. Instead, the attorney receives a percentage of the settlement or damages award. The client is still responsible for the costs of litigation. These include, but are not limited to, filing fees, as well as costs associated with service, depositions, transcripts, expert witnesses, and travel. However, the out-of-pocket expenses incurred by the client in a contingent-fee case are much, much lower.

An Incentive to Settle When Settlement Is Proper

As the patent infringement case progresses, the defendant and his attorneys may offer to “settle” the case by paying an amount less than the plaintiff is seeking. From the plaintiff’s perspective, this represents giving up the possibility of a large damages award at the end of the trial for the certainty and closure of the settlement. In an hourly billing case, the patent lawyer has little incentive to encourage settlement, even where it is in the client’s best interest. As the litigation progresses, the billable hours continue to increase – and they are billable regardless of the eventual outcome.  By contrast, in a contingent-fee case, if the client loses at trial, so does the attorney – he gets nothing as well. Thus, if weaknesses have appeared in the case, the attorney may urge the client to consider settlement. If the attorney is still confident of victory at trial, he will communicate this confidence to the client, because a large damages award will also benefit the attorney. Regardless of what advice any attorney may give, whether or not to settle is always the client’s decision.

Controlling Time and Costs

Law firms in hourly billing cases frequently find that it is necessary to conduct numerous lengthy depositions, send multiple attorneys to conferences and hearings (many of which could be handled over the phone by a single attorney), and prepare long, extensively researched pleadings that have little chance of success. These are just some of the techniques used to maximize the number of billable hours the firm can charge to the client.

This is not true in contingent-fee cases. The contingent-fee attorney must invest enough effort to assure the client of a winning outcome. Again, without a winning outcome, the attorney gets nothing. However, the attorney has no reason to make the process more costly and time-consuming than necessary. Once again, the direct link between the fortunes of the client and the attorney benefits the client.

Contingent-Fee Arrangements Are Not for Everyone

Not all patent infringement cases are suitable candidates for contingent-fee arrangements. The attorney or law firm must carefully evaluate each case to determine whether it is likely to repay a substantial investment. If the case has significant weaknesses, or the client lacks credibility as a witness, the attorney may well decline the case. If the attorney takes your case on a contingent-fee basis, it means he is confident, and you should proceed confidently as well. You should actively assist the attorney when possible, providing any requested information quickly and thoroughly. A good working relationship between client and attorney is important in any case. However, it is especially important in a contingent-fee case, where the client and attorney are partners, sharing in the rewards of a successful outcome.