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Commercial

Claim Language as a Determining Factor in Patent Infringement Litigation

Whilst patent litigation remains a priority target for many funders, there is no doubt that it is an area of heightened risk that often requires both extensive levels of due diligence and large capital commitments to reach a successful conclusion. Funders must evaluate a myriad of factors when assessing which patent infringement cases to pursue, and amongst those factors, one funder argues that the quality of the patent assets and the specific wording of claim language are the keys to success. A new piece by GLS Capital focuses on the challenges of underwriting patent litigation finance, exploring the ‘outsized role’ that patent claim language plays in determining the viability of any case. It is the quality and specificity of this claim language that is often used by funders to decide on whether or not a successful claim can be brought, with both the precise wording and scope of the patent claims playing a pivotal role.  The quality with which the language is constructed can either mitigate or exacerbate issues that can arise, such as whether a claim is ‘properly supported or enabled by the patent’s specification’ or if there are ‘non-infringing alternatives that may affect the damages analysis.’ GLS emphasize that because of the vital role the claim language will play in any patent infringement lawsuit, patent owners should ensure that they are retaining the services of a skilled and forward-thinking patent drafter who can anticipate what issues could determine a patent’s strength in court.
Commercial

The Role of Litigation Finance in ESG Initiatives

At its most basic level, litigation funding is an alternative asset class that provides an investment vehicle that can achieve a lucrative return on invested capital. However, the practice plays a much more important role when it is considered within the context of litigation finance’s power to widen access to justice, as well as push for meaningful change when tackling social and environmental abuses.  In a post by No Impunity, an impact litigation funding platform that focuses on human rights and environmental abuse, the role of litigation finance in leading the way to achieving social and environmental justice is explored. At the core of the argument is the fact that litigation funding is key to ‘leveling the playing field’ between large corporate entities with vast financial resources and smaller businesses, communities and individuals who have suffered harm from corporate malpractice. Beyond the base capital that is required to fight this type of ESG litigation, No Impunity also highlights the fact that funders can support litigants who might otherwise be powerless, such as marginalized communities or even whistleblowers who reveal such corporate and government wrongdoing. In supporting these kinds of legal action, litigation funding becomes a powerful tool for reasserting some level of accountability both in the private sector and where state or local governments fail to meet their obligations to citizens.
Case Developments Commercial

Review of Quinn Emanuel’s Fee in Obamacare Class Action Raises Questions for Litigation Insurance

Alongside the growth of the litigation funding market is the equally important role that litigation insurance plays in the industry, allowing all litigation participants to reduce their risk profile whilst still pursuing meritorious cases. However, an ongoing review of a law firm’s awarded fee could highlight the risk taken on by litigation insurers, specifically those providing judgement preservation insurance policies. An article by Bloomberg Law provides an overview of the issue which arose following a class action brought by Quinn Emanuel Urquhart & Sullivan, which in 2020, successfully secured $3.7 billion for health insurers who had not been paid by Congress for providing higher risk policies under Obamacare. However, whilst Quinn Emanuel received a $185 million fee for its work in 2021, this fee was endangered in January of this year when the Federal Circuit ‘ordered a district court judge to recalculate the award’. The role of litigation insurance enters the picture because Quinn Emanuel had taken out a judgement insurance policy that is designed to secure a portion of the award if it is appealed or overturned, which happened in the Obamacare class action after the health insurers objected to the size of the award. Charles Agee, CEO of Westfleet Advisors, suggests that if the litigation insurer incurs a significant loss in this case ‘it could really have a broader chilling effect’ on the practice. Whilst there is the question of whether insurers are ready to pay out such claims, Tom Baker, professor at the University of Pennsylvania Carey Law School, argues that insurers ‘are definitely going to pay in the beginning because otherwise the market will go away’.
Commercial

How Portfolio Financing Can Support Law Firm Growth Strategies

Whilst single case financing from third parties represents a useful tool for law firms, one funder argues that these businesses should also explore portfolio financing as part of a strategy to maintain growth in the face of market instability. In an article published in Lexology, Amy T. Geise and Sarah Jacobson, investment managers and legal counsel for Omni Bridgeway, argue that there are multiple uses for portfolio financing that law firms should look to take advantage of to fuel growth. Firstly, Geise and Jacobson suggest that utilising portfolio financing will allow these firms to remove the uncertainty of litigation costs from their balance sheets, which in turn will allow them to increase their market share. Portfolio funding provides law firms with the opportunity to offer increased fee flexibility to clients, thereby attracting clients who might otherwise have avoided pursuing litigation due to their own cost pressures. Secondly, the authors argue that this kind of financing can be used to invest in the law firm’s own growth plan by avoiding otherwise necessary austerity cuts, and instead cover expenses or investing in internal improvements for the firm. This could mean using funds to expand a firm’s footprint, attract new employees and possibly most importantly, retain existing talent. Finally, Geise and Jacobson point to the value of portfolio financing as a risk management tool, allowing law firms to mitigate the more substantial risk of pursuing a single large contingent fee case. Furthermore, this influx of capital counters the potential of waiting years to realize the financial return of unresolved litigation.
Commercial Regulatory Issues

