Intellectual Property Cases and Litigation Finance

Intellectual property is becoming one of the most active areas of litigation finance for a few reasons.  In particular, trade secret misappropriation cases are a good fit for litigation finance.  Many trade secret cases arise from startup companies and are company-endangering situations.  Meaning that these are high stakes situations for small companies that usually do not have extensive legal budgets.  These types of cases often present themselves in the way of an extremely large and wealthy company against a smaller, less wealthy organization.

This is the case with the current court case in the Northern District of California, where Space Data is alleging that Google used confidential information and infringed on three of the company’s patents.  While it recently came out that Space Data is not using third-party litigation financing in this particular case.  This would be the type of trade secret or intellectual property case for third-party financiers to get involved in.

In cases like Space Data where there is a noticeable difference in size and resources between the two companies, the use of alternative litigation funding helps serve a primary purpose of leveling the playing field and allowing the smaller organization to continue the litigation longer than they probably would be able to on their own.  Third-party money would allow the startup or smaller organization to hire the best legal representation and afford expert witness testimony rather than taking an early, low-ball settlement offer.

Beyond just leveling the playing field, litigation financing can be extremely important for technology that is untested or not well known.  A new invention may have great prospects but may not have hit store shelves yet so it would be hard to prove damages for the court.  Litigation funding can assist in this dilemma by providing money to get the best experts to testify to the value of the invention or to use the best predictive software for market sales to provide the court with an appropriate damages amount.

Litigation funding is not only for trade secret cases or intellectual property cases where the two parties are distinctly different in size.  Larger companies can also benefit in the use of alternative litigation finance to transfer risk from their company to a third-party.  As well as transferring the cost of litigation from their books to an outside company’s to preserve the company’s bottom line.

Topics:  litigation finance, alternative litigation finance, third-party funding, antitrust, international, competition

 Works Cited: John Bair, ‘Potential’ Litigation Funding Not Relevant in Google Lawsuit, The Legal Examiner (July 5, 2018).

Matt Harrison, Investment Manager and Legal Counsel, Bentham IMF (June 07, 2017).