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Casting a Worldwide Net: How Litigation Funders Can Leverage Europe’s New Unified Patent Court

By John Freund |

The following article was contributed by Lionel Martin (Partner, August Debouzy), Pierre-Olivier Ally (Counsel, August Debouzy), Ben Quarmby (Partner, MoloLamken LLP) and Jonathan E. Barbee (Counsel, MoloLamken LLP). 

Europe’s Unified Patent Court (UPC) is on the cusp of launch, confirmed for this June 1, 2023.  It has been eagerly anticipated by the patent litigation community across the member states—starting with 17 European countries, but expected to extend rapidly to all of Europe minus Poland, Spain, Croatia, and, most notably, the UK.

The UPC has been long in the making: over ten years have passed since the agreement was first signed.  What is to be expected of this new court, and what opportunities does it present for litigation funders?

Uniformity and Scale.  The principal goal of the UPC is to offer a single, consistent, and coherent court system in Europe for the litigation of patents.  Historically, procedural differences in the member states’ national patent and court systems meant that the timeline of patent litigation could vary wildly from one jurisdiction to the next.  The jurisdictions also differed on substance: infringement, validity, and injunctive relief rulings were not consistently applied across the board.  And the one way in which the national jurisdictions were similar—comparatively low damages models—acted as further disincentive for patent owners looking to enforce their rights.

The UPC promises to overhaul that system entirely.  It is expected to issue speedy judgments on both infringement and validity.  It should set the scene for damages verdicts that are not only more consistent across jurisdictions, but also generally much greater in size—as one would expect for verdicts covering at least 17 member states.  And it promises greater accessibility and uniformity insofar as English will be the preeminent language of infringement proceedings in any matter involving allegations of infringement extending beyond a single member state.

The UPC must now live up to that promise, and there is some uncertainty as to how the system will play out in its early stages.  Will the court be able to keep up the expected pace?   What standards will the court rely on when imposing preliminary injunctions?  How will damages awards be limited or expanded?  How will the appellate process work?  How will early litigants help shape the law and jurisprudence of the UPC?

Those questions and many more will have to be answered in the coming months and years.  But if the UPC delivers on even part of its promised mandate, it may represent an exciting new arena for litigation funders working with patent owners to enforce their rights.  Indeed, there is reason to believe that the court will strive to be patentee-friendly—at least at the outset—in order to attract its “customers”.

Opportunities for Litigation Funding.  Many of the key features of the UPC as currently contemplated, align neatly with the incentives and priorities of litigation funders and patent owners.