ILFA Director Says GAO Report Recognized the Value of Litigation Funding

The Government Accountability Office’s (GAO) recent report into the litigation finance industry was viewed by some as a promising start to wider acknowledgement and acceptance of the practice, whilst others criticized it for a lack of tangible policy recommendations. However, the leader of one of the industry’s most prominent associations has stated that the GAO’s report in fact recognized the ‘value of commercial legal finance’ to improving access to justice. Writing in RealClearPolicy, the executive director of the International Legal Finance Association (ILFA), Gary Barnett, argues that the report demonstrated the viability and positive impact of the litigation funding industry. Barnett points out that the report highlighted third-party funding’s ability to widen access to legal redress, whilst also noting that the significant due diligence that funders conduct on prospective cases ensures a high quality of cases being brought before the courts. Barnett contrasts the GAO’s findings with the oft-repeated criticisms leveled by the U.S. Chamber of Commerce and other parties, who claim funders represent a threat to U.S. security and are allowed to control litigation with no regulation or oversight. Barnett highlights that it was in fact notable that the GAO did not recommend additional regulatory measures, nor did it seem to support critics’ calls for increased disclosure around funding.
Commercial Deals

RPX Report Finds 36% Slowdown in Q1 NPE Litigation

One of the biggest topics in the world of patent litigation is the role of Non-Practicing Entities (NPEs) in driving a wave of patent infringement cases, often backed by funders eyeing lucrative investment opportunities. Whilst the role of NPEs in patent litigation is a divisive topic, with critics blaming NPEs for acting as ‘patent trolls’ and pursuing supposedly frivolous litigation, new research indicates that NPE litigation saw a downturn in the beginning of 2023. Research produced by RPX Patent Market Intelligence found that there was a 36% decrease in the volume of NPE litigation in the first quarter of 2023, which RPX attributes to two main reasons.  The first cause of this slowdown was the much-discussed conflict around funding disclosure in Delaware, that led IP Edge LLC, a leading NPE firm, to add zero new defendants to litigation in Q1 2023 (compared to 147 new defendants added in the first quarter of 2022). Secondly, RPX highlighted a 55% reduction in the number of defendants in the Waco Division of the Western District of Texas, which was caused by a standing order that no longer allowed plaintiffs to file in their preferred division. RPX’s full report includes insights into: changes to the Patent Trial and Appeal Board (PTAB), developments within the UK and Europe around SEP and FRAND litigation, and additional highlights from the litigation funding market. The full report can be found here. **Note: a previous version of this story stated that IP Edge filed zero new cases in Q1 2023. For accuracy's sake, we adjusted the statistic to read that IP Edge added zero new defendants.  We regret the error. 
Announcements Commercial Regulatory Issues

Validity Finance is First Commercial Litigation Funder to Achieve B Corp™ Certification

Validity Finance, one of the largest private commercial litigation funders in the United States, today announced that it has been awarded Certified B Corporation™ (B Corp) status. This recognition acknowledges Validity’s accountability to its stakeholders, including employees, investors, clients, and the communities in which it operates. Since its founding, Validity has been a purpose-driven organization focused on funding meritorious litigation as a corrective measure for an unbalanced legal system, and its new B Corp status reflects this commitment.

Validity’s B Corp certification, bestowed by the nonprofit B Lab, is an acknowledgement that the company is meeting high standards of verified performance, accountability, and transparency on factors ranging from environmental sustainability to employee benefits and corporate governance. Validity is the first U.S. commercial litigation funder to achieve B Corp status, a significant milestone in the maturation of the litigation finance sector, joining such prominent companies as Patagonia, Bomba, and Warby Parker.

“The B Corp evaluation process offered an excellent framework for Validity to review and improve our policies and practices, and to affirm our commitment to making a meaningful impact for our clients and the legal community,” said Ralph Sutton, Validity’s Founder & CEO. “Since our founding five years ago, we have been guided by a promise to not only help promote fairness in the legal system, but also to adhere to the strictest ethical standards in our business operations.”

There are currently only 6,000 Certified B Corporations across more than 80 countries and 150 industries. To become a Certified B Corporation, companies must undergo a comprehensive, multi-year assessment of the impact of their operations and business models on their workers, customers, communities, and environment, and must receive a minimum verified score on the B Impact Assessment. Certified B Corps are legally required to consider the impact of their decisions on all stakeholders.

