Posts Tagged: "litigation funding"

Several attorneys associated with patent monetization firm IP Edge are being referred to their state disciplinary bars, the Texas Supreme Court’s Unauthorized Practice of Law Committee, the U.S. Patent and Trademark Office (USPTO) and the Department of Justice for their conduct in directing several individuals, including a fried chicken restaurant owner and a surgical assistant, to undertake liabilities associated with patent litigation in U.S. district court without disclosing the interests of IP Edge, which stood to gain 90% of the gross recovery from the asserted patents.

The U.S. Court of Appeals for the Federal Circuit (CAFC) yesterday denied a petition for writ of mandamus asking the Delaware district court to vacate an order to produce certain documents to ensure compliance with Chief Judge Connolly’s standing orders on initial disclosures in patent litigation cases. Nimitz Technologies LLC petitioned the CAFC asking it to vacate a November 10, 2022, order by the Delaware court demanding Nimitz produce documents including communications between Nimitz owner, Mark Hall, his counsel, and patent assertion entity IP Edge and the related entity, Mavexar. Following a failure to timely comply with the standing orders, Nimitz had initially told the court that Hall was the sole owner and LLC member of Nimitz and asserted in a statement that Nimitz “has not entered into any arrangement with a Third-Party Funder, as defined in the Court’s Standing Order Regarding Third-Party Litigation Funding Arrangements.”

Heightened mandatory initial disclosures in patent litigation may affect a client’s decision to pursue litigation in a forum, especially if there is a risk (real or perceived) of having to disclose sensitive company information from the outset of litigation. In the District of Delaware, there has been much attention on recent requirements for transparency regarding litigation funding and company and/or patent ownership issued by Chief Judge Colm Connolly. The Chief Judge’s fervent enforcement of those requirements has prompted a writ of mandamus and potential review by the Federal Circuit. Although the propriety of the third-party litigation funding order may be reviewed by the Federal Circuit, best practices for complying with both the third-party litigation funding and Rule 7.1 Standing Orders will be discussed, along with potential impact of those orders on patent litigation in the long term, and considerations of whether certain information could be sealed.

With Judge Alan Albright no longer a lock for patent litigants in the Western District of Texas, prospective claimants and their counsel should be rethinking their venue selection strategies. Litigants and lawyers who previously relied on Judge Albright’s favorable procedural rules and efficient trial schedules as a proxy for more rigorous due diligence will now need to take a closer look at the merits of their cases when considering whether and where to file. For those navigating this new world order, litigation funders serve as a valuable resource. Experienced funders can offer objective advice about the strengths and weaknesses of complex patent infringement cases, strategic insights about potential litigation venues, and non-recourse financing for meritorious cases.

Today, many companies make the business decision to infringe patented technology instead of paying a royalty to license it—so called efficient infringement. The calculation is that it will ultimately be less expensive to ignore the patent rights of innovations than to take a license in an arm’s length negotiation. Over the last 15 years, that calculus has largely proven correct, with changes to numerous laws and the introduction of additional administrative processes all conspiring to make it easier to challenge issued patents. This means that litigation is often the only way for an innovator to protect valuable intellectual property and to stop infringement. Unfortunately, lacking leverage and financial resources, many patent owners cannot stop infringement—in some instances, even after a jury trial.

If patent owners do not have the financial resources to pursue infringers the patent becomes nothing more than a wall decoration – a very expensive wall decoration. And getting funding is more difficult than ever. According to Ashley Keller, Managing Director of Gerchen Keller Capital, speaking on the last panel of the day on Monday at the IP Dealmakers Forum in New York City, they are funding 1 out of ever 100 cases they review these days.

Ashley Keller: ”I think the market is challenging right now. I wouldn’t say it’s deteriorating—it’s more stable than it’s been—but I think it’s a challenging market. There has been a fair amount of court activity, with a lot of it potentially negative for patent monetization and patentees. In terms of things on the horizon, Congress seems to perhaps have decided not to pursue patent reform this year, but that is always something that’s looming large in the background. And some of the reform proposals had some decent ideas in them, but they were sandwiched between some ideas that were potentially going to weaken patent rights even further. So until that risk is decidedly off the table, I think the patentees have to be cognizant of it. All of that leads to a difficult environment for monetizing IP rights for the moment.”