  • Broader Geographic Reach. The UPC makes multi-jurisdictional patent campaigns cost-effective and efficient by allowing plaintiffs to target infringement across at least seventeen countries in one court proceeding.  Plaintiffs no longer need to pick and choose the countries in which to enforce their patents.  The reach of the UPC is likely to expand further: the UPC is expected to be integrated into European mutual recognition mechanisms that will allow the UPC’s jurisdiction to extend not only to the EU but also to Switzerland, Norway, and the UK.  While these mutual recognition mechanisms have long existed, national courts have historically been reluctant to rely on them.  The UPC, by contrast, is expected to do so much more regularly.
  • Reduced Transaction Costs. Reliance on a single proceeding across multiple countries will cut down on the costs of litigating in multiple European countries in parallel.  The UPC will therefore dramatically reduce the resources necessary to launch and maintain a multi-jurisdictional campaign in the EU.  The UPC will also cut down on the logistics and transactional costs associated with such campaigns.  A plaintiff, for example, no longer needs to hire three separate teams to enforce patents in, for instance, France, Germany, and Italy, and pay additional fees for those three teams to coordinate to ensure coherence across jurisdictions.
  • Short Time to Trial. UPC proceedings will expedite the pace of patent campaigns.  Some commentators suggest that proceedings will only take 12-15 months from complaint to final ruling—a significant boon for patent owners looking to promptly and efficiently enforce their rights.  If this holds true, and if sustainable, this pace would rival the speed of some of the fastest dockets among U.S. district courts.
  • Efficient Evidence Gathering Procedures. Unlike the U.S., there is no formal discovery in the UPC, which significantly reduces litigation costs and can expedite proceedings.  But the UPC offers several key features that will be of value to patent owners: (i) plaintiffs may move to seize evidence of infringement from a defendant’s premises, and (ii) they may obtain court orders to force defendants to produce documents.
  • Larger Damages Awards. Since UPC judgments will cover more countries and consumers, the potential damages awards should be considerably larger than they would be in a single jurisdiction.  This should help drive up the value of settlements, and put more pressure on defendants to settle earlier.  It also radically tips the scale on the economics of patent litigation funding in the EU.  Suddenly, the EU becomes an attractive venue in-and-of-itself for funders—not just an ancillary venue in support of higher-stakes U.S. litigation.
  • Broad Injunctive Relief. The UPC will allow patent holders to seek injunctive relief across multiple countries in one shot.  This too should help drive bigger and earlier settlements—a boon for funders looking for a rapid return on their investment. 
  • High-Quality Decisions. It is expected that the Court will render first-rate decisions for two principal reasons: (i) it has attracted seasoned IP judges from across Europe, and (ii) the judges consist of a mix of legally and technically qualified judges.  Furthermore, due to the high specialization of the Court, the number of judges will be quite limited (<100), which may help contribute to greater respect for precedent from fellow judges, which in turn leads to greater predictability for litigants.

Will the UPC be able to deliver on all of these fronts?  Only time will tell.  But for a savvy funder looking for an early mover advantage in a relatively underdeveloped market, and with the opportunity to potentially help shape early UPC jurisprudence in ways that will benefit patent owners for years to come, these are exciting times indeed . . . .

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Commercial Regulatory Issues

Legislation to ensure the enforceability of LFAs is progressing smoothly through Parliament

By John Freund |

The following is a contributed piece by Tom Webster, Chief Commercial Officer at Sentry Funding.

So far, the Litigation Funding Agreements (Enforceability) Bill has been passing through Parliament without a hitch.

The government is bringing the legislation in response to the Supreme Court’s decision last summer in PACCAR Inc & Ors v Competition Appeal Tribunal & Ors [2023] UKSC 28, which called into question the enforceability of LFAs.

The Bill was briefly introduced into the House of Lords on 19 March, and was debated at second reading on 15 April. During the debate, while some peers discussed the need for regulation of the litigation funding industry and for careful consideration of whether the retrospective nature of the legislation was justified, no peers opposed the Bill – and many welcomed it.

More recently, during scrutiny at grand committee on 29 April, the relatively small number of peers who attended the session broadly supported the Bill, and several spoke in favour of the need for its provisions to be retrospective.

In terms of the Bill’s drafting, the government proposed some small changes at committee stage, which were waved through by peers. The most significant was to address a potential problem with the original drafting where the LFA relates to the payment of costs rather than funding the provision of advocacy or litigation services.

The problem was that, in the original wording, it could be argued that the Bill only applied to the funding of costs that relate to court proceedings, but not those relating to arbitration, or settlements. This has now been resolved by new wording to make clear that an LFA may relate to the payment of costs following court, tribunal or arbitration proceedings, or as part of a settlement. An LFA may also relate to the provision of advocacy or litigation services.

Meanwhile another government amendment was aimed at avoiding problems for litigants-in-person, by ensuring that the definition of LFAs in the Bill includes agreements to fund the expenses of LiPs, for example where they need to pay for an expert’s report.

During grand committee, peers also expressed their approval of the broad terms of reference that have now been published by the Civil Justice Council for its review of litigation funding, which will include an examination of whether the sector should be regulated; and if so, how. Peers commended the speedy timescale that the CJC has set itself, aiming to produce an interim report by the summer, and a full report by summer 2025.

