Litigation and IP dispute basics

1. The core idea#

Most startups never go to court. But almost every deeptech startup receives, or wants to send, at least one serious legal letter in its first five years: a patent owner saying your product infringes; a competitor using your trademark; a former employer claiming your founder took its trade secrets; a university disputing who owns an invention; a customer refusing to pay; a co-founder leaving badly.

Litigation is the most expensive and slowest way to resolve any of these, and for a startup it consumes the scarcest resource, founder time, as much as money. Patent litigation in the US typically costs from several hundred thousand to several million dollars per side. So the goals, in order, are:

1. Prevent disputes with clean paperwork (Area 4 so far), sensible IP clearance, and good records.
2. Respond well when a letter arrives: calmly, quickly, with the right adviser, without admitting anything or ignoring it.
3. Resolve early where possible: by negotiation, a licence, a design-around, mediation or arbitration.
4. Litigate only deliberately, in the right forum, with a budget, a funding plan and a clear outcome you want.

On the other side, your own patents and trademarks are only worth what you can credibly enforce. Knowing the cheaper forums (UK IPEC, India's commercial courts, the Unified Patent Court, US inter partes review) and the role of insurance and litigation funding makes your IP more valuable even if you never sue.

Who this is for: founders who have received a cease-and-desist, licence demand or claim; anyone considering enforcing a patent or trademark; anyone whose investors are asking about IP risk.

Pairs with: 2.06 (freedom to operate), 4.12 (trademarks), 4.09 and 4.10 (employment and contractor IP), 4.15 (JDAs) and 4.17 (lawyers).

2. What the evidence says#

Patent litigation is expensive, especially in the US. The American Intellectual Property Law Association's 2025 Economic Survey reported median costs per side, for cases with $1–10 million at risk, of about $600,000 through discovery and claim construction and $1

million through trial and appeal. For $10–25 million at risk, the medians were $1.5 million and $3 million. Cases brought by non-practising entities (NPEs, sometimes called patent trolls) cost about 35% more to defend than cases between competitors. Legal-spend tracker Persuit reports a median of about $4.1 million across larger US patent cases it tracked over five years.

Most cases settle. In the US the large majority of patent suits end in settlement or dismissal before trial. At the Unified Patent Court, just over half of infringement claims and over a third of revocation claims settled before a first-instance decision in its first two and a half years.

Cheaper and faster forums exist.

• UK Intellectual Property Enterprise Court (IPEC): designed for smaller cases, with damages capped at £500,000 and recoverable costs capped (currently £60,000 for the liability stage), so the loser's exposure to the winner's costs is limited. Trials usually come within about a year.
• Unified Patent Court (UPC): since June 2023, one action can cover the participating EU states, and the court has also granted relief covering non-UPC countries in some cases. Infringement actions averaged about 13 months to a first-instance decision in 2025, with a fixed court fee of €14,600 for an infringement action plus value-based fees. Over 1,280 first-instance cases were filed in the first three years. Patentees have won roughly two-thirds of decided cases in the busiest local divisions, so it is a serious enforcement venue, and a serious risk for defendants.
• US Patent Trial and Appeal Board (PTAB): inter partes review (IPR) lets an accused infringer challenge a patent's validity before expert judges at much lower cost than court. But since 2025 the USPTO has used discretionary denials much more, and institution rates have dropped, making IPR a less reliable defence.
• India: the Delhi High Court's IP Division (since 2021) and commercial courts handle IP cases. Indian courts grant interim injunctions relatively quickly in clear trademark and passing-off cases. Patent revocation now goes to the High Courts after the IP Appellate Board was abolished in 2021.

Pre-suit steps are often mandatory. India's Commercial Courts Act s.12A requires preinstitution mediation for commercial disputes unless urgent interim relief is sought. English courts expect pre-action correspondence under the Practice Direction on PreAction Conduct, and can penalise parties who refuse reasonable offers to mediate.

Insurance and funding. IP defence and enforcement insurance exists in all three markets. A famous example is Octane Fitness, which used defence insurance to fight an NPE claim to the US Supreme Court rather than settle, and later recovered over $1.6 million in fees.

Litigation funders finance some patent enforcement for a share of recoveries, though funding is under growing disclosure requirements in US courts. Directors' and officers' insurance and general liability policies rarely cover IP claims fully; check the exclusions.

