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Commercial Deals

Advice for Patent Owners Considering Third-Party Funding

Patent infringement lawsuits have become some of the most sought-after targets for litigation funders, despite the increasing pressure from courts in the US to increase disclosure around the involvement of third-party funding. In this contentious environment, it is important for litigants and patent holders seeking third-party funding to keep several factors in mind. An insights article by Lauren Sabol and Lawrence Hoff of Fox Rothschild, provides an overview of key considerations for patent owners when pursuing litigation funding for their infringement cases.  Sabol and Hoff emphasize that in order to begin the process, patent owners should enlist the services of experienced patent and litigation funding counsel before approaching funders with their case. They suggest that this kind of specialist counsel makes it more likely that patent owners will obtain a funding agreement with favourable terms, and enter into an agreement with full knowledge of the potential issues that can arise during litigation. Sabol and Hoff also highlight the ongoing issues around disclosure that have been brought to the forefront by Judge Connolly in Delaware, and note that whilst disclosure requirements vary from state to state, patent owners should always be prepared to, at the very least, disclose the existence of third-party funding. In addition, they note that proper care must be taken to ensure that privileged or confidential information cannot be exposed, primarily by using NDAs that counsel can assist patent owners with.
Commercial Regulatory Issues

Delhi High Court Provides Favorable Ruling to Funder in Costs Liability Appeal

As litigation funding continues to expand into newer markets, a key issue that funders will be keeping an eye on is the creation of precedents from court judgements and rulings that relate to the use of third-party funding, as well as any norms that are established in these cases. In a market that has enormous potential for growth, as India does, funders who are considering entering the market will be pleased by a recent ruling which suggests a limited scope for funder liability in unsuccessful claims. An article by Bar and Bench provides an overview of a recent judgement from arbitration proceedings in the Delhi High Court, which found Tomorrow Sales Agency (TSA), a litigation funder, is shielded from liability in the case, “which they have neither undertaken nor are aware of.” This ruling related to the case of Tomorrow Sales Agency Private Limited v. SBS Holding, Inc and Ors, in which SBS Holding had asked the court to order TSA to pay its legal costs, after TSA’s client had failed in its claims against SBS Holding. SBS Transpole, the claimant which TSA had funded, was unsuccessful in its arbitration against SBS Holding. However, SBS Transpole did not have the capital or assets to pay the tribunal’s award against it. SBS Holding’s request to force TSA to cover this award was appealed and finally rejected by the Delhi High Court, which found that “there are no rules applicable to proceedings in this court for awarding costs against third parties.” The High Court’s ruling will be of further interest to funders, as it emphasized the importance of third-party funding to the judicial system and stated “A person without the necessary means would have no recourse, in the absence of third-party funders. Third party funders play a vital role in ensuring access to justice.”
Commercial Deals

Legal Experts Share Guide to Choosing the Right Litigation Funder

The expansion of litigation funding around the globe and the concurrent increase in the number of funders has meant that there are now more options than ever for litigants or law firms seeking third-party funding. However, that increased choice also means that it will become harder for first-time users of litigation funding to know which funder would be the best partner for them. An article for the Concurrences journal by Marc Barennes of Bureau Brandeis and Miguel Sousa Ferro of Milberg Sousa Ferro, provides a guide to those seeking litigation funding on what factors they should consider when evaluating different funders. The article offers prospective users of third-party funding the necessary framework for choosing the right funder, outlining some of the key questions to ask during the process, and what considerations to keep in mind before making a final decision. The detailed and comprehensive article includes useful information on the following topics:
  • Approaching the right number of funders
  • Understanding who the funder is
  • Asking about the investment decision-making process
  • Agreeing on the timeline
  • Inquiring about the experience, expertise and appetite of the funder for a case
  • Understanding the financial criteria and expectations of the funder
  • Special considerations for the funding of class actions
Barennes and Sousa Ferro suggest that with the increasing maturation of the litigation funding market, the increased competition between funders will allow prospective clients to take a more comparative approach to find the best option for their case. Above all the factors to consider, the authors encourage potential users of litigation funding to be proactive in asking questions and gathering information before making a final decision. The full journal article can be found here.
Commercial

An Overview of Third-Party Funding in Mainland China

The global growth of litigation funding has funders, law firms and other interested parties all looking to see where the next major market could be for the widespread adoption of third-party funding. Whilst individual jurisdictions such as India or broader regional markets like Latin America are often discussed, one market that remains enticing, yet illusive, is mainland China. A new article for Global Arbitration Review by Heng Wang, partner at Global Law Office, provides a detailed overview of the current state of third-party funding (TPF) in mainland China and offers key takeaways for those interested in exploring this market. Wang’s analysis suggests that ‘Chinese courts take a similar approach to TPF for arbitration as international practice’, with it being permitted but with an expectation that parties involved in such arbitration will disclose TPF arrangements to avoid conflicts of interest. However, Wang emphasizes that whilst the permissibility of TPF in arbitration has repeatedly been confirmed in courts, there is less certainty over the legality of litigation funding.  Highlighting a case in Shanghai in 2017, Wang notes that whilst the courts confirmed there was no prohibition against litigation funding in Chinese law, the funding agreement itself was ruled to be ‘contrary to public policy and good morals, and invalid’. Yet in other cases the courts have come to contradictory conclusions, having ruled in favor of allowing third-party funding agreements and even sided with funders in disputes over unpaid returns. Wang concludes that there are clearly contradictory and divergent outcomes for the third-party funding of litigation specifically, with little sign of a consistent policy from the courts towards the practice. Importantly, Wang emphasizes that no cases involving the legality of TPF have come before the Supreme People’s Court, which does leave the door open to its use being more widely affirmed or prohibited in the future.
Commercial Deals

