What Makes a Good Contingent Fee Patent Case?

In my last post, Some of the Many Ways You Can Lose Your Patents or Won't Be Able to Assert Your Rights, I discussed many pitfalls that may cause issues for a patent owner during an enforcement effort.  So what makes a good case?

In an hourly rate or flat fee patent representation, a lawyer is required to explain the risks and potential rewards of a course of action to a client.  The client decides on whether or not to proceed, and the lawyer will then collect a fee regardless of the outcome.  This arrangement puts all of the risks on the patent owner.

In a contingent fee representation, the lawyer needs to be able to maximize the chances of a favorable outcome to the client while reducing the risk to both the client and the lawyer.  Thus, a contingent fee patent lawyer looks for cases with minimal uncertainty, the ability to fix blemishes that may exist, and the ability to improve the situation as more is learned about the specific infringement, as defenses are presented, and as the law changes over time.

After a patent owner raises a potential matter with a contingent fee patent lawyer, the lawyer will conduct due diligence into the patent owner and the patent portfolio.  During the initial due diligence period, a contingent fee lawyer evaluates at least the following factors:

1. Title.  Does the potential client own the patents and the right to enforce them?

2. Term.  What is the duration of the patents in the portfolio, are there any intervening rights, and has the patent owner paid the maintenance fees?

3. Continuations.  Is there a continuation? Has there been any lapse in continuity?  Has any new matter been added that has modified the term (i.e., priority date)?

4. Validity.  What art did the patent owner overcome during prosecution?  Is there other art that was not considered?  Have the patents been confirmed in post-grant proceeding or in court?

5. Infringement.  How clear is the accused violation?  Is it one company or many in an industry?

6. Damages.  What is the recovery to the patent owner likely to be?  What are the expectations and desired outcome of the patent owner?

If you do not understand some of the legal terms listed above, do not worry now.  I will discuss each of these factors in more detail in future posts.

However, there is one factor above that should be highlighted now, because many inventors and patent owners are unfamiliar with the concept.  Continuity and continuations are of the utmost importance; they are a powerful tool for fixing problems, increasing claim coverage, and minimizing risk.  If there are no pending continuations, it is unlikely that a lawyer will accept a patent portfolio on a contingent fee representation unless the other factors are extraordinary.  Continuations allow the patent claims to be refined over time to improve validity and infringement positions as issues surface or the law changes.  If the opportunity to file a continuation has passed, the patent owner cannot continue to obtain issuance of new patents and claims with the same effective filing date. 

A patent owner must file a continuation before the issuance of the parent application. Thus, for readers currently prosecuting patents, please talk with your lawyer about ensuring that a continuation application is pending at all times.   The other two factors--valid and infringed claims--can be developed over time throughout the representation using continuation applications.

For contingent fee cases, we look for patent portfolios with:

1. Title. Clear title and standing.

2. Term. We prefer cases with at least about ten years of term remaining, no lapse in maintenance fees, and no intervening rights.

3. Continuations. At least one pending patent application with proper continuity.

4. Validity. Clear validity based on known art and the current law, extensive and consistent art citations, well-articulated distinctions over the art in the file history, and strong objective evidence of non-obviousness.

5. Infringement.  Direct and literal infringement by numerous large companies.

6. Damages. Significant damages and reasonable recovery expectations patent owner.

Even if you are not interested in hiring a contingent fee patent lawyer, you can learn a lot about building an enforceable portfolio by knowing what a lawyer looks for when evaluating a contingent fee patent matter.

In my next post, I will discuss the information that a prospective client needs to provide for a lawyer to consider the above factors.