Intellectual property is one of the most active areas for litigation funding. A recent survey in the U.S. by Law 360 found that 49% of counsel who had used a funder to finance their litigation did so in IP cases. What is it about litigation finance that appeals so much to IP litigants and their law firms?
Keeping Secrets Safe—on a Budget. Bentham often receives requests from companies considering litigation over the misappropriation of trade secrets due to, for example, departing employees. The problem for such companies is two-fold: First, they need to prevent their valuable business assets from misappropriation by competitors. This necessity has increased as the digitization of IP assets has made them easier to steal. Second, they may need to bring litigation to secure such protection, which can eat into their bottom lines and tie up capital that could otherwise be used to innovation.
By utilizing litigation funding, companies shift the cost of pursuing claims off their balance sheets and onto their funders’ books. This allows companies to preserve their profitability and enhance their value. Meanwhile, the litigation made feasible by such funding can help companies deter others from misappropriating their IP assets.
Retaining Top Lawyers and Experts. IP litigation requires skilled lawyers and expensive experts. Litigation funding can provide the resources needed to retain the law firm of the client’s choice, as well as top experts to conduct prior art reviews, substantiate allegations of infringement, and conduct the analysis needed to prove harm, loss of profits and/or unjust enrichment.
Keeping Investors Interested and Happy. By involving a funder, a litigant – particularly a startup – may be able to assuage the worries of venture capital investors wary of litigation. Though litigation is never a "sure thing," funders assess cases carefully before deciding to fund them. A funder’s decision to invest in a matter can therefore send a strong signal about the strength of the claim. Furthermore, using funding for the litigation ensures that the company can use its capital for its operational and business needs, rather than for litigation, thereby boosting investor confidence in the long-term viability of the business.
Operating Capital for a Protracted Legal Battle. When the size of the claim justifies it, a funder can offer clients the opportunity to use their claims as collateral for working capital. This working capital, which can be recognized as income, can give companies the breathing room they need to stay afloat throughout IP cases.
Using litigation funding to bring IP cases affords benefits to companies that cannot be secured by traditional contingency arrangements or self-funding. As the oldest litigation funder in the business, Bentham IMF’s investment team has extensive experience evaluating IP cases and funding them in ways that allow law firms and companies to enjoy these benefits.
For more information on how litigation finance can be utilized in IP matters, contact us.