The new AIA procedure, Inter Partes Review, will change the fundamental dynamic of patent monetization.
Up until Inter Partes review comes into effect (Sept. 2012), plaintiffs have a strategic advantage in litigation—the costs of litigation cause an asymmetric playing field, in favor of the plaintiffs.
In litigation plaintiffs have little-to-no downside, particularly where a law firm takes the case on contingency and fronts all expenses. Defendants, on the other hand, only have downside. At a minimum, defendants are responsible for excessive legal fees (running $1M to $3M per patent, on average), on top of any liability due to patent infringement, should it be found.
Plaintiffs have leveraged this asymmetric playing field to extract “nuisance value” settlements, e.g., settlements in the mid six-figure range, which is far below the cost of litigation.
With the introduction of Inter Partes Review, the asymmetric playing field becomes symmetric, in favor of the defendants.
In brief, Inter Partes Review is a parallel trial the defendants may launch, to challenge the validity of a given patent. Most importantly, defendants have the option of negotiating to settle out the Inter Partes Review procedure.
Now, defendants can negotiate for a quid pro quo exchange—if you drop the infringement action, we’ll drop the Inter Partes Review. This has the potential to entirely negate plaintiff’s bargaining leverage to drop the lawsuit for a “nuisance-value” six-figure settlement.
Expect to see Inter Partes Review being used by defendants to increase their leverage at the negotiating table.
Time will tell how the monetization shakes out with this new tool for the defendants.