The award is not the recovery: managing appeal risk after a large patent verdict
A jury in the Eastern District of Texas recently returned a $190 million award in a patent infringement claim brought by Aspen Networks against Verizon Wireless. The defendant has said it will pursue post-trial motions and an appeal. That combination, a substantial award followed immediately by an announced appeal, is the point at which our phone tends to ring. It is also the point at which the most common misconception in this area becomes expensive. The figure reported in the press is not cash. Until the post-trial and appellate process concludes, its value remains at risk.
What sits between a verdict and a recovery
What sits between a verdict and a recovery is well understood in outline and frequently underestimated in practice. Post-trial motions may reduce the award or set it aside. An appeal may reverse liability outright, or leave liability intact while vacating the damages award and remanding the case for a new trial on damages, which is a materially different outcome for a claimant and often a poorly modelled one. Where enforcement is contested, collection carries its own cost and delay. Each stage consumes time, and time has a price for any claimant that needs to make commercial decisions before the process concludes.
The product, and the state of the market
Judgment preservation insurance is the product designed to address that exposure. In outline, it protects an agreed amount of the award against specified reductions or reversals during the post-trial and appellate process. Subject to the policy terms, it can convert a binary appellate exposure into an outcome with an insured floor.
The important qualification concerns the state of that market. Following a series of high-profile appellate reversals, including the Fifth Circuit’s reversal in April 2024 of the $1.6 billion judgment obtained by BMC Software against IBM, a number of insurers reassessed the class and several withdrew from it. Capacity contracted, pricing rose and attachment points moved.
In our experience, the proportion of an award that can realistically be insured today is materially lower than it was in 2023. Claimants working from a benchmark set in that period, or from what a comparable matter achieved then, are usually working from an outdated one.
We make that point not to discourage anyone from approaching the market. Cover still exists, it remains worth exploring, and on the right facts it is valuable. It is simply more accurate now to treat judgment preservation insurance as typically protecting part of an award rather than most of it, and to build the claimant’s position on that basis. Our team at TheJudge can usually provide an initial view at an early stage, before any formal submission is prepared, on whether a matter is likely to attract underwriter interest, on the range of cover that may realistically be available, and on whether the exercise is worth pursuing at all. An early indication of that kind is generally more useful than a broad impression of market conditions.
Preparation has become correspondingly more important. Underwriters still active in this class are markedly more selective. They expect a specific analysis of appellate risk rather than an account of the size of the verdict: the standard of review applicable to each contested issue, how the trial record reads on those issues, the realistic prospect of a remand on damages as distinct from outright reversal, and the claimant’s position in that event. Claimants who involve appellate counsel early are generally better placed to secure meaningful terms and to form a realistic view of what is achievable.
Monetisation as an alternative
There is a second route that is often overlooked. Rather than insuring an award, a claimant may be able to monetise part of it, taking capital now against a judgment that remains subject to appeal. That transfers a share of the appellate risk to a funder and provides certainty of a different kind. Our affiliate Erso Capital considers structures of this sort regularly. It is not inexpensive, and it will be priced for the same risk that makes insurance expensive, but for a claimant that requires liquidity before the appellate process concludes it can be the more workable option. The two are not mutually exclusive, and insurance is sometimes used to support a monetisation rather than to replace it.
A related point applies wherever the same patent is asserted against more than one defendant. Those exposures are correlated. An adverse appellate ruling on validity or claim construction can affect several matters at once. Risk of that kind is frequently mispriced when each action is assessed in isolation, and it can sometimes be addressed more efficiently at portfolio level.
Timing
Timing runs through all of this. The most useful moment to examine the options is usually shortly after a verdict, once the trial record can be assessed but before post-trial and appellate positions have fully hardened.
At TheJudge, our role is to present an award to the market in terms an underwriter can price, to identify the capacity that remains, and to say plainly when the available cover does not justify the premium. That last conversation occurs considerably more often than it did three years ago.
KEY CONTACTS
James Blick, Director (USA)
Robert Warner, Director (UK)