Omni Bridgeway’s Giacomo Serra Zanetti Discusses Italian Expansion

Despite the looming spectre of potential regulation affecting the litigation funding industry in Europe, it seems that third-party funding is continuing to grow in activity across a wide variety of European jurisdictions. One country that has experienced a surge in new activity is Italy, with domestic startup funders emerging to take advantage of local opportunities, and international established firms, such as Omni Bridgeway, looking to expand their operations into the country. An article by Legalcommunity.it explores the entry of Omni Bridgeway to the Italian market, providing insight into the company’s strategy through an interview with Giacomo Serra Zanetti, who will be leading the funder’s operations in Italy. Serra Zanetti shared that he will be responsible for sourcing investment opportunities in Italy, with Omni Bridgeway looking to explore both domestic disputes and international arbitration cases involving Italian parties or recoveries within the country. Discussing Omni Bridgeway’s targets for clients, Serra Zanetti explained that the funder will primarily focus on establishing relationships with law firms in Italy, but will also look at direct engagements with companies involved in litigation, especially in the bankruptcy and insolvency arena. Emphasising the nuances of the Italian market, Serra Zanetti points out that Italian law firms often have to take a creative approach to align with the financial interests or constraints of their clients. This creates opportunities for a funder like Omni Bridgeway to take that burden off of the law firm and allow it to focus on the litigation itself.
Commercial Deals

Deminor and Grimaldi Alliance Discuss New Partnership

The relationships between law firms and funders are key to the success of the litigation finance industry, whether around the funding of individual cases or wider-ranging partnerships. Last month saw the announcement of a new approach to this relationship, as litigation funder Deminor and Italian law firm Grimaldi Alliance entered into a global partnership. An article in Legalcommunity.it provides more detail on the partnership between the two companies, featuring comments from Giulia Lovaste, counsel at Grimaldi Alliance, and Giacomo Lorenzo, senior legal counsel at Deminor. Clarifying the exact nature of the partnership, Lorenzo stated that whilst this would not be an exclusive relationship between Deminor and Grimaldi, it is the only partnership of its kind that Deminor has entered into so far.  Lovaste and Lorenzo confirmed that the partnership will allow Grimaldi to present its clients with a range of financing options for their cases, whether that be single case funding or the opportunity for Deminor to purchase the claim outright and thereby allow the client to monetize that claim. Lovaste emphasized that the main advantage of this partnership will be to support its customers in managing the costs of litigation, allowing the client and law firm to focus on managing cases. With the potential for new regulation looming over the industry in Europe, both Lorenzo and Lovaste agreed that whilst regulation could be beneficial by adding credibility and legitimacy to the industry, it will need to be approached in the right way and in collaboration with the existing funding industry.
Commercial Regulatory Issues

Louisiana Advances Legislation to Regulate Litigation Funding

The push for increased regulation of litigation financing across several US states has been gaining momentum this year, with new bills announced, and in some states like Montana, those bills being signed into law. This campaign does not appear to be losing steam, as the Louisiana legislature has advanced its own regulatory bill.  An article in Bloomberg Law details the advancement of a bill in the Louisiana legislature that seeks to increase the level of regulation over litigation funding in the state. Compared to similar bills announced or passed in other states, the Louisiana bill goes further in requiring the production and disclosure of litigation finance agreements to the courts within 60 days of being signed. If plaintiffs and their funders do not provide the agreement within the timeframe, the contractual agreement will be deemed unenforceable.  The bill’s sponsor, State Senator Barrow Peacock, has argued that litigation funding has “flourished in the shadows with very minimal oversight”, and repeated the common refrain from the US Chamber of Commerce that litigation funding represents a threat to national security. The Chamber’s senior vice president of legal advocacy argued that the bill does protect the plaintiff and funder’s sensitive information, as the bill gives the court the power to modify any disclosure of the funding agreement to redact proprietary information. Dai Wai Chin Feman, director of commercial litigation strategies at Parabellum Capital, had testified in opposition to the bill during its passage, stating that the concern around national security was “entirely speculative” and described these claims as “careless and baseless accusations without any evidence or facts”. The bill will go to the House as early as next week for further amendments, before being sent back to the Senate, with the bill’s supporters hoping that a mutually agreed draft can be sent on to the governor to be signed into law.
Announcements Commercial Deals

