New Intellectual Property Metric Helps Manage & Measure Risk
Today, metrics have become essential to the business and practice of law. A new one, with the potential to help anyone involved in intellectual property…
July 31, 2017 at 01:00 PM
4 minute read
The original version of this story was published on Law.com
Today, metrics have become essential to the business and practice of law. A new one, with the potential to help anyone involved in intellectual property litigation, has evolved called the Litigation Year or Lit Year. Developed by Bryan Wheelock a lawyer with IP law firm Harness Dickey, the “Lit Year” is the cost of one year of IP litigation. The Lit Year benchmark can provide perspective when considering whether an activity is worthwhile.
Recent reports have the median cost of a medium patent infringement case at $2 million and the time to trial at 2.4 years. This puts the Lit Year at a cost of $833,000. For example, a $350,000 IPR might initially sound budget busting, but if you consider that it is only 0.42 lit years — the amount you would spend in about five months of litigation — it starts to make sense.
Wheelock sat down with Inside Counsel to discuss how the Lit Year can help manage and measure risk, or more precisely the cost of reducing risk and can be applied to specific intellectual property situations since the cost of litigation varies based upon subject matter and location.
So, how did Wheelock come up with this idea?
“While watching a recent episode of Jeopardy, a contestant did not understand that a 'light year' was a measure of distance, not time. It got me thinking about what a convenient unit of measure the light year was to bring understanding to astronomically (literally) large numbers,” he explained. “This brought to mind litigation costs, which are the only astronomical (figuratively) numbers in IP law. And I thought the amount of money spent in a year of IP litigation – the 'Lit Year' – was an interesting unit of measure to bring understanding to IP litigation costs.”
These days, metrics have become essential because they provide a basis to evaluate and select among various courses of conduct. As long as metrics are used properly, they can make decision-making more objective and less personal. However, when not understood, metrics may support or even encourage bad decision-making. The Lit Year is a way to bring perspective to the cost of conducting or not conducting an activity.
The high cost of IP litigation is well known, but comparing the cost of a course of conduct against the typical cost of a patent infringement lawsuit is not logical. First, a lawsuit may not ever be brought. Second, even if a lawsuit was brought, it is unlikely to proceed all the way to a jury trial and appeal to the Federal Circuit – only five to 10 percent of cases ever make it all the way through trial. Instead, according to Wheelock, evaluating the cost of a course of conduct relative to how long it would take to spend the equivalent amount in litigation gives a basis to compare the costs.
The Lit Year is a simple double-check on decisions. – it may help make better decisions, or add a level of confidence to decisions that have been made, and in this respect may save some time and money, according to Wheelock. It is just another way to look at and evaluate various courses of conduct.
“Consider the light year – it's one thing to say that something is six trillion miles away, but when you frame that distance as the distance light could travel in year, one has greater perspective than just a stark measure of distance. So, too, with the Lit Year,” he explained.
In fact, the most recently published AIPLA Economic Survey reports the median cost of a medium ($2-$10 million) patent infringement case at $2 million. The 2017 PWC Litigation Study puts the median time to trial in a patent case at 2.4 years. This makes a conservative estimate of the Lit Year at a little over $833,000.
“Consider a company trying to decide whether to bring a $350,000 IPR to challenge a patent asserted against them. This might initially sound budget busting, but if you consider that it is only 0.42 lit years — the amount you would spend in about 5 months of litigation — it might make sense,” Wheelock explained. “ Similarly, a company deciding whether a $20,000 new product clearance is a necessary expense should consider that that this is just 0.024 lit years — the amount they would spend in about six days of litigation, it may sound like a better idea.”
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