“At a time when the U.S. Chamber of Commerce is attempting to leverage misinformation to unfairly stigmatize the litigation funding sector and to preserve the unfair advantage traditionally afforded deep-pocketed defendants in commercial litigation, we are proud to spotlight our corporate purpose,” said Julia Gewolb, Validity’s Chief Risk Officer.

Validity approaches every funding opportunity with a focus on trust, fairness, and transparency, enabling the company to build and sustain long-term client relationships by empowering clients with the resources they need to pursue and resolve meritorious litigation fairly and equitably. With decades of combined experience in funding, the Validity team of trial-tested attorneys has invested more than $400 million since 2018 across more than 70 matters.

“As commercial litigation funding expands in the U.S., it’s important to engage and educate people about the industry’s dedication to a more equitable legal system,” said Roman M. Silberfeld, National Trial Chair at Robins Kaplan. “I commend Ralph and Validity for being so forward-thinking and taking this significant step to solidify their commitment to responsible business practices.”

About Validity Finance

Validity is a leading commercial litigation finance company dedicated to fair and transparent funding practices that build trust. The first funder to become a certified B Corp, Validity’s mission is to make a meaningful difference in the legal system by helping clients bring good cases to trial with top counsel, while managing legal spend and risk. We believe every client has the right to a fair deal, clear term sheets, access to strategic advice, and timely responses. We invest in commercial, patent, bankruptcy, and breach of contract litigation, as well as international arbitration. Clients and law firms count on Validity for reliable capital, strategic resources, and risk mitigation that supports their litigation goals.

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Commercial Regulatory Issues

Settlement CFOs in Australian Federal Court

The viability of third-party litigation funding relies on the ability of funders to ensure that if their funded case reaches a successful conclusion, they will be able to secure an adequate financial return to make their investment worthwhile. However, recent developments in the Australian courts have demonstrated the difficulties of this process as it relates to the practice of courts making common fund orders (CFOs). A recent piece of analysis by Herbert Smith Freehills examines the potential consequences of a ruling by Justice O’Callaghan in the Federal Court of Australia, in the case of Davaria Pty Ltd v 7-Eleven Stores Pty Ltd, which denied the litigation funder’s application for a settlement CFO. The analysis illustrates that this ruling built upon the High Court’s 2019 decision in BMW Australia Ltd v Brewster, which found that s 33V of the Federal Court Act 1976 does not allow the court to order a pre-settlement CFO. Justice O’Callaghan’s ruling went further, by stating that the Brewster ruling made it ‘clear enough’ that s 33ZF equally does not grant the court the power ‘s 33V of the Federal Court Act 1976’. This issue has since been referred to the Full Court of Australia, which is in the process of receiving submissions from Attorneys-General in Australia, and will likely then offer clarification as to the court’s power around making CFOs at later stages of litigation. Herbert Smith Freehills’ article offers additional analysis of the situation, suggesting that ‘this will not be the end of the debate regarding funding models and their permissibility’ and that ‘there will likely be continued innovation in funding markets’. Among other observations, the analysis also reinforces the fact that these developments do not affect the situation in the New South Wales Supreme Court, which ruled in 2022 that courts do have the power to make settlement CFOs.  
Case Developments Commercial

Details of Funding Behind J&J Talc Lawsuits Revealed

Whilst the topic of disclosure in litigation funding has primarily been dominated by discussions around the financing of patent infringement lawsuits, the issue remains a key one across the whole spectrum of third-party litigation funding. Large class action claims against major corporations have been prime opportunities for funders looking to gain lucrative rewards, and new reporting by Bloomberg Law has shed light on one of the highest profile examples. An article by Bloomberg Law reveals the details of third-party funding in the ongoing lawsuits brought by consumers against Johnson & Johnson over the alleged cancerous effects of its talc-based baby powder products. The reporting reveals that it is Virage Capital Management and TRGP Capital who have been working with law firms representing plaintiffs in these cases, having funded over 500 of the 60,000 claims brought against J&J. Bloomberg Law’s Emily Siegel highlights that the reason this information is available to the public is because a 2021 rule enacted in New Jersey ‘requires parties using outside funding to disclose certain information about their backers.’ Of particular interest is the fact that since the rule came into force nearly two years ago, there have only been nine examples of disclosed funding out of over 800 filings examined during that period. Burford Capital’s Andrew Cohen stated that he hasn’t seen a significant impact since the rule was introduced, with very few discovery requests following these rare disclosures, and that the main effect has been to burden litigants with the cost of these additional filings. Of the nine lawsuits that had disclosed third-party funding, familiar names from the industry included Legalist, Longford Capital and Omni Bridgeway.