Why Patent Contingency Litigation is Declining?

Why Patent Contingency Litigation is Declining?There has been a steady decline in number of contingency litigation law firms, attorneys, and even cases filed, which continues to greatly impact the intellectual property industry. To get to story behind declining contingency litigation, IPWatchdog recently sat down with Paul Storm, partner in Gardere’s Intellectual Property Practice, and Edward C. Kwok, partner in VLP Law Group’s Intellectual Property Practice.

According to Storm, the decline in contingency representation over the last few years can be explained by weakened patents making success on the merits less likely. Even if the patent owner does prevail, what will the win? After a win at trial, the law of damages has made large damages less and likely to achieve in the first place, and keep even if awarded after trial.

“The net effect is that all patents are less valuable and weaker patents are much less likely to be asserted,” Storm explained. “The overall reduction of contingency law firms and attorneys has led to a reduction of all cases and to earlier, lower settlements.”

Storm makes an excellent observation. Contingency representation is monetarily feasible for attorneys and law firms if and only if there is a high likelihood of success. Even in the best case scenario attorneys will sometimes make bad judgment calls when taking a contingency case, but when the underlying asset is under attack — as patents have been — it makes it all the more difficult to justify the risk of putting in all that work and ultimately receiving nothing in return.

For Kwok, there are three separate factors that explain the decline in contingency law firms, attorneys and number of cases. First is the supply of patents. Between 2003 – 2008, the USPTO had a “quality” campaign where Examiners were told to be tough. KSR v. Teleflex also helped make getting patents harder and invalidating patents easier.

“In the meantime, the U.S. electronics/computer industry shifted to much more software-intensive technologies, which allows companies to become dominant extremely rapidly,” he explained. “One result of quick dominance is early entry barrier. Less start-up competitions means less patents that can be picked up by NPEs from failed startups and less plaintiffs.”

Second, adversarial proceedings at the PTAB are quicker, perceived less burdensome and less costly option for defendants to litigate patent validity on the merits. Defendants are more willing to engage plaintiffs in the PTAB. “PTAB litigation raises the stakes for NPEs significantly,” Kwok said.

Finding contingency representation, where the attorney or law firm only get paid if money is recovered through settlement or successful litigation, becomes extremely difficult in a world where nearly every substantial patent litigation winds up having an inter partes review (IPR) filed to challenge the patents involved. When one needs to first fight validity to get a ticket to the courtroom it has a way of making contingency representation far less attractive.

Third, hardware manufacturers moved overseas, so component products now rarely touch U.S. soil. Components, such as integrated circuits, are often designed, manufactured, sold, and delivered to system integrators overseas. The number of defendants can be sued on U.S. soil has shrunk significantly.

“Suing a foreign component entity presents jurisdictional and discovery uncertainties,” he said. “The end-product manufacturers are typically few and large enough to be able to negotiate hard and not settle early, which has also significantly raised the NPE stakes.”

Today, financing for patent enforcement campaigns has become even harder to come by for individuals, per Kwok. For instance, large NPE organizations like Intellectual Ventures, Rambus and Acacia are not growing as much. Instead of buying, many of the large NPEs are adopting the Rambus model, i.e., developing the patents in-house. In fact, Kowk has been told that many financing companies have left the field.

What about the value of patents post-PTAB? “Still too early to tell,” said Kwok. But, a couple of cases (e.g., Oil States) pending before the U.S. Supreme Court can potentially change the landscape. “Otherwise, I think people will adjust over time and new case law and strategies will emerge to mitigate the patent-unfriendly character of the PTAB,” he added. “The more significant factor is really the direction of U.S. industries. Technology monopolies are a much greater factor that makes patents less valuable.”

As those with patents in the industry know, it has been very difficult to get contingency representation for software-based patents for some time. Kwok provided an anecdotal data point from a colleague shopping a software-based patent to several plaintiff’s firms. Every potential firm has a different and contradictory take on how the claims would be litigated by the potential defendant, and everybody claims to know how to litigate under Alice, but nobody does. The only common belief is that nobody wants to put the case before a jury. Regardless of whether the case is prosecuted contingency or not, Alice will eventually have to be overturned, according to Kwok.

