Former US Senator Calls for Mandatory Funding Disclosure in Patent Lawsuits

Criticisms of third-party litigation funding of patent disputes have focused on the perceived lack of transparency and oversight, with the U.S. Chamber of Commerce going so far as to suggest that this represents a threat to national security. These calls for a crackdown on litigation finance in patent lawsuits have found a warm reception in some corners, with a former US Senator from Vermont being the latest high-profile political figure to come out in support of the proposed reforms.

Writing in an op-ed in Bloomberg Law, former US Senator Patrick Leahy echoes the Chamber of Commerce’s warnings that third-party funding is a tool for America’s competitors to undermine economic and national security. Leahy argues that ‘as more than half of US patents are issued to foreign entities’, there is a broader concern about the lack of transparency regarding patent ownership, with litigation funders offering the potential for ‘foreign competitors to advance their strategic interests’.

Whilst Leahy acknowledges that ‘third-party litigation funding is not always problematic’ and can provide access to justice for those who cannot afford it, he maintains that there is an issue if ‘funders are able to influence litigation without revealing themselves’. Leahy highlights recent events including the patent lawsuits in Delaware that saw the court order disclosure around funding, and the ongoing dispute between Burford and Sysco, as examples of the dangers litigation funding poses.

Leahy argues against creating complex legislation to regulate litigation funding, and instead argues for a straightforward approach that mandates the disclosure of any third-party funding in all patent lawsuits. Leah concludes by stating that such a requirement ‘poses no threat to good-faith actors, but will expose litigation investors that are weaponizing the US legal system’.