Key Takeaways

  • A patent infringement lawsuit can result in major financial and business consequences, including damages, injunctions, and licensing obligations.
  • Settlements often include royalty payments, cross-licensing, or patent transfers to resolve disputes outside of court.
  • Defendants in a patent infringement case have several options: negotiating a settlement, challenging patent validity, or filing for declaratory judgment.
  • Early legal advice is critical — understanding the claims, potential defenses, and settlement leverage can significantly affect outcomes.
  • Large-scale settlements, such as those involving Microsoft, Merck, Cordis Corporation, and TiVo, highlight how even top corporations seek negotiated resolutions to avoid prolonged litigation.

Patent Infringement Cases

A patent infringement settlement is an agreement that has been reached between a patent owner and an individual or corporation that used and profited from the intellectual property in the patent without the patent owner's permission. Legal cases involving patent infringement are complex and can have a substantial impact on both parties. 

Suing someone for patent infringement is a big risk for most companies. These cases are costly, can drag on for years, and are often difficult to win at trial. This is especially true if you are a small business attempting to sue a large company for patent infringement.

Understanding Patent Infringement Lawsuits

A patent infringement lawsuit occurs when a patent holder claims that another party has made, used, or sold an invention protected under their patent without permission. These lawsuits are filed in federal district court, as patent law is governed by federal statute under Title 35 of the U.S. Code.

Typically, the plaintiff (the patent owner) must prove:

  • Ownership of a valid patent.
  • That the defendant made, used, sold, or imported the patented invention without authorization.
  • That such activity occurred within the United States during the patent’s term.

Defendants may raise defenses such as non-infringement, patent invalidity, or unenforceability due to inequitable conduct. In some cases, defendants also file counterclaims seeking declaratory judgments of invalidity or non-infringement.

Because a patent infringement lawsuit can be costly and time-consuming, many parties opt for settlement negotiations before trial. Settlements help both sides control litigation risks and costs while achieving predictable results.

Outcomes of Patent Infringement Lawsuits

Common outcomes of patent infringement lawsuits include:

  • A negotiated settlement in which the defendant agrees to pay an ongoing royalty for the intellectual property in question. Through this licensing agreement, the plaintiff will enjoy a stream of income. Also, he or she may be able to negotiate for retroactive payments as well.
  • If a settlement cannot be reached, a mediator specializing in patent infringement may be used to assist with the negotiation and terms of agreement. These firms can often secure favorable settlements for the plaintiffs in such cases. In addition, they can sometimes resolve the issue more quickly than if both parties proceeded with the case to trial. 
  • If these measures are not successful, the plaintiffs in patent infringement cases can attempt to win a victory at trial.

Common Strategies for Defending a Patent Infringement Lawsuit

When a company receives notice of a patent infringement claim, quick and strategic action is essential. Common defense strategies include:

  1. Challenging Patent Validity: Defendants can argue that the patent should never have been granted, often citing prior art or lack of novelty.
  2. Claim Construction Challenges: Many disputes hinge on how a patent’s claims are interpreted. Clarifying or narrowing these definitions can limit potential liability.
  3. Filing an Inter Partes Review (IPR): Through the U.S. Patent and Trademark Office (USPTO), defendants can request a reexamination to invalidate questionable claims.
  4. Settlement and Licensing Negotiations: Early settlement can minimize litigation expenses. Settlements may include one-time payments, ongoing royalties, or cross-licensing agreements between companies.
  5. Declaratory Judgment Actions: If accused of infringement, a company can proactively file a case seeking judicial clarification that it does not infringe or that the patent is invalid.

How Patent Infringement Settlements Are Structured

Patent infringement settlements are often structured to balance the rights and interests of both parties. Typical settlement components include:

  • Monetary Compensation: Lump-sum payments or ongoing royalty agreements based on product sales.
  • Licensing Agreements: Allowing the infringer to continue using the patent under agreed terms.
  • Cross-Licensing: Each party grants the other rights to use specific patents, common in tech and pharmaceutical industries.
  • Non-Disclosure or Non-Compete Clauses: These help protect proprietary information exchanged during negotiations.
  • Dismissal of Related Litigation: Parties often agree to drop pending claims in other jurisdictions once settlement terms are finalized.

Well-structured settlements also define future usage rights, preventing subsequent disputes over the same intellectual property.

