The recent spate of mega-verdicts and patent holder litigation

We are in the midst of an unprecedented run of mega-verdicts—that is, large damage awards of over $50 million—in patent cases. Lex Machina reports 17 damage awards totaling over $6.75 billion since the beginning of 2020—an average of nearly $400 million per award—in cases that went to trial in 2020 or 2021. Of those, an astonishing 11 were awards in excess of $50 million.

This is a remarkable 15-month stretch for patent verdicts, especially during a period of extraordinary procedural and business disruption, including severe court slowdowns due to the pandemic.  Below, we discuss the potential implications of these mega-verdicts on patent holder litigation.

Notable nine-figure patent mega-verdicts awarded in key industries

Of the 17 awards, three notable damages awards were valued at upwards of $1 billion, each ranking in the top five patent damage awards of all time at the time of the award:

• The California Institute of Technology v. Broadcom Limited et al. received a damage award of $1.1 billion in January 2020 that later increased in post-trial rulings, with the potential to increase further from ongoing royalties.
• Centripetal Networks v. Cisco Systems, Inc. received a damage award of $1.9 billion in October 2020, and ongoing royalties may increase the award to over $3 billion.
• VLSI Technology, LLC v. Intel Corp. received a damage award of $2.18 billion in early March 2021 and currently awaits post-trial rulings.

Interestingly, a number of these verdicts spring from atypical patent plaintiffs. The patents generating these mega-verdicts over the past 15 months have mostly originated from innovative tech companies or university research. Although it is often not the case that the original innovator is the entity asserting a patent—patents are often transferred to third parties before assertion—several of these verdicts saw original operating companies and universities asserting their own IP.

Further, it is notable that this spate of large awards comes despite the lack of pharmaceutical verdicts, which typically account for about a quarter of large awards. Looking at top industries involved, underlying technology ran the gamut, and semiconductors, mobile communications and networking technologies appeared multiple times.

What these mega-verdicts mean for patent holders and investors

These cases still have a long way to go, and however eye-popping an award may be, patent owners must be well resourced to see a case all the way to completion. Experienced firms and litigants know that the announcement of a damage award is only the beginning of the story. On the most obvious level, given the magnitude of the awards on the line, defendants are incentivized to exhaust their options to attack the award post-trial and on appeal.

Moreover, not only do mega-verdicts draw a lot of attention from the press, conventional wisdom suggests that they are also subject to a heightened level of scrutiny from the Federal Circuit. Nearly all mega-verdicts have been appealed to the Federal Circuit, which has been inconsistent in its past treatment of mega-verdicts, often leading to a large cost and time investment by patent holders well after the verdict is announced.

The long and costly road of appeals

Savvy plaintiffs know that the period from when a verdict is announced to when a final judgment is entered generally takes a minimum of two years and often much longer. There are many points of delay: Post-trial rulings can be delivered six months or more after trial; Federal Circuit of appeals may take 18 additional months to render an opinion; and petitions for en banc review or for certiorari often add additional months, even if they are rarely granted.

Given the scale, frequency and concentration with which we are seeing these mega-verdicts, it would be unsurprising for one of them to capture the attention of the full Federal Cicuit (en banc) or the Supreme Court. Regardless of the result of an appeal to the Federal Circuit, these cases will return to the district court for, at a minimum, clean up and interest calculations. But often, parts or all of the case will need to be retried, adding additional months or years and potentially triggering another appeal cycle.  

Also important to note is the difficulty of predicting the sustainability of these large patent verdicts given the range of mega-verdicts we have seen over that last few years. In 2018 there were 10 such awards, in 2019 five, in 2020 six, and five so far in 2021, the latter two data points despite a significantly reduced trial calendar over the last year. Others have speculated about potential reasons behind this apparent trend, from jurors with pandemic-inspired anxiety to changing attitudes about Big Tech. Although the past 15 months have indeed been remarkable, the sample size is small and there is not enough evidence to suggest a true proliferation of mega-verdicts. Regardless, an uptick in mega-verdicts and their fate on appeal is something patent holders should watch closely as courts begin to reopen. There is little doubt that frequent defendants in patent litigation will be doing the same.

Managing resources throughout the appeals process

Beyond testing a plaintiff’s patience and the patience of a firm waiting for a contingency fee, the additional steps of retrials and appeals are very likely to exceed the party’s original legal budget. Patent holders will need risk-sharing solutions (such as legal finance) to offset their legal costs to a third-party and leverage an experienced partner’s expertise and funds to navigate the post-award process. Ultimately, this can make all the difference in ensuring that a plaintiff is able to see mega-verdict litigation through to its final, optimal conclusion.

Christopher Freeman is a Vice President of Burford Capital, the leading global finance firm focused on law.