Funding for Patent Disputes Remains Attractive Despite Criticism Around Disclosure

Patent disputes remain a top target area for litigation funders, and continue to attract a significant portion of all third-party litigation funding. Whilst this has not come without fierce critiques of the practice surrounding disclosure and frivolous lawsuits, industry insiders maintain that the future for patent litigation funding remains bright in the face of this increasing scrutiny.

In an article by World IP Review, leaders from both commercial funders and law firms voiced their confidence over the current state of litigation finance for intellectual property lawsuits. Validity Finance’s director of patent investments, Michelle Eber, emphasized that Validity is dedicating around a quarter of its investments to patent litigation, and with demand for funding being so high, “we’re seeing more competition, and more funders, coming into the space.”

Richard Rochford, partner at Haynes Boone, sees the use of third-party funding growing in popularity and suggested that it is a particularly useful tool for midsize businesses that are suffering from patent infringement, but lack the resources to pursue claims. Whilst disclosure remains a hot button topic for third-party funding in these disputes, Rochford argues that disclosure can be beneficial for certain plaintiffs who can demonstrate they have the resources to take on the case and “are determined to try and have their rights vindicated.”

Eber offers the more sceptical position that disclosure can be used as an unwarranted distraction from the merits of the case, but acknowledges that if increased disclosure requirements are mandated, then funders will simply have to adapt their approach to the practice. Regarding the accusations of funders investing in ‘troll’ patent lawsuits, Eber argues that funders are not interested in frivolous claims and with their focus on gaining a return on investment, what really matters is “a strong invention story, and that means strong patents.”