In the case of WAG Acquisition, LLC v. Multi Media LLC, Civil Action No. 2-14-cv-02340, a New Jersey court has reaffirmed that the pursuit of litigation funding by a plaintiff – in this case a partnership with Woodsford Litigation Funding – does not harm standing.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
In the case of WAG Acquisition, LLC v. Multi Media LLC, Civil Action No. 2-14-cv-02340, a New Jersey court has reaffirmed that the pursuit of litigation funding by a plaintiff – in this case a partnership with Woodsford Litigation Funding – does not harm standing.
As reported in Nat Law Review, WAG Acquisition owns a pair of patents related to streaming media buffering systems, which it sought to enforce in a series of 10 disputes against various adult website operators. Several defendants sought to remove WAG’s standing given the litigation funding agreement with Woodsford.
The funding agreement gave Woodsford right of first refusal on any potential claim, but allowed WAG to pursue any claim which Woodsford refused fund. Only WAG could initiate a claim, yet Woodsford maintained the right to reject any settlement offer. Should WAG and Woodsford disagree on whether or not to settle, a third party expert would be entrusted to make a binding decision.
Woodsford is entitled to less than 50% of any damages claim, though it maintains first payout. And should WAG default, the patents themselves are transferred to Woodsford.
Based on these terms, the defendants argued that the funding agreement transferred significant rights to Woodsford – so much so, that WAG lacked standing to enforce its patents. They argued that Woodsford essentially controlled the litigation, and that Woodsford’s involvement necessitated negotiation with a non-party entity – one that had ownership rights in the patents no less, given that they’d be transferred to Woodsford should WAG default.
However the court rejected those claims, on the basis that Woodsford cannot compel WAG to settle (Woodsford can only reject a settlement offer, and prompt a third party’s binding decision). Additionally, Woodford’s interest in WAG’s patents do not amount to ownership, only a security on its investment.
The court’s decision reaffirms a plaintiff’s standing with respect to seeking a funding agreement – even one with some (arguably) onerous terms.
