Patent litigation has become all too common, especially in industries where technology and intellectual property (IP) are at the forefront. From industrial-grade innovators like Apple and Moderna to individuals, many have to face the consequences of IP infringement. And the high costs and complexities of patent prosecution and litigation often make it difficult for smaller companies or business owners to assert their IP rights, especially when they’re up against large corporations with extensive legal resources.
This is where legal finance or litigation funding comes in, offering support to those who face financial barriers during IP rights disputes.
In this blog, we will understand what legal finance is and how it helps in the patent litigation landscape, empowering inventors to fight for their patent rights.
Key Takeaways
- Legal finance or litigation funding in IP is when third-party investors or companies fund the litigation process.
- Patent litigation is one of the most common IP disputes, especially in the highly evolving tech sector.
The funding can be very beneficial to small businesses and patent holders in fending for their innovation rights.
Legal financing or litigation funding in IP is a process where companies or investors provide financial support to cover IP litigation costs. The IP litigation process is quite lengthy and resource-consuming. The average cost of patent litigation is nearly $3.5 million and IP infringement lawyers can thoroughly guide you through it.
According to the July 2024 patent disputes report published by Unified Patents, the District Court filings have seen a significant rise of 8.6% in the first half of 2024 compared to last year. The re-examination requests have also witnessed a staggering increase of 100%, doubling from 2023 to 2024 (during the first half of both years).
On the other hand, petition filings for the Patent Trial and Appeal Board (PTAB) have remained quite stable.
There are different types of litigation funding (with T&C applying):
- Third-party litigation funding
- Conditional fee agreement
- Non-recourse funding
- Private funding
- Loans and insurance
- Damages-based agreements
As we all know, if you – the inventor – hold patent rights, you can file a patent infringement case against the infringer in federal court to defend your patent rights and secure proper value for the IP. The lawsuit is filed only after initial negotiations (patent licensing agreement or cease-and-desist letter) are ignored by the infringer.
By securing funds, you can worry less about litigation expenses and pursue proper legal actions. But securing such legal finance for patent litigation is not an easy task, and it depends on various factors like:
- Due diligence
- The patented product and its specifications
- The products’ value and commercialization scope
- Nature of infringement and damages
- Company’s profile and reputation
- Total secured IP rights (so far, if any)
- To explain with a simple example, let’s consider the 2023 patent infringement dispute between two famous medical tech companies – Colibri Heart Valve LLC vs. Medtronic CoreValve LLC. In 2019, Colibri filed a lawsuit against Medtronic, alleging that they infringed upon two of their patents. With the legal finance aid from Burford Capital, Colibri was able to fight against Medtronic and win $106+ million in damages during the verdict last year.
Impact of Legal Finance on Patent Litigation
There are several impacts of acquiring litigation funding:
- The legal finance services enable many small businesses and startups to file for patent litigation against well-established companies.
- Proper funding opens a door for justice against patent infringement and infringers, giving the owner a fair chance to fight for their rights legally.
- Third-party litigation funding offers guaranteed partial payouts from funders even if the defendant wins. This means that the smaller firms can hire expert legal teams and improve the quality of their patent litigation.
You can also turn to IP consulting firms that focus on IP asset valuation and patent monetization.
One leading firm is Lumenci. With a team of 100+ experts in technical, valuation, and damages domains, Lumenci is pretty much the most popular go-to in patent litigation processes.
Advantages of Patent Litigation Funding
Some benefits of patent litigation funding for the owners and businesses are:
- It provides steady capital: The funding allows patent holders to cover legal expenses and compete against strong defendants, especially in the tech sectors.
- It preserves business resources: It allows businesses to focus on growth while pursuing strong legal actions against their infringers.
- It reduces risks: The legal finance approach minimizes financial risks for claimants with non-recourse funding.
- It supports law firms: The funding for patent defense eases the burden of contingency cases.
Drawbacks in Patent Litigation Funding
- Legal financiers may have a bias or a conflict of interest. They may favor cases with high payout potential, which could be unfair to the patent holder.
- There’s a risk of funders and attorneys (sometimes) exploiting and sidelining the plaintiff’s interests in favor of earning profits, and this may hugely impact the lawsuit.
- Some legal finance for patent litigation also comes from foreign sources, raising concerns about potential impacts on the U.S. legal system and patent law.
The Future Outlook
The future of IP litigation funding will be (and is already being) driven by AI and other emerging technologies. AI’s ability to streamline due diligence, improve decision-making, identify potential risks, and assess claim viability offers insights for funders, law firms, and patent holders.
As legal finance becomes more accessible in the IP industry, it is likely to see continuous growth, with investors backing legal claims to protect innovations. But as tech plays a crucial role today, it is equally essential to address ethical and practical challenges to uphold the interests of justice and fair trials.
IP, especially patent litigation, can be an overwhelming experience, and this is why firms like Lumenci are extending their support to navigate the legal complexities surrounding IP rights. Reach out to get started.
About Lumenci
Lumenci’s global presence with offices in the US and India brings together over a hundred experts in technical and damage-valuation fields to offer comprehensive solutions to protect intellectual property worldwide. With a proven history of success in over 300+ IP litigations, 70K+ patent analyses and 175+ clients, Lumenci’s expert team is dedicated to safeguarding your innovations. The in-depth industry knowledge, combined with advanced automation technologies, ensures that all your legalities are taken care of, under one roof.
Visit us at lumenci.com to learn more or connect with us on LinkedIn and X for the latest updates. Let Lumenci be your trusted partner in defending and securing your ideas.
