How Boards Should View IP Litigation Risk

Introduction – When Litigation Shapes Strategy

Patent disputes are no longer rare, occasional events — they are part of the competitive playbook in telecoms and technology markets. The Apple–Qualcomm battle disrupted iPhone shipments. Ericsson and Apple fought multiple injunction battles across continents before reaching a settlement. Huawei and ZTE have faced cross-border lawsuits that impacted network rollouts.

For boards, the lesson is clear: IP litigation is now a strategic risk with operational, financial, and reputational implications. The cost of ignoring it can be catastrophic — injunctions can shut down sales in major markets, court-ordered royalties can run into billions, and share prices can swing dramatically based on litigation outcomes.

This blog examines the IP litigation landscape, identifies where risks are emerging, and sets out a governance framework for boards to manage this risk proactively — and even turn it into competitive advantage.

1. The Litigation Landscape – A Global View

Key Jurisdictions

Patent litigation is highly international. Boards must understand the venues where disputes are most impactful:

• US ITC (International Trade Commission): Offers exclusion orders that can block imports of infringing devices — a powerful tool often used in handset disputes.

• UK & Germany: Popular European venues for SEP litigation, offering relatively fast injunctions and high enforceability.

• China: Increasingly a venue of choice for global FRAND determinations. Chinese courts have been willing to set lower royalty rates than Western courts.

• India & Brazil: Rising markets where local courts are becoming more assertive in granting injunctions, especially for network infrastructure cases.

Types of Cases

• FRAND Disputes: Disagreement over “fair, reasonable, and non-discriminatory” rates.

• Infringement Claims: Direct suits against implementers to secure payment or stop sales.

• Anti-Suit Injunctions: Jurisdictional battles where one court orders a party not to litigate elsewhere.

2. Risk Heatmap – Where Boards Should Focus

Boards should map IP litigation risk across the value chain:

• Chipsets: High concentration of IP ownership, particularly by Qualcomm and ARM. Litigation risk is high but often resolved via cross-licensing.

• Infrastructure: SEP litigation can delay network rollouts, particularly if injunctions are granted. Vendor selection must consider IP indemnification.

• Devices: The most exposed category due to high volume and global distribution. A single injunction can halt sales in a country or region.

• IoT & Automotive: Emerging area where pools like Avanci are setting baseline rates — disputes may rise as more implementers enter.

Overlaying geopolitical risk is essential. In times of trade tension, IP litigation can become an economic weapon — for instance, China’s use of anti-suit injunctions to protect domestic manufacturers.

3. Financial Impact – The Board’s Line of Sight

IP litigation can move the numbers in a way few other risks can:

• Direct Cost: Legal fees for multi-jurisdictional disputes can run $50–100M per case.

• Indirect Cost: Lost sales due to injunctions, delayed product launches, or forced redesigns.

• Settlement Payments: Apple’s settlement with Qualcomm was reported at $4.5–$6B upfront plus ongoing royalties.

• Market Perception: Share price volatility based on litigation outcomes can destroy shareholder value.

Boards must require that litigation exposure is included in risk-adjusted financial forecasts and that contingency reserves are in place for adverse rulings.

4. Governance – Building a Board Oversight Framework

Boards need to bring IP risk into the enterprise risk management (ERM) process and establish governance that keeps directors informed.

Key Elements of a Governance Framework:

• IP Risk Dashboard: Regular updates on litigation, licensing negotiations, and exposure by geography.

• Thresholds & Triggers: Define when board notification or approval is required (e.g., litigation above a certain financial exposure).

• Board Competence: Ensure at least one director (or advisor) has IP expertise or legal strategy experience.

• Scenario Planning: Run “war games” for worst-case litigation outcomes, including injunction scenarios.

5. Litigation Strategy – Defensive and Offensive

Defensive Strategy

• Indemnification Clauses: Ensure vendor contracts include IP indemnity provisions.

• Portfolio Audits: Regularly review your own patent holdings and exposure to infringement claims.

• Early Settlement Analysis: Weigh litigation costs versus early resolution to reduce uncertainty.

Offensive Strategy

Boards should not be afraid to use IP litigation as a competitive lever:

• Assertion Campaigns: Assert patents to block competitors’ products or drive cross-licensing deals.

• Portfolio Monetisation: Sell or license dormant patents to generate cash.

• Strategic Acquisition: Acquire distressed IP portfolios to strengthen negotiating position.

6. Case Studies – Lessons from the Field

• Ericsson vs. Apple (2022): Multi-jurisdiction dispute over 5G SEPs. Ericsson obtained injunctions in Brazil and India, forcing Apple back to the negotiating table.

• Nokia vs. Oppo (2021–2023): Nokia secured injunctions in Germany, leading Oppo to temporarily suspend sales.

• InterDigital vs. Xiaomi: Chinese courts set a global FRAND rate, creating a precedent that may shift bargaining power towards Chinese implementers.

For boards, these examples show that litigation outcomes are not just legal footnotes — they can change market share and revenue trajectories.

7. Reputation and Stakeholder Considerations

Boards must also weigh public and regulatory perception. Aggressive litigation can trigger antitrust scrutiny or damage relationships with key partners. Conversely, a reputation for strong IP defence can deter opportunistic litigation from competitors or non-practising entities (NPEs).

Board “So-What” – Integrate IP into Strategy

Patent litigation is no longer a back-office issue; it is a boardroom issue.

Recommended Board Actions:

• Add IP risk as a standing agenda item at risk or audit committees.

• Require quarterly litigation and licensing updates.

• Ensure the CFO and General Counsel collaborate on litigation provisioning and scenario modelling.

• Treat IP as a strategic asset — integrate it into M&A planning, capital allocation, and competitive strategy.

Handled strategically, IP litigation can be a value-creation lever rather than just a cost sink. The companies that master this will turn legal disputes into bargaining power and competitive advantage.

“IP litigation is no longer just a legal expense — it’s a competitive weapon.”