Protecting patents can be pricey, especially when competing globally with aggressive startups, low-cost competitors, and industrial giants. Yet, not protecting patents can be equally costly. Patent theft costs the US economy billions annually. Failing to defend patent rights today can limit their value in the future.
In some cases, taking patent pirates to court is straightforward. If a product is already generating revenue, it's worth spending millions in legal fees to maintain market share and deter thieves.
For companies with active R&D and extensive patent portfolios, it gets complicated and expensive. What if a patent you aren't using is infringed? What if it's stolen by a company that isn't an obvious threat?
When immediate infringement costs seem minor, deciding whether to engage in a lengthy, resource-intensive legal battle is perplexing. Anxiety arises when you're a small company unable to afford patent battles, waiting for better financial standing, or fearing lawsuits impacting quarterly earnings.
There's a temptation to ignore patent theft unless it affects short-term revenue, endangers products, or gives competitors an advantage. This is a mistake.
Often overlooked is the hidden cost of not protecting patents when infringement is discovered. Patent lawyers know that neglecting to defend patent rights limits their future value, a lesson corporate executives might not have learned.
Patents have a 20-year lifespan from the earliest filing date and cannot be renewed. A patent with only three years left is less valuable than one with 10 years remaining. Failing to mark products with patent numbers may make it impossible to get damages for prior infringements. Waiting to protect your patent reduces its value each year. Saving millions now may significantly reduce a long-term revenue stream.
Even knowledgeable lawyers recognising these risks might lose the debate on litigation due to immediate cost concerns.
Companies choosing between covering operational costs and engaging in a lengthy, costly patent lawsuit might understandably avoid litigation. This only happens if the company relies on conventional legal strategies and funding models.
Litigation finance offers a solution, freeing companies from budget constraints. As a director at Longford Capital, I've spoken with clients about litigation finance opportunities:
Protecting crucial corporate IP assets without sacrificing core business or slowing growth.
Pursuing legal claims based on merit, not budgetary pressure and bottom-line impact.
Driving shareholder value by keeping litigation off expenses while maximising value from legal claims.
Hiring the best lawyers without compromising on affordability.
Litigation finance can turn legal departments into profit centres. Litigation expenses are paid by the finance company, reducing legal department costs. Proceeds from litigation feed back into the company—proceeds not generated without litigation. Previously allocated budgetary funds for litigation can be used for company operations, R&D, or patent portfolio development.
In the past, companies could justify not pursuing patent infringers due to litigation's direct and indirect costs. With over a third of US law firms using litigation finance, and a similar percentage of in-house counsel onboard, there's an irreversible shift.
When meritorious legal claims arise, the boardroom conversation is simpler: Is the legal team confident in the case? How much is the claim worth? And who should we partner with to reach the finish line?