Why do Contingent Fee Lawyers Look for Industry-Wide Infringement?
As discussed previously in What Makes a Good Contingent Fee Patent Case?, evidence of infringement is necessary. Who infringes and how much infringement exists is just as important.
If there is one infringing company and the licensing demand is reasonable, then the case may make sense on a contingency fee arrangement. However, a better situation is where there are a large number of infringing companies. In these cases, a contingency fee licensing program can be created to help defray the cost and risk associated with asserting a patent.
Furthermore, when there are many companies in an industry that rely on the patented technology, initial licenses with the medium size companies can help fund the program, establish credibility, and justify higher licenses with the largest companies in the market. Another reason to save larger companies in an industry for later is that if litigation should be necessary, the best damages case is against the largest company. A reasonable royalty rate established by the medium companies can scale up well for the larger companies. If the largest company refuses a license after licenses are made with its competitors that have considered the merits of the case and determined a license was warranted, that also weighs in the patent owners favor.
To give a famous example, in the Lemelson licensing program, over $1.3 billion in licenses were negotiated from 950 major corporations in a variety of industries with an average license fee of about $1 million. See, e.g., "Jerome H. Lemelson," Wikipedia and Robben, "Son of Invention," Willamette Week (August 24, 2004). The scale of the Lemelson licensing program was one of a kind, and subsequent changes to the law have made a repeat unlikely. However, it still holds true that licensing many large companies at a relatively small "average" prices can add up and defray risk when you have a large number of infringers.