Whilst outside observers traditionally think of litigation finance in terms of single case funding, the maturation of the industry has seen funders increasingly focus on portfolio funding efforts that can mitigate risk whilst still providing strong returns on investment. It is also true that portfolio funding is by no means the end of the road when it comes to the evolution of legal funding, as prominent litigation finance firms are exploring opportunities to provide direct financing to law firms.In a new editorial for Bloomberg Law, Maurice MacSweeney, director of legal finance and sales planning at Harbour Litigation Funding, offers a compelling overview of the benefits and opportunities for funders willing to explore engagements that go beyond single case financing. MacSweeney frames this strategy in terms of moving past ‘binary outcomes’ in terms of winning or losing an individual case, instead funders can look at flexible portfolio structures which can reduce the upfront risk for the funder, and therefore enable lower pricing on such deals.Law firm financing is another option that has been growing increasingly attractive, especially in the current economic climate that finds law firms with restricted budgets struggling to find the capital necessary for growth and internal development projects. Not only can this option be useful for established law firms looking to ‘monetize work in progress’, but also for lawyers looking to start their own firms, who would otherwise struggle to secure the necessary startup capital.
At last week’s litigation funding conference held by Brown Rudnick, the topic of collective actions in the UK generated an interesting discussion, with panelists noting that the upcoming Supreme Court decision could impact the entire third-party funding industry. As LFJ reported last month, the DAF appeal resulting from lawsuits brought at the Competition Appeal Tribunal (CAT), has put UK funders on alert, as many are carefully watching to see how the Supreme Court will act.In an article for The Law Society Gazette, Rachel Rothwell takes a look at the background to this appeal which had its hearing in front of the Supreme Court last month, and also looks forward to what the potential consequences could be if the judges were to side with DAF and rule that litigation funding agreements (LFAs) should be classified as ‘damages-based agreements’ (DBAs). Rothwell points out that while the general assumption may be that the Supreme Court will not side with DAF’s arguments, having been rejected twice by both the CAT and a Divisional Court of the High Court of Justice, there is no guarantee as to the outcome. Analysing the history of past Supreme Court decisions, Rothwell highlights that the two judges who did not side with the majority in the claimant-friendly decision in Merricks v Mastercard, were both also present in last month’s hearing. If the Supreme Court does side with DAF’s appeal, Rothwell suggests that whilst some LFAs could be renegotiated to adhere to the regulations for DBAs, this would not be a solution for opt-out collective actions due to the Competition Act 1998 stating that DBAs are unenforceable in those proceedings. As a result, if this worst-case scenario for funders does come to pass, Rothwell argues that only the government may be able to take swift action by amending the legislation relating to DBAs.
Last week, Brown Rudnick hosted its second European Litigation Funding Conference, which brought together a crowd of international thought-leaders from across the industry, and provided attendees with an agenda filled with insightful discussions on a wide array of issues. The conference proved to be a beneficial experience for all, with Augusta Ventures co-founder Robert Hanna describing it as ‘the pre-eminent litigation funding conference in Europe, if not the world’. Following a successful inaugural showing in 2022, this year’s event reinforced the maturation of the litigation funding industry, with panelists keen to dive into the opportunities and challenges that funders, law firms and other industry participants are facing. In addition to the high-level topics that continue to shape the market such as ESG and collective action litigation, the conference featured panels on areas that are still maturing within the litigation funding space, including crypto litigation and opportunities for a secondary market. After an introduction from Brown Rudnick partner Elena Rey, the conference kicked off with a keynote address delivered by Anya Neistat, Legal Director of The Docket initiative at the Clooney Foundation for Justice. Having recently returned from conducting research and investigations in Ukraine, Neistat spoke of the importance of litigation which can help provide justice for victims of atrocities and war crimes. Highlighting the fact that survivors and NGOs often lack the means to take on complex litigation, Neistat emphasised that ‘litigation funding can be absolutely critical to allow survivors to get on the offensive.’ The first panel of the day featured a unique discussion of the emergence of crypto litigation, with the panelists discussing the primary challenge of accurately valuing this bespoke practice of litigation, as well as the underlying crypto-related assets. Moderating the panel, Stephen Palley of Brown Rudnick pointed out that despite the relatively new state of crypto litigation, he has found that courts are adapting well, and has ‘yet to find a judge who just says, “I don’t get it”’. Whilst members of the panel disagreed on whether all cryptocurrency is fundamentally ‘snake oil’, all agreed that valuation was the most important hurdle to overcome, with BDO’s Simon Greaves stating that a major issue is ‘how do you value it at the point of recovery’ when the worth of these assets can vary so wildly over time. James Collins KC of Essex Court encouraged industry participants to take a broad view of what crypto litigation might entail, suggesting that the future will see ‘claims in almost every area of law’. Steven Friel, CEO of Woodsford, kicked