“The decision was irrational and self-contradictory, as borne out by the subsequent case law development. The uncertainty in the law makes meritorious patents difficult to get or enforce in such future technological development along the lines of artificial intelligence, fintech and data sciences, and even in some conventional system integration technologies,” he explained. “Whether that impedes the advance of science and useful art is debatable, but U.S. based companies, being high-cost technology developers, have lost a significant entry barrier.”

So exactly, how much have NPEs declined lately? This is difficult to quantify, Storm explains, the number of NPEs may not have changed much but the number of lawsuits filed by NPEs has dropped for the reasons discussed above. In general, there are much fewer weak cases filed so less defense work on such cases.

“The drop in weaker cases is a welcome relief from the patent troll plague, but the changes in the law that has lead to this has also weakened all patents,” he said.

These days, the overall value of all patents have been reduced by the AIA. According to Storm, while patents are still presumed valid, the likelihood that a patent will be invalidated in an AIA proceeding weakens all patents, so all patents have less value.



The Author

Amanda G. Ciccatelli

Amanda G. Ciccatelli s a Freelance Journalist for IPWatchdog, where she covers intellectual property. She earned a B.A. in Communications and Journalism from Central Connecticut State University in 2010. Amanda is also currently Head of Content Marketing, Social Media & Digital Products at Informa, a leading global business intelligence, academic publishing, knowledge and events business. Follow her at @AmandaCicc.

Amanda G. Ciccatelli

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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Discuss this

There are currently 31 Comments comments.

  1. Anon February 24, 2018 11:58 am

    The narrative of “law suits are bad – no matter what” has been effective for its purposes.

    Those purposes do NOT align with what is best for innovation, or for this country as an innovation leader.

    Shakespeare’s quote of “The first thing we do, let’s kill all the lawyers” has found its modern day twisted (spin generously applied) doppelganger.


  2. Paul Morinville February 24, 2018 2:11 pm


  3. Anon February 24, 2018 4:27 pm

    Love it Paul – thanks!

  4. Patent Attorney Bill February 24, 2018 11:32 pm

    The end of contingency patent lit is just the beginning. All patent litigators and prosecutors should be very worried about their futures. Patents in the US are worth about as much as the paper they are printed on. We can try to tell ourselves that things are getting better, but we all know the truth. Patents in the US are dead.

  5. StrongPatents February 25, 2018 10:50 pm

    This article seems to be taking a snapshot of the contingency lit environment for patent owners from today, backward as opposed to from today, forward. I have seen recent signs of the contingency lit market heating up again as the smart, early movers are taking educated risks again. While the new environment is far from settled, No Latches + Willfulness + Aqua + Iancu + Pending Oil States + Berkheimer/Aatrix = reasons to bet that accused infringers will be far less emboldened over the net 12 – 36 months as compared to the previous 5 years.

  6. Tim February 26, 2018 7:05 am

    If the “Vringo vs IP Internet” case didn’t wake people up, showing just how corrupt our legal system and the deepstate controlling the strings is, and tossing jury cases, because an Obama supported behomoth “GOOGLE” can have the like’ of judges, “Mayer & Wallach” go against unanimous jury findings, and a former head of the US Patent Office and 3rd judge “highly” dissent, “Judge Chen” and the US Supreme Court “not hear” this case. Which tarmac did Schmidt and Obama meet on? Vringo stock did reverse split, changed it’s name and platform twice, now symbol XSPA and at all-time low of $.91 a share. Probably facing delisting soon.

  7. Gene Quinn February 26, 2018 12:39 pm


    That would be great news if the contingency environment is heating up, but I’ve personally heard no evidence of that happening. To the contrary, with the PTAB there seems to be so many who understandably won’t engage in contingency when they first have to survive the gauntlet of the PTAB. I’d love to be wrong. It would mean there is more optimism in the market than I really think there is.

