A lodestar is a star used to guide a ship's navigation
A lodestar is a star used to guide a ship’s navigation

Now that it is easier for prevailing parties in a patent litigation to recover attorney fees [see our previous post], how likely is that that fees paid under some form of non-hourly arrangement – for example flat fees, contingency, success fees  or some other alternative fee arrangement (AFA) – can be recovered?  The answer is that the court’s end-of-case determination of a reasonable hourly rate and fee, called the “lodestar,” trumps the amount paid under any AFA.

AFAs that exceed the lodestar likely cannot be recovered.  In Kilopass v Sidense (ND Cal), Judge Illston found that Kilopass engaged in litigation misconduct and made exceptionally meritless infringement claims, and, therefore, awarded Sidense attorney fees totaling $5.3 million.  (Kilopass has appealed.)

While the fees awarded to Sidense are significant, they appear to be less than half of the fees that Sidense actually paid its counsel under a contingency bonus arrangement.  Sidense’s fee arrangement called for Sidense to pay 50% of its lawyer’s hourly billing on a monthly basis, with the remaining 50% held back until the end of the case.  The payment of the holdback was tied to a performance based multiplier.  Since the court granted summary judgment in Sidense’s favor and dismissed all claims, Sidense’s counsel was entitled to the maximum multiplier of 2.5x, effectively requiring Sidense to pay 175% of its lawyers’ standard rates.  While the public record does not disclose the full amount of the contingency bonus, what can be inferred from the decision is that the fees paid by Sidense under the contingency arrangement exceeded $11 million (based on inferred standard rate fees of $6.5 million).


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Statistics show that an accused infringer usually wins on summary judgment, yet the great majority of accused infringers will settle rather than progress to the merits.  The reason is that it often costs too much and takes too long to litigate on the merits.  Changing to a non-hourly based fee gives trial counsel the heretofore missing will to find the way to a faster and cheaper adjudication.

Statistics often are misleading. This said, the odds of a patent litigation surviving a motion for summary judgment are strikingly low under any margin for error. PwC’s most recent survey of patent litigation says that in instances where a final decision is reached at summary judgment, lawsuits brought by patent owners who are non-practicing entities (NPEs) are successful only 2% of the time and that lawsuits brought by patent owners who are practicing entities are successful only 9% of the time. While these odds improve to 66% if the patent owner can get to trial, the point is that this is a very hard thing to do.

So based on the empirical data there is a compelling case that the party bringing the patent litigation likely will lose a decision on the merits.

Why then do the great majority of patent litigations, 95% by some accounts, settle instead of progressing to a decision on the merits? (See RPX: From Exposing NPE Myths to Explaining NPE Math) (PwC acknowledges that “[d]ismissals that didn’t occur at trial or summary judgment are not included in this breakdown [of PwC’s reported success rates at summary judgment].”)


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