Largest Patent Infringement Award: Microsoft

Microsoft was sued for patent infringement for its use of technology that places ads within search engine results. The suit was filed in New York federal court. However, a settlement was eventually reached under which Microsoft had to pay the patent owner $1 million, assign certain patents to that company, enter into a licensing agreement with the plaintiff, and pay the plaintiff 5 percent of what Google pays to use the same patents. 

This case illustrates the possibility of settling a patent infringement case even with a large corporation, as well as the breadth and depth of terms that can be involved in these settlements.

Largest Patent Infringement Award: Merck

Merck was awarded more than $2.5 billion by a jury when Gilead Sciences, Inc. was found guilty of willful infringement for using a Merck patent to make and to sell two prescription drugs for hepatitis C. This was the largest patent infringement verdict ever granted in the United States. Moreover, damages could even be multiplied by three based on a June Supreme Court case in which additional penalties for willful misconduct were approved.

Largest Patent Infringement Award: Cordis Corporation

In a 2010 patent infringement settlement that was the largest in U.S. history at the time, a Fortune 50 medical device company called Cordis Corporate received $1.725 billion. The defendant, a Fortune 500 manufacturer, infringed on a revolutionary cardiac stent device. They previously paid more than $700 million in damages by issues that another stent they produced had caused in patients.

Largest Patent Infringement Award: TiVo

TiVo received a minimum of $215 million in a settlement from AT&T. This was for an infringement complaint filed in Texas and California courts. The suit revolved around TiVo's digital video recorder, the first of its kind in the marketplace. AT&T countersued, claiming TiVo violated three of its own patents. The issue was resolved by this patent licensing agreement less than a week before the case was set to go to trial. TiVo's attorney noted that they were pleased about this recognition of the value of TiVo's intellectual property.

The settlement outlined a $51 million payment as well as quarterly payments that equaled to $164 million. AT&T was also to be held responsible for monthly license fees for each of their DVR subscribers over a certain level, through June 2018. Also, both companies agreed to dismiss other pending litigation involving the other party and to cross-license their existing patent portfolios.

TiVo previously received two settlements for patent infringement from the Dish Network, through which they were awarded a total of more than $600 million.

Lessons from Major Patent Infringement Lawsuits

The major settlements involving Microsoft, Merck, Cordis Corporation, and TiVo underscore several recurring themes in patent litigation:

  • The Power of Strong Patents: Companies with well-drafted patents have significant leverage in negotiations.
  • Importance of Willfulness: Courts may triple damages for willful infringement, as seen in Merck’s case, increasing incentives for early settlement.
  • Cross-Licensing as a Strategic Tool: Technology giants often resolve disputes through cross-licensing to maintain access to each other’s intellectual property portfolios.
  • Timing Matters: Early legal intervention can reduce exposure and support favorable settlements before trial.

These cases demonstrate how settlements can protect business operations, preserve partnerships, and mitigate reputational harm in industries driven by innovation.

Key Considerations Before Filing or Settling a Lawsuit

Before filing a patent infringement lawsuit or agreeing to a settlement, parties should evaluate:

  • Cost vs. Benefit: Litigation can cost millions; settlement may offer certainty and financial predictability.
  • Public Relations Impact: Litigation can affect a company’s market reputation.
  • Patent Portfolio Strength: A weak or overly broad patent is more likely to be invalidated.
  • Future Business Relationships: Settling may preserve potential collaborations or licensing opportunities.
  • Enforcement Risk: Plaintiffs must consider whether they can enforce and collect on any judgment obtained.

Consulting an experienced patent attorney early can clarify these factors and help craft a litigation or settlement strategy aligned with business goals.

Frequently Asked Questions

  1. What is a patent infringement lawsuit?
    It’s a legal action filed when a patent owner claims another party has used or sold a patented invention without permission.
  2. What are common outcomes of a patent infringement case?
    Outcomes include monetary settlements, licensing agreements, injunctions stopping production, or court judgments.
  3. How long do patent infringement cases usually take?
    They often take 2–3 years if they go to trial, though settlements can be reached within months.
  4. Can I challenge a patent’s validity if I’m sued?
    Yes. Defendants can request the USPTO to review the patent through an inter partes review (IPR) process.
  5. Why do companies choose to settle instead of going to trial?
    Settlements minimize legal costs, reduce uncertainty, and allow businesses to maintain commercial relationships without protracted litigation.

If you need help with a patent infringement lawsuit, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.