Risk Evaluation in Intellectual Property Litigation: Free Download - Decision Tree
Chapter 50 Risk Evaluation in Intellectual Property Litigation *
4-50 Intellectual Property Counseling & Litigation § 50.02
§ 50.02 Structuring the Problem
The evaluation of any lawsuit must begin with "structuring" the major uncertainties whose resolution by the judge and jury will determine just how well the client does. This structuring consists not merely of identifying the key legal rulings and factual findings that are in dispute, but also clearly setting out the relationships between all of these uncertainties using a decision tree…
…The five major uncertainties displayed in the decision tree create 17 different possible "total values" associated with the Litigate alternative. On the other hand, the Settle alternative poses no significant uncertainty--it consists of an initial payment of $600,000 plus 1% of Diversified's expected $60 million of sales in each of the next two years, for a total of $1.8 million (current dollars). Should Razor accept this settlement? Clearly, counsel's recommendation must depend in large measure on the relative likelihoods of the 17 different litigation scenarios, and therefore on the probabilities of each of the major uncertainties in the decision tree that define these scenarios.(6)
FOOTNOTES:
Footnote (6). For most clients, the Litigate v. Settle decision will also depend on the magnitude of litigation costs that it could save should an early settlement be reached. It is very easy to deduct these costs from the value of the litigation alternative we will calculate below, and so arrive at a net value of litigating that can be compared to the $1.8 million settlement option. (Just be careful to subtract only those future costs that could be avoided should a settlement be reached. In particular, do not subtract those "sunk costs" your client has already incurred.)
* Marc B. Victor is a California attorney who assists inhouse and outside counsel in the evaluation of large, complex litigation. He is also president of Litigation Risk Analysis, Inc. (www.LitigationRisk.com), in which role he instructs senior attorneys nationwide in how to perform the kind of risk evaluation illustrated in this chapter.
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