Trade secret and ex-employee disputes are common for deeptech. Claims that a founder or engineer took confidential information from a former employer are one of the most frequent early disputes. Clean onboarding (4.09) is the best defence.

3. The method#

Prevent#

• Clean ownership: founder, employee, contractor, advisor and JDA assignments (4.05, 4.09–4.11, 4.15).
• Freedom-to-operate checks on your core product before major launches or raises (2.06), and trademark clearance before naming (4.12).
• Records: dated lab notebooks, invention logs, version control. They prove who invented what and when.
• Onboarding hygiene: new hires confirm in writing they bring no former employer's confidential material.
• Contracts with dispute clauses: governing law, forum or arbitration, escalation to senior management and mediation first (4.14).
• Insurance: price IP defence cover once you have revenue or a product in a crowded patent field, and check it before signing large customer contracts with IP indemnities.

When a letter arrives: the first 10 days

1. Don't ignore it and don't reply on instinct. Acknowledge receipt politely if a deadline is short, saying you are reviewing it.
2. Preserve documents. Tell the team not to delete relevant emails, code or notebooks. Destroying evidence after a dispute is foreseeable is itself serious.
3. Don't discuss it in writing internally beyond what's needed; communications with your lawyer are privileged, internal Slack threads usually are not.
4. Read it for the basics: who is the sender (competitor, NPE, former employer, university)? What right is claimed (patent number, trademark registration, contract clause)? In which countries? What do they want (stop, licence fee, damages, assignment)? By when?
5. Brief a specialist in the right country. For a patent letter, the first questions are: is the patent valid, granted and in force where you operate; do you actually practise the claims; and what prior art exists?
6. Tell your investors and insurer if your agreements or policy require it. Notifying an insurer late can void cover.
7. Decide a strategy within a few weeks: ignore (only on advice, for weak NPE letters), negotiate a licence, design around, challenge validity, or contest.

Choose a resolution path#

Enforcing your own rights#

Before you send a letter, check: is your registration or patent solid? Can you prove infringement? What do you really want: the copying to stop, or a licence? In some countries an unjustified threat to sue for patent, trademark or design infringement can make you liable (the UK has a statutory unjustified threats regime; India's Patents Act s.106 and Trade Marks Act s.142 allow relief against groundless threats). Write carefully, usually through a lawyer, and start with the manufacturer or importer rather than their customers.

Worked example#

CoolGrid, a UK startup selling a phase-change thermal storage module, receives a letter from a US-based NPE claiming that its control software infringes a US patent, and offering a licence at $250,000.

1. Day 1–3. The CEO acknowledges the letter, says CoolGrid is reviewing it, issues a document hold notice, and notifies its insurer (it bought IP defence cover with a £1 million limit at seed).
2. Week 2. A US patent litigator reviews the patent. The relevant claims cover a specific temperature-forecasting method CoolGrid doesn't use, and there is strong prior art from a 2009 academic paper. US sales are only 10% of revenue.
3. Week 4. CoolGrid's counsel replies explaining non-infringement and pointing to the prior art, inviting the NPE to withdraw. Counsel advises that an IPR petition would cost about $300,000 and could be denied on discretionary grounds, so it is kept as a fallback.
4. Month 3. The NPE offers a $40,000 licence. CoolGrid's insurer and board compare: defending a suit through claim construction would likely cost far more (the AIPLA medians suggest around $600,000), mostly covered by insurance but with a large founder-time cost. CoolGrid counters at $15,000 for a worldwide licence and release, and settles at $20,000.
5. Lesson recorded: the insurance and a quick, specific technical response turned a $250,000 demand into a $20,000 settlement in three months.

4. Forums and country notes#

India specifics.

• Interim relief is central. Most IP disputes are effectively decided at the interim injunction stage. Be ready with evidence of use, registrations, and sales from the start.
• Disputes with former employers usually turn on confidentiality and IP assignment, because post-employment non-competes are void (4.09).

• Arbitration is common for commercial contracts. Choose a seat and an institution (MCIA, SIAC, ICC) in your contracts.

US specifics.

