Who Pays For Patent Litigation?

dollar Your company is threatened with a lawsuit for patent infringement.  You are confident that your product does not infringe.  Should you fight or should you surrender?

These are very real questions that businesses face every day.  According to a 2009 survey by the American Intellectual Property Law Association, the average cost for infringement litigation through the end of discovery was $2.5 million where the amount in controversy was between $1 million and $25 million.  These costs do not include the costs of the trial or of any appeals.

In short, your attorneys’ fees may well hit seven figures.  Whether you can collect those fees may well determine whether it makes sense for you to fight or to cave.  So can you collect your attorneys’ fees from the patent owner when you win the infringement lawsuit?

In the U.S., the answer generally is ‘no.’  The patent statute tracks the ‘American Rule’ and allows the prevailing party to collect its attorney’s fees only in ‘exceptional circumstances.’  The Federal Circuit has generally held that ‘exceptional circumstances’ occur and an accused infringer is entitled to an award of its attorney’s fees where the litigation is frivolous or the patent owner committed misconduct in obtaining the patent or in the litigation.  The Federal Circuit also has held that ‘exceptional circumstances’ occur when the litigation is both (a) brought in subjective bad faith and (b) objectively baseless.

The law elsewhere is different.  The ‘British Rule’ allows the prevailing party routinely to collect its attorneys’ fees.

–Robert Yarbrough, Esq.

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