Litigation Finance Turns Justice into a Financial Asset

We’re all familiar with the phrase ‘equal justice under the law.’ Yet some would say the accuracy of that statement is debatable. Meanwhile, litigation funding, a practice developed specifically to increase access to justice, is sometimes painted as a way of exploiting lawsuits for financial gain.

The Hill details that so-called ‘patent trolls’ develop IP or patent lawsuits with no intention of taking them to court. This could leave a damaging impact on small businesses that must spend limited resources fighting the accusation. The Litigation Finance industry has been accused of increasing its investment in so-called patent trolls—especially since patent lawsuits have become a popular case type for funders and investors. Those who oppose funded patent cases make much of Litigation Finance investors being hedge funds and private equity firms.

Steps to curb third-party legal funding for patent cases have been introduced. The Pride in Patent Ownership Act would require disclosure of the identities of patent owners. The thinking is that this transparency would discourage funders from bankrolling patent cases. The bill is supported by Democrat Patrick Leahy and Republican Thom Tillis.

Also under fire is the NHK-Fintiv rule, which states that a Patent Trial and Appeal Board review is denied if a case is already underway. This would send a message that the validity of the patent is uncertain—otherwise, PTAB could have made a ruling on the merits of the case.

Those who oppose funding patent litigation claim that the current system “punishes” innovators by forcing them to prove that their innovations aren’t based on, or utilize existing patents. Some even assert that third-party legal funders are “twisting” existing patent law—generating a profit for investors by taking it from business owners and product developers. The word “extortion” has even been used to describe funder involvement in patent cases.