  8. Paul Morinville February 26, 2018 12:50 pm

    StrongPatents- I too have been checking the contingency market in the last few months. As far as I can tell, nothing has changed. However, there is optimism that things are changing soon, just no action until it is more certain.

    The funding market has improved, but it seems to be chasing large portfolios as opposed to small. There needs to be an en banc hearing on Aatrix or some other way to address 101. There also needs to be real visible changes made to the PTAB before contingency deals pick up in any noticeable way. Perhaps Oil States will do the magic.

  9. angry dude February 27, 2018 9:51 am

    Why ?

    It’s very simple math

    money in < money out

    nobody wants to lose money

  10. angry dude February 27, 2018 9:56 am

    sorry, I meant

    money in > money out

    (averaged over many litigations and adjusted for inflation and interest for all the years it takes to get paid via patent litigation route)

    Simply put, investing in stock market index is a hell of a lot better than investing in contingency patent litigation even with a strongest patent in hand

  11. RTB guy February 27, 2018 1:17 pm

    On February 13, 2018 I was issued a patent for Real-time bidding advertising for mobile devices. I will definetly be needing litigation support on a contingency basis.
    Any IP litigation firms interested in providing litigation support please respond

  12. RTB guy February 27, 2018 1:22 pm

    My Real-time bidding (RTB) patent has priority to 2005

  13. angry dude February 27, 2018 1:47 pm

    Real-time bidding advertising ?



    you are screwed, dude (unless you are almighty google in which case you can harass smaller companies with your patent)

  14. RTB guy February 27, 2018 1:57 pm

    I think you missed the 2005 priority part on my second post angry bird je je

  15. angry dude February 27, 2018 8:21 pm

    RTB guy

    You are green, dude
    US patent laws and regulations are applied retroactively regardless of priority or issue date – they don’t give a f^&*
    You will grow up very soon
    Do not waste any of your own money on litigation
    And of course, no one will litigate on contingency basis – too much risk and uncertainty
    casino gives you MUCH better chance to win

  16. RTB guy February 27, 2018 8:55 pm

    Did I say patent laws and regulations can not be applied retroactively? no. I know you are an angry dude but what makes you think that CBM+IPR+PTAB are applicable in my case. If I got a patent don’t you think I have already cleared CBM? As for IPR+PTAB -112 & 103 back to 2005 not a chance. PTAB will be dead soon.
    If you are not aware of what my patent covers why make such vague comments?

  17. angry dude February 27, 2018 11:05 pm

    RTB guy

    one more time: your priority date does not matter at all

    it can only matter if there is interference or something like that

    And btw, you’d better introduce yourself to Alice

  18. RTB guy February 27, 2018 11:20 pm

    Angry dude
    I think you are lost.

  19. Anon February 28, 2018 9:05 am

    RTB guy,

    Angry dude has long now been lost and consumed in his emotions. So much so that it has been (repeatedly) pointed out that his mantra here actually serves the purposes of the Efficient Infringers.

    It is sad really, that a person so caught up in his own personal being wronged turns into a t001 for the very type of “people” that wronged him.

    There is nothing wrong with emotion.
    There is nothing wrong with passion.

    There is everything wrong with emotion and passion without reason.

    Such evidence is provided by angry dude on a nigh constant basis.

  20. angry dude February 28, 2018 9:56 am

    RTB guy

    Nothing personal, dude, but you were bragging about your 2005 priority date
    on some bidding advertising e-commerce patent

    I don’t think I was wrong by pointing out that your patent is worthless if used for litigation alone… and that you won’t find any contingency litigator

    Prove me wrong, dude

    At the very least, can you find just one example of an e-commerce patent being successfully enforced on a contingency basis in USA in the last 3 years ?

    Anyone ?