• NPE suits are common, especially in a few districts. Many NPE demands target small companies with nuisance-value offers. A rapid, technical response with prior art often reduces them sharply.
• ITC exclusion orders can stop imports of infringing hardware. Hardware startups manufacturing abroad should know this risk.
• Willful infringement can triple damages. Get a written opinion from counsel if you know of a relevant patent and decide to proceed.
• Fee shifting: after Octane Fitness (2014), courts award attorney fees in "exceptional" cases, which helps defendants facing weak claims.

UK specifics.

• IPEC is the startup's friend: capped damages and capped costs make enforcement and defence predictable. The small claims track within IPEC handles low-value trademark and copyright claims, up to £10,000.
• Unjustified threats rules protect you from aggressive letters and constrain your own. The UK is not in the UPC. A European patent in the UK is litigated separately.

UPC specifics.

• If you hold European patents, decide whether to opt them out of the UPC (possible during the transitional period) or use unitary effect. Opting in gives broad enforcement power, but also exposes the patent to central revocation.
• If you sell in Europe, a single UPC action can bring injunction risk across many countries at once. Watch competitors' filings.

Funding and insurance. Ask brokers about IP defence insurance and "after the event" (ATE) insurance for litigation costs. For enforcement against large infringers, specialist funders and contingency-fee firms may finance strong cases in exchange for a share of recoveries.

5. Scripts, mistakes, related playbooks, sources#

Scripts#

Holding reply to a demand letter:

"We acknowledge your letter of [date] concerning [patent or mark]. We are reviewing it with our advisers and will respond substantively by [date]. Nothing in this letter is an admission of any kind."

Document hold notice to the team:

"We've received a legal claim about [subject]. Please don't delete or alter any emails, files, code, notebooks or messages relating to [products, people, dates] until further notice. Please don't discuss the claim in writing except with [names] and our lawyers. If you have questions, ask me directly."

Briefing a litigator:

• "We're a [stage] company. We received [letter] from [sender]. Our product does [description] and we sell in [countries], with revenue of about [amount] there. We have [insurance or not]. We'd like your view on infringement and validity at a high level, the realistic cost and time of each option, and a recommended response, within [two] weeks, for a fixed fee if possible."

Proposing mediation:

"Before either of us spends heavily on this, we'd propose a one-day mediation with an experienced IP mediator within the next six weeks, costs shared. We think there's a commercial solution that works for both sides."

Common mistakes#

1. Ignoring a letter, especially one with a deadline or from a court.
2. Replying emotionally or admitting facts before taking advice.
3. Destroying or editing documents after a dispute is foreseeable.
4. Discussing the dispute in Slack or email, which may be disclosable.
5. Not telling the insurer in time.
6. Choosing the most expensive forum by default when IPEC, mediation or an opposition would do.
7. Sending aggressive threats that create unjustified-threats liability or a declaratory action against you.
8. Ignoring the UPC when selling in Europe.
9. Paying nuisance demands without checking, which can attract more.
10. Letting a dispute consume the founders: appoint one owner and set a budget.

Related playbooks#

• 2.05 Provisional filings and the PCT timeline
• 2.06 Freedom to operate: the basics
• 2.19 Patent landscape mapping
• 4.09 Employment contracts, NDAs and invention assignment
• 4.12 Trademarks and brand protection
• 4.14 Customer contracts: MSAs, SOWs and pilot agreements
• 4.15 Joint development agreements and who owns co-developed IP
• 4.17 Choosing and paying lawyers at an early stage

Sources#

• AIPLA, 2025 Report of the Economic Survey , as summarised by IPWatchdog (October 2026).
• Persuit data via Sterne Kessler on 2026 litigation and IPR institution trends.
• Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014).
• UPC: EIP on three years of filings (July 2026); ip fray on 13-month average for infringement actions; Lewis Silkin on court fees; IPWatchdog on outcomes and settlement rates.
• UK: Civil Procedure Rules Part 63 (IPEC); Intellectual Property (Unjustified Threats) Act 2017; Practice Direction – Pre-Action Conduct.
• India: Commercial Courts Act 2015 s.12A; Delhi High Court Intellectual Property Division Rules 2022; Patents Act 1970 ss.25, 64, 106; Trade Marks Act 1999 s.142; Tribunals Reforms Act 2021 (abolition of the IPAB).