A relatively small company with a $10 million revenue stream has to ask whether it can afford $3 million in litigation, said Sunstein.
The downside
Traditionally, many factors have conspired to preclude contingency fee arrangements in patent cases. A main factor is the risk to the law firm.
Froio, whose firm goes against the grain by deriving 30-40 percent of its annual revenues from contingent fees, said most law firms won't even consider taking a patent case on a contingent fee basis.
The level of risk for the law firm and the willingness to evaluate a case fully is a talent and takes a tremendous amount of trial experience, Froio said.
Sunstein estimates that recovery would have to be at least $15 million, and closer to $25 million, in order to justify taking a patent case on a contingent fee basis.
If somebody has a good case, even an excellent case, the prospects are daunting, he added. Some of the factors are long waits, high reversal rates and some recent court decisions allowing reexamination of patents.
These are intensive cases, Hayes said. If you sue Microsoft, they don't take it lying down. They bring out an army. Second, there are only two or three jurisdictions where you can get a trial in a year and a half. Against a big company, they'll litigate you to death, so the actual investment by the law firm is huge.
Another consideration is that most patent cases go to trial, and juries can be unpredictable, especially in cases with highly complex scientific or technological ideas.
Law firms may also be reluctant to agree to contingent fees in patent cases because they lack the staff or expertise to properly vet them.
Froio said his firm goes through a rigorous vetting process, using employee scientists and conducting mock trials before a case is ever filed.
