Patent Litigation Financing Is Up

Patent Lawsuits with Litigation Financing Are Up 61% from 2021

If you’re not familiar, patent litigation financing refers to an industry of third-party businesses that finance patent litigation lawsuits, for example, in instances where a plaintiff cannot afford to go through litigation. The premise is that patent lawsuits are expensive and that many ordinary people and businesses cannot afford to go through with them.

Since 2020, patent cases with funding deals are up 61%, according to litigation financing advisors Westfleet. Though no litigant can ever be guaranteed a win, the potential payout in large patent infringement lawsuits can often justify outside investment—millions or even billions can be on the line. For example, A 2021 infringement lawsuit against Intel resulted in a $2.21B verdict. In another recent case, inventor Michael Kaufman secured $10M from Microsoft in a patent dispute surrounding a computer database interface patent. Both these cases involved litigation financing. Per a Westfleet industry report, nearly one third of litigation capital commitments in 2021 were to patent infringement lawsuits.

Concerns about litigation financing have been raised (notably, at times, by entities that lose lawsuits) including arguments that it can be unclear who is actually in charge of the litigation financing organizations. Others argue that litigation financing can worsen a perceived problem of patent trolls. In response, some federal courts—including the Northern District of California and the District of New Jersey as well as Connolly in Delaware—have begun to mandate litigation financing arrangement disclosures, which could interfere with the optics of an otherwise David vs. Goliath lawsuit by exposing big money backing from large litigation financing firms.