Contingency fees in patent lawsuits
The issue of how a patent litigator will charge for such services is normally a difficult consideration in retaining an attorney. Attorneys’ fees are generally charged on an hourly basis, a fixed fee basis, a contingency basis, or combinations thereof.
Patent litigation fees often reach millions of dollars, even in cases involving a single patent. Out-of-pocket costs, such as testifying expert fees, transcripts of proceedings, photocopying and legal research, may add up to tens or hundreds of thousands of dollars. Under these circumstances, the only viable avenue for a party without such financial resources may be to pursue high-quality representation under a contingency fee arrangement with willing counsel.
Unlike English law, under which a losing party in litigation is expected to pay the winning side’s legal expenses, the US legal system has evolved to avoid the ‘loser pays’ requirement and to permit contingency fees. A contingency fee is normally payable only upon successful completion of the services, where there is a recovery or another favourable result.
Recovery typically results from an award of damages or via a settlement. Without a recovery, there is no fee. Contingent fees are often calculated as a percentage of the client’s net recovery, subject to their ‘reasonableness’ under local rules. Fee ranges of between one-quarter and one-third of a recovery are not unusual.
“Unlike English law, under which a losing party in litigation is expected to pay the winning side’s legal expenses, the US legal system has evolved to avoid the ‘loser pays’ requirement and to permit contingency fees."
Clients seeking to retain patent litigation counsel on a contingency basis will significantly increase their chances of a better recovery by working with a seasoned attorney with many years of experience focused on patents. Factors influencing attorneys’ consideration of such arrangements will include the probability of winning and the risk-to-reward ratio. They will generally screen opportunities and will turn down more cases than they accept. According to a quote attributed to Elihu Root by Mary Ann Glendon in A Nation Under Lawyers: How the Crisis in the Legal Profession Is Transforming American Society: “About half of the practice of the decent lawyer consists in telling would-be clients that they are damned fools and should stop.”
Some law firms, with an eye trained on reports of truly huge jury awards and settlements, may devote a percentage of their litigation work to patent contingency cases. Examples of extraordinary awards (subject to appeal) and settlement recoveries include:
