The true cost of a patent lawsuit

Business by on March 15, 2007 at 5:59 pm

I’ve gotten into more than my fair share of cocktail party arguments with patent lawyers (note to self: talk about football next time), and greatly desire an overhaul of software patent legislation (fat chance). Jason Mendelson, has a great post at AskTheVC about the true cost of a patent lawsuit. Here are a few numbers from his post:

Litigation costs of controversies where $25M or less in damages is concerned:

Through close of discovery (pre trial)
75th percentile: $1M
Median: $1.25M
25th percentile: $600k

Through trial and appeal
75th: $3.5M
Median: $2M
25th: $1.2M

He goes on to quote uglier numbers for lawsuits that awarded greater than $25M in damages. These numbers don’t include loss of management time, focus, etc.

While I was at Quova, a smaller startup started an irrational patent pissing match. We eventually averted huge legal fees and a giant time suck (although the same company is suing Google last I heard). It was a distraction that neither company needed, and we greatly detested being dragged into it - we each needed to focus on building our businesses and more broadly speaking, growing the market.

Prosecution or defense of a patent is an unreasonable undertaking for a startup. Not only are the costs absurdly high, but patent lawsuits are siginficant drains on management focus. Everyone at the startup needs to be focused on actually building a company and building a market (hard enough without distractions), not the details of ‘who built what first’ and ‘why my blue widget is different from your green widget’.


  1. Anonymous — March 15, 2007 @ 7:56 pm

    22 patents and going strong ;)

  2. davenaff — March 15, 2007 @ 9:27 pm

    Healthy =)

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License. | Dave Naffziger's BlogDave & Iva Naffziger