off the discussion by defining the current environment as one where ‘opportunities vastly outweigh challenges’ and praised the CAT’s willingness to ‘have an expansive definition of what is a competition claim’. Whilst the speakers expressed some concern about the ongoing Supreme Court appeal, which, as part of the defence strategy, is attempting to call into question certain aspects of the claimant’s funding agreement in the CAT – that strategy has failed at first instance and in the Court of Appeal. There is a high level of sophistication among the judiciary in this area and significant support for funding as a part of the landscape of collective actions in the UK. Without funding, good claims simply are not viable. After a short break, the next panel looked at the investor perspective on litigation funding as an asset class, with Chad Clamage of Victory Park beginning the discussion by reinforcing the central principal that litigation funding remains ‘attractive as an uncorrelated asset class’. Robert Hanna stated that ‘there has never been a better time to be a funder’ with demand at an all-time high, and that ‘in the current economic environment, liquidity is going to be king’, as a wider investor base for funding emerges. D.E. Shaw’s Sarah Johnson cautioned that duration still remains an obstacle for many investors, highlighting that durations that start to approach 7 to 10 years can block investment ‘even if all the other factors are there’. Nick Moore of AON put the spotlight on the increasingly beneficial relationship between funders and insurers, describing it as a situation where ‘two industries with a history of mutual cynical disregard, are now coming together’. The morning’s final session touched on the in-house perspective on litigation funding, with Suber Akther of Siemes Energy describing the difficulties faced by legal departments where they are ‘always under pressure’ to reduce costs and increase efficiency. Rocco Pirozzolo from Harbour Underwriting advised that whilst it may not always be viable for in-house teams, the best approach is for them to ‘look at the options out there, be open to it’. However, he also noted that work still needs to be done to counter the narrative that funders will control litigation, stating that ‘this myth has to be dispelled’. Andrew Jones of Fortress Investment Group reframed the issue at stake for in-house counsel, arguing that ‘a general counsel is an investor in litigation just like a funder, the only question is whose money you are going to use’. The hot topic of portfolio and law firm financing kicked off the afternoon’s agenda, with Burford Capital’s Leeor Cohen emphasising that one of the core fundamentals for this approach is that a ‘portfolio is not worth more than what is actually in the portfolio’. Looking at the factors that funders must consider in portfolio deals, Tom Steindler from Exton Advisers highlighted four key considerations: open versus closed portfolios, the identity of the borrower, what the capital will be used for, and the method of repayment of proceeds. The panel closed its discussion by looking at future trends with Cohen and North Wall Capital’s Alex Garnier agreeing that we may see the less-specialised and opportunistic financiers exit the market, whilst Chris Neill of Pogust Goodhead predicted more collaborative efforts in the industry. The penultimate panel for the day saw a fascinating discussion around collective redress in Europe, with panelists representing firms in France, Germany, the Netherlands and Spain. Emily Woolcott from Woodsford stated that ‘the Netherlands is the most attractive EU jurisdiction,’ which was widely echoed by the other panelists. Paul de Servigny from IVO Capital contrasted the French market’s unwelcoming environment for class actions with Spain, which stands out as a market ‘becoming an attractive location’. Discussion around the EU’s new collective redress directive featured interesting insights into the differing routes toward implementation in each country, with Tobias Glienke of Greenfort arguing that its introduction ‘could be a real gamechanger in Germany’, where the draft law looks to go beyond the directive by allowing small business participation and also include civil claims. The panel also discussed the crossover between the directive and the prominence of ESG litigation in Europe, with Frank Peters from Bureau Brandeis highlighting that environmental cases will be a major feature in the Netherlands, particularly around ‘polluter pays’ and greenwashing claims. To close out the day, the much-awaited panel on secondary market opportunities provided attendees with an overview of the state of that market, as well as the potential routes for growth in the future. Patrick Rode from Deminor differentiated between jurisdictions, and stated that where countries have a more mature primary litigation funding market, we are also seeing the development of a more ‘advanced secondary market’. Therium Capital Management’s Ben Smyth highlighted that the very concept of secondary deals still faces challenges, as there is ‘a lot of cynicism why the seller wants to get rid of the asset’. The issue of transparency was also one of the main challenges raised, as Ben Moss from Orchard Global asserted that for trust in sellers to exist, ‘the reasoning needs to be visible’. In looking to further develop the market, David Vanaskey from Wilmington Trust Company suggested that lessons can be learned from outside the industry and that there is a ‘need to use technology solutions that are utilised in other secondary markets’. Overall, Brown Rudnick’s second European Litigation Funding Conference once again demonstrated the breadth of experience in the industry and managed to deliver a full day of engaging content with speakers bringing current and relevant insights to each discussion. Attendees across the event remarked on the quality of panelists, which was facilitated by Brown Rudnick’s team of moderators who skillfully guided each discussion across interesting and impactful topics.
