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30% ROI Anyone? (5) – Principal + 30% ROI Within 12 Months?
Continuing from the last post, today we will discuss the general timeline for each case from start to finish and what happens at each stage. Understanding this will clarify how they can achieve a principal plus 20-30% ROI within 12-18 months.
The first critical step for a case that passes initial screening, and a very important one, is claim construction. Once this process is completed, the lawyers will have a good understanding of whether the case should go to trial and the approximate range of damages. If it is decided to go to trial, a third-party valuation report will be provided to further support the reasonable range of damages, and this evidence will be submitted to the court together. This forms the basis for a series of subsequent actions. This step can take anywhere from a few months to a year and typically costs over $500,000 at a standard law firm. However, since they handle it internally, the cost base at this step is much lower.
Once the claim construction step is almost complete, the next step is to send the claim to all defendants. Remember how I mentioned that each case must have multiple defendants to proceed? At this stage, nearly identical materials are sent to each corporate defendant, and some cases can involve all the big tech companies at once, such as Meta, Amazon, Alphabet etc.
This step is usually completed within a few months. Next, it is highly likely that the defendant companies, after internal review, will respond and begin settlement discussions.
Why settle? Because the internal process of a large company typically involves the in-house legal team and the company’s external law firm reviewing the claim. They quickly realize that fighting the case all the way to the end would cost at least seven figures, whereas settling for a low six-figure amount can resolve the issue immediately. With the constant influx of various lawsuits, they are naturally overwhelmed. Therefore, they prefer to settle when possible, focusing their main resources on more critical cases, such as antitrust lawsuits filed by governments. As for the frequent claims from patent owners, small companies, or small law firms, the intention is clear: if the settlement amount is appropriate, the problem goes away.
I’m curious, is there data to support this?
They say that there is published data showing that the settlement rate for all cases in the U.S. is as high as 97%! This means that very few cases go to trial, and the vast majority are resolved out of court. Their own cases have a settlement rate of over 75%.
So, do you see the core strategy here?
The key is to settle many cases for small compensation amounts rather than winning lawsuits!
I completely believe in this. After all, in the many years of funding legal lending, the settlement rate for car insurance companies is almost 99.99%. Lawyers make their big money from settlements, not from going to trial!
What is the typical settlement amount per case?
They say it generally starts at around $100,000 and can go up to several hundred thousand. By securing multiple settlements of around $100,000 each, they can achieve a principal plus 20-30% return within 12 months, even with some defendants not settling. Moreover, there is still extra profit after distributing the principal and the first year’s return.
What happens to the extra money?
This is another interesting point. By this time, about a year has passed, and they have likely secured several settlements. They use these settlements to approach the defendants who haven’t settled yet, telling them that their competitors have already settled. They imply that if the remaining defendants don’t pay up, they will be the only ones going to trial. Given that the settlement amount is not much, why make things difficult for each other? At this stage, more defendants are likely to settle. After this, since the principal and the first year’s return are already in hand, they can start assessing whether to go for a trial which can potentially bring 100%-300% return.
What does that mean? We’ll discuss that next time.