Tag Archives: intellectual property

Litigation Finance and University IP

In the world of intellectual property, often the way to enact licensing deals is through litigation.  However, litigation comes with significant risks and costs and studies show that there is one group in particular that is more hesitant than others to enforce patents through litigation.  That is, universities.  Since many universities across the United States produce cutting-edge research, intellectual property is very important to them but they often have to consider other issues before pursuing litigation to protect their IP.  Some of those issues include whether a licensing dispute will harm valuable research partnerships between the university and corporate sponsors, if the university will have the support of professors and individual colleges at the university, and will litigation deter future research partners from working with the university.

Litigation financing can be used by universities to help in this type of scenario. If the research is a narrowly focused on a particular topic, single-case financing may be an appropriate option.  For single-case financing the funder would work with the university and its litigation counsel to finance the attorney’s fees and other costs through trial and appeal, including any Patent Trial and Appeal Board (PTAB) proceedings.  This is a great option for the university because like all litigation financing it is no cost unless there is a successful outcome and it shifts the risk from the university to the financier.

However, for universities that have research crossing over far-ranging fields the single-case option may not make sense.  Universities like this may want to purse a multi-faceted licensing approach for the overall licensing program to be successful.  This is even more risk and money and commitment for the university.  But that is where litigation financing can come in and provide significant capital for such a process, which would allow the university to spread its risk and facilitate a broader resolution.

While universities may not at first thought be clients that one would think litigation finance could benefit, this post suggests that they are.  From small claims to much larger diverse group of claims, litigation finance will help shift the risk from the university to an entity with diversified risk across uncorrelated claimants.  This allows the university to focus on their main prerogatives educating students and continuing their extensive research initiatives.

Topics:  litigation finance, alternative litigation finance, third-party funding, universities, intellectual property, patent law

 Works Cited: Katharine Wolanyk & Emily Hostage, Using Legal Finance to Unlock University IP Assets, Burford Capital (July 17, 2018).

Is Litigation Finance Really Such a Contradiction to Established Norms?

Because a third-party litigation financer gains an economic interest in the legal claim belonging to another, the financing transaction can resemble the assignment of a claim. As a general rule, American jurisdictions impose strict rules that limit the ability of a party to assign its legal claim to another who would litigate it.  To a certain extent, discomfort with litigation financing may be traced to the fact that it seems like something that contradicts an established principle.

But is claim transfer really against the grain of the American legal tradition?  There are good reasons to think that it is not.  In fact, claim transfer is more common than one might think.

Under federal law, patent claims are transferable. As a result, patent claim transfer and acquisition is a multibillion-dollar industry. In addition, there is an accepted U.S. market for bankruptcy claim transfers. Creditors with preexisting rights have purchased claims out of bankruptcy and litigate them as their own.

Other transactions give one party an economic interest in the legal claim of another.  Insurers can acquire the claims of their insureds through subrogation.  Attorneys acquire an economic interest in their clients’ claims when they agree to be paid through a contingency fee.

Given these accepted practices through which one party acquires or obtains an interest in another party’s claim, it is harder to understand the idea that litigation financing is contrary to established ethical or legal norms.  To be sure, there is no claim transfer in litigation funding as there is in bankruptcy or patent cases.  In that respect, litigation funding is a less radical departure from the general rules prohibiting claim transfer. The party providing financing is not is such a different position than the insurance company who funds litigation for its policyholders or than the attorney with a contingent fee agreement.  Instead of viewing litigation financing as a doubtful novelty, maybe it is time to see it as an analogue practices that everyone takes for granted.

Topics:  litigation finance, legal reform, third-party funding, litigation costs, legal costs, economics of law practice, assignment of claims, bankruptcy, intellectual property, patent claims

 Works Cited:

Geoffrey McGovern, et al., Third-Party Litigation Funding and Claim Transfer:  Trends and Implications for the Civil Justice System (2010), available at http://www.rand.org/pubs/conf_proceedings/CF272.html