Litigation funding is most often associated with commercial litigation, and primarily focused on plaintiff-side funding, as these are the cases with the surest route to a profitable return on investment. However, a new funding opportunity is looking to break that mould, as 4 Rivers Services is seeking investors to fund the defense costs of a high-profile criminal case which will pit a rapper against the U.S. Justice Department.An article from Reuters provides the details on this unique situation, which has originated from the Justice Department’s indictment of Fugees rapper Prakazrel Michel on charges of a criminal conspiracy relating to illegal donations of foreign money into Barack Obama’s 2012 election campaign, and two separate cases of lobbying the Trump administration. Whilst at first glance, this may not appear to be an obvious litigation finance opportunity, the funding advisor and broker 4 Rivers is looking for investors to fund Michel’s upcoming defense costs.Peter Petyt, co-founder and CEO of 4 Rivers, stated that he is looking for investors to provide at least $2.6 million in funding, with the financial return guaranteed by either the recovery of previously forfeited assets if Michel is acquitted, or a share of Michel’s future revenue from his music career. Petyt recognized that the case may be ‘difficult to finance’ due to its unique circumstances, and while he has received interest from funders in the opportunity, they had not yet secured an agreement as of the time of Reuters’ publication.Mr. Michel’s trial is currently scheduled to begin on March 27 in the U.S. Federal Court for the District of Columbia.
The issue of disclosure is once again front and center in a patent litigation suit. In the US District Court for the District of New Jersey, the identities of the funders of an infringement suit against a Merck & Co. company were revealed.Reporting by Bloomberg Law details the latest development in Microspherix’s lawsuit against Organon, a Merck & Co. spinoff company, over the infringement of patents for a contraceptive implant. In a court filing on March 15, the plaintiff’s attorneys revealed that it had received funding from Law Finance Group and from a GLS Capital affiliate, Zepata SPV. GLS Capital recently made headlines in another case, after its client Nanoco Technologies reached a $150 million settlement with Samsung Electronics over another patent infringement lawsuit.The filing also confirmed that Kirkland & Ellis, who are acting for Microspherix, were engaged on a contingency arrangement, and that in 2022 the firm had ‘agreed to share a portion of any proceeds it receives from this matter with LFG and GLS in exchange for a non-recourse payment of a portion of its estimated fees for the matter.’It is also noteworthy, given recent events, that the court filing explicitly states that ‘none of LFG’s, Zepata’s, or GLS’s approval is necessary or required in any way for litigation decisions or settlement decisions in the action.’
Given all of the economic and geopolitical uncertainties at play, industry leaders and analysts are expecting insolvencies to continue to rise, which will create opportunities for funders focused on the space. This has been reflected in an update from one of the UK’s leading funders of insolvency litigation, which has announced record new case investments, case completions and cash recoveries in the current financial year to date (FY23 YTD).In a trading update to the London Stock Exchange, Manolete Partners has announced that it has made 246 new case investments for FY23 YTD, an increase of 55% compared to 159 new investments for the entirety of FY22. In parallel, Manolete stated that in this time period, it had also completed a record 168 cases, along with a record cash recovery from already completed cases of £26.2 million. According to the company, this has led to a consecutive five month run of profitability through the end of February 2023, with Manolete expecting a strong recovery of profitability in FY24.As LFJ had previously reported, Manolete has been engaged with Barclays on a pilot programme to recover misappropriated funds from the government’s Bounce Back Loan Schemes. In the trading update, Manolete revealed that 119 companies have been included in the pilot scheme, with 45 cases assigned to Manolete. Of these cases, Manolete claims that three have already been settled and a further seven have settlement offers, with only one of these cases not having offered or agreed to repay the full amount of misappropriated loans.Manolete’s CEO, Steven Cooklin, stated that ‘the UK is now experiencing record high levels of insolvencies and that is directly leading to the Company's impressive operating performance’. However, the trading update did also reveal that the Court of Appeal had dismissed Manolete’s appeal to a High Court judgement from last year, and that £750k in costs relating to the case ‘will now be written off in H2 FY23 and a line drawn under the matter.’
Insolvency and bankruptcy litigation remain one of the top targets for litigation funders, fuelled by the current economic uncertainty and the prolonged after-effects of the Covid-19 pandemic, which left many businesses in dire financial trouble. The recent implosion of Silicon Valley Bank (SVB) has only added to this fertile environment for insolvencies.In an article by City A.M., LCM’s chief executive Patrick Moloney stated that SVB’s collapse would likely cause a “myriad of litigation”, which will only further compound the difficult circumstances that many corporations are facing. Moloney highlighted the fact that in such an environment, liquidators will be keen to utilize litigation financing as a tool to pursue any resulting lawsuits.In the same interview, Moloney pointed to the dramatic rise of class action claims in the UK as another sector that LCM is pursuing. Moloney suggested that this increase in class actions is largely due to the “change in the law that’s allowing these claims to come through”, with funders like LCM standing by to provide the needed capital to move these claims forward.
Critics of the litigation funding industry have intensified efforts to lobby the federal government to more heavily regulate the practice in recent months, buoyed by examples of courts mandating increased disclosure of third-party funding. These efforts have also found an audience in state legislatures, with the Nevada Senate Judiciary Committee scrutinizing a bill that proposes increased disclosure requirements for funders.An article by 2News recaps the Senate Judiciary Committee’s hearing that took place this week, with lawmakers examining Senate Bill 179 which primarily concerns disclosure for litigation funding and the advertising of lawsuits. Senator Scott Hammond, who is sponsoring the legislation, argued that third-party funding has the potential to increase frivolous lawsuits and put pressure on plaintiffs to aim for higher settlements to recoup the