As the Litigation Funding Agreements (Enforceability) Bill continues its journey through Parliament and the CJC begins work on its review, there are clearly significant changes on the way for the litigation funding sector in the UK.

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Commercial Regulatory Issues

Rowles-Davies: Retrospective Provision in Litigation Funding Bill is ‘Fundamentally Flawed’

By John Freund |

In an article shared on LinkedIn, Nick Rowles-Davies, founder and CEO of Lexolent, makes the case against the retrospective aspect of the UK government’s Litigation Funding Agreements (Enforceability) Bill. Whilst acknowledging that many within the industry disagree with his position, Rowles-Davies argues that ‘the Bill should be prospective only and that the retrospective element is fundamentally flawed.’

Rowles-Davies summarizes his extensive article into the following key points:

  1. ‘The starting point for any consideration of the Bill must be firstly to correct the various inaccurate Supporting Documents (to the Bill) such that the law as it stands, and has always stood, is properly reflected. 
  2. The Government has put forward no credible justification to support the retrospective provision in the Bill.
  3. When considered under the true set of facts, this legislation appears to be incompatible with the ECHR. 
  4. The justification for the Bill’s prospective elements and its (arguably unprecedented) retrospective aspect must be considered separately. The Supporting Documents grossly misrepresent the position. Save for pure value transfers from previously funded parties to existing funders, what the Bill properly seeks to achieve can be accomplished through prospective only legislation. 
  5. If retrospectivity survives, it is likely that the matter will come before the courts quickly thereafter in relation to the ECHR.’

Rowles-Davies argues in the article that ‘the Supporting Documents to the LFA Bill provide absolutely no evidence of legal precedent to support the retrospective aspect of the Bill.” He goes on to say that not only is this bill ‘unprecedented’, but it also fails to provide ‘credible “public interest” justification for the retrospective aspect.’ 

In the conclusion of the article, Rowles-Davies calls on both chambers of Parliament to ‘take proper time to explore the foundation upon which the Bill rests and then test its contents after it has been repaired.’ Furthermore, he argues that ‘the positioning of the Bill is disrespectful to a busy Parliament tasked with addressing far more pressing global, social, and public interest matters.’

Commercial Regulatory Issues

Bills Targeting Litigation Finance Disclosure and Foreign Funders Make Progress in Louisiana

By John Freund |

Reporting by Bloomberg Law covers the campaign to introduce new rules governing litigation funding in the state of Louisiana, with proponents of the legislation sensing an opportunity to make progress since the state elected a new governor, Jeff Landry. The two bills making their way through the Legislature are: HB336, which would create a Litigation Financing Disclosure Act, and SB355, which would enact ‘transparency and limitations on foreign third-party litigation funding’. 

In an interview with Bloomberg, Representative Emily Chenevert ,who brought HB336, explained that the turnover in elected representatives provided a fresh opportunity, saying: “The appetite was there already within the legislature and so now it’s like, let’s attempt this and let’s see with a new House and some new senators what could happen.” Dai Wai Chin Feman, managing director at funder Parabellum Capital, spoke out in opposition to Chenevert’s bill but said that SB355 was “acceptable to our industry.”

HB336 would require any party in a civil action to disclose the existence of a litigation financing agreement, whilst redacting the financial details of the agreement, and would make all financing arrangements ‘permissible subjects of discovery’. The bill also prohibits funders from controlling or making any decisions in the proceedings, stating that ‘The right to make these decisions remains solely with the plaintiff and the plaintiff's attorney in the civil proceeding.’

SB355 requires any foreign litigation funder involved in a civil action in Louisiana to disclose its details to the state’s attorney general (AG), and to provide the AG with a copy of the funding agreement. Similarly to HB336, this bill would prohibit the foreign funder from controlling the legal action in any way and also prohibits the funder from being ‘assigned rights in a civil action for which the litigation funder has provided funding’.

HB336 has been approved by the state House and was referred to the Senate Judiciary Committee, whilst SB355 has cleared the majority of procedural hurdles and now awaits a vote by the House.