Fortress Management and Mubadala to Acquire Fortress Investment Group

Fortress Investment Group (“Fortress”) and Mubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital (“Mubadala Capital”), today announced that they have entered into definitive agreements to acquire 90.01% of the equity of Fortress that is currently held by SoftBank Group Corp. (“SoftBank”), who have been the owners of Fortress since 2017. Terms of the deal were not disclosed, and the deal is subject to customary closing conditions and regulatory approvals. After transaction close, Fortress management is expected to own a 30% equity interest in the company and will hold a class of equity entitling Fortress management to appoint a majority of seats on the board. Mubadala Capital (which currently holds a 9.99% stake in Fortress through its Private Equity Funds II and III), will own 70% of Fortress equity. After the closing, Fortress will continue to operate as an independent investment manager under the Fortress brand, with full autonomy over investment processes and decision making, personnel and operations. Drew McKnight and Joshua Pack will be appointed co-CEOs of Fortress and Pete Briger will be appointed Chairman. Mubadala Capital’s CEO and Managing Director, Hani Barhoush, who has served on Fortress’ board since 2019, will continue to serve on the board. Dean Dakolias will continue in his role as Managing Partner and Tom Pulley will continue in his role as the CEO of the global Fortress Real Estate business. Jack Neumark has been appointed a Managing Partner and will continue to lead the Legal Assets business and co-head the Specialty Finance business, and Marc Furstein will continue in his role as President. Fortress co-Founders Wes Edens and Randy Nardone will continue to oversee the PCV business and remaining PE investments, including Brightline. Under the new joint ownership, Fortress is expected to generate significant value for its stakeholders by further establishing itself in the alternative investment space, particularly in credit and real estate across public and private markets, where it currently manages $46 billion of assets on behalf of more than 1,900 institutional investors and private clients. Fortress is expected to benefit from Mubadala Capital’s global network and extensive portfolio of diversified assets, as well as its access to proprietary investment opportunities to support its growth and expansion. Fortress’ Pete Briger, Drew McKnight and Joshua Pack said in a joint statement: “We are extremely pleased to deepen our relationship with Mubadala, partnering with one of the world’s most sophisticated investors in a transaction that will provide significant long-term benefits to our company, our employees and the clients we serve. We have worked closely with Mubadala for years and have enormous respect for their investment acumen and discipline. We view Mubadala’s further investment as an affirmation of the business model and investment approach we have embraced for more than 20 years, and—at a time when market dynamics are better aligned than ever before with our experience and expertise— we could not be more excited about the future of Fortress.” Hani Barhoush, CEO and Managing Director of Mubadala Capital, said: “Fortress is a world-leading investment manager with a proven track record of delivering superior risk-adjusted returns to its investors throughout business cycles. Over the last 20 years, they have built an incredible franchise and established themselves as a premier credit and asset investor while simultaneously growing investment strategies across a wide range of asset classes. We have a strong existing relationship with Fortress’ exceptional management team, and are excited to deepen the relationship further in the years ahead based on a strong alignment of vision, while delivering even greater value to our investors.” The transaction is expected to close in the first quarter of 2024, subject to regulatory approvals. Ardea Partners served as financial advisors and Shearman & Sterling served as legal counsel to Mubadala. Goldman, Sachs & Co. LLC served as financial advisor and Kirkland & Ellis served as legal counsel to Fortress senior management in the transaction. Skadden, Arps, Slate, Meagher & Flom LLP represented Fortress in the transaction. The Raine Group served as exclusive financial advisor and Morrison Foerster served as legal counsel to SoftBank. About Fortress Investment Group Fortress Investment Group LLC is a leading, highly diversified global investment manager. Founded in 1998, Fortress manages $45.8 billion of assets under management as of December 31, 2022, on behalf of over 1,900 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies. About Mubadala Capital Mubadala Capital is the asset management subsidiary of Mubadala Investment Company, a leading global sovereign investor headquartered in Abu Dhabi. In addition to managing its own balance sheet investments, Mubadala Capital manages c. $20 billion in aggregate across its own balance sheet investments and in third-party capital vehicles on behalf of institutional investors, including four private equity funds, three early-stage venture funds and two funds in Brazil focused on special situations.
Commercial Deals

Catalonian Fintech Targets Litigation Funding Opportunities in the UK

As litigation funding is predicted to continue its impressive growth, it is perhaps no surprise that beyond the traditional cohort of funders, small fintech companies are starting to look to the sector as a lucrative investment opportunity. Another example has reinforced this trend, as a Spanish fintech is entering the world of litigation funding with a focus on disputes targeting UK banks. Reporting by Fintech Finance News highlights the entry of 11Onze, a community fintech based out of Catalonia, into the world of litigation funding with two tranches of €100,000 investments already raised. Due to the current economic instability that is impacting traditional investments, 11Onze has turned to litigation finance as an avenue to generate financial gains for its community of investors. James Sène, chairman of 11Onze, explained that the fintech’s litigation funds will primarily target litigation around Personal Protection Insurance (PPI) that was wrongly sold to customers by UK banks. Outlining the broader aims of 11Onze’s litigation funds, Sène said that “this not only helps fight for justice; it also offers great returns on your savings above inflation.” Hoping to reassure the 11Onze community around the risks involved with investing in litigation finance, Sène stated that all of the capital involved is being covered by insurance from AM Best.