  21. RTB guy February 28, 2018 10:48 am

    Angry dude,

    Again, if you do not know what my patent covers you should not be bragging about the unknown. And again if a patent was issued to me just a few days ago, what makes you think I have not overcome Alice?, my patent involves new technology (smart phones, high speed networks, integrated hardware components).
    e-commerce patents may not have been enforced on a contingency basis in the last 3 years because no body knew, not even law firms, where Courts where going with Alice but in my case it is clear that new, improved technology is not abstract idea.
    That is the point I am making, my patent is one of the very few that overcomes Alice because of new and improved technology, and there was no prior art for that in 2005 when Google was in diapers. Google “invented” RTB in 2010. Prove me wrong.

  22. RTB guy February 28, 2018 11:12 am

    Well said Anon, unfortunately there is always an Angry dude in these kind of conversations attempting to prove that he knows better than everybody else.

  23. Anon February 28, 2018 11:24 am

    RTB guy,

    I tend to not view it as “proving that he knows better than everybody else,” as it is not his “knowing” that is on display (and he apparently knows this because his chosen moniker is tied to emotion, not knowledge).

  24. Josh Malone February 28, 2018 12:13 pm

    RTB guy, you need a hundred patents to get a contingency. It is impossible to get a positive return on investment with a single patent on a single invention. Your contingency firm will have to write off $20-30M in billings and someone will have to finance experts and other expenses of $2-3M. The infringer will lob hundreds of attacks on your patents – PTAB, reexam, motion to dismiss, motion for summary judgment, venue transfer, stays, claim construction, 101, 112, 102, 103, inequitable conduct. Your contingency firm will have to survive multiple appeals to the Federal Circuit over a period of 7-10 years. There is but a sliver of a possibility of a single patent surviving the gauntlet. I know. I am four years into my patent term and not even half way through the litigation. The litigation costs are quickly approaching the damages, leaving me with a net loss. No firm will take a contingency when even the strongest cases are not profitable.

    You might be able sell your patent to a PAE for a profit, depending on how much you invested in R&D.

  25. RTB guy February 28, 2018 12:35 pm

    Josh Malone

    Point well taken.
    I think I should expand on my posts and say that my portfolio of continuation applications include, RTB, dynamic pricing, high speed networks, mobile devices, integrated hardware components, digital wallets, digital coupons, mobile operating systems, mobile geo location applications and more to come as prosecution is still open and PTA extends to 2028.

  26. angry dude February 28, 2018 1:47 pm

    RTB guy

    I wish you best of luck, dude

    But you should listen to real inventors like Josh (and myself), not to patent prosecution lawyers like anon, before spending your own money on US patents and litigation
    Josh was in litigation for years – you should read his unbelievable story
    And I was in litigation too, for short period of time, BEFORE AIA and PTAB mind you, and it looked so frustrating and endless that I decided to drop it (and fortunately was able to which is usually not the case – infringers won’t let you drop it without first punishing you big time…)
    Like one prominent patent contingency lawyer told me back in the days (2011):
    “You caught a tiger by his tail. Now you can’t let the tiger go – or the tiger will turn around and eat you alive”
    But I let the tiger go (to the ravine as it happened to be) and escaped virtually unscathed

    Best of luck, dude
    You’ll need it 🙂

  27. RTB guy February 28, 2018 2:33 pm

    Angry dude.

    Thanks for the good wishes.

    Do not get too emotional.
    Next time grab the tiger by the balls.

  28. angry dude February 28, 2018 4:01 pm

    RTB guy@27

    “Next time grab the tiger by the balls”

    I thought I could … then Ebay happened.. so no more “grabbing tiger by the balls” for NPEs

  29. RTB guy February 28, 2018 4:09 pm

    Angry dude,

    Ok, let me put it this way, next time choose a good IP law firm.

  30. RTB guy March 1, 2018 3:49 pm

    I contacted Fish & Richardson law firm today, they are already checking their database to see if they can be adverse to the companies infringing upon my patent.

    Any questions Angry dude?

  31. angry dude March 2, 2018 1:14 pm

    RTB guy @30

    Best of luck, dude

    Tell us when you actually see any money coming in from your patent (if I’m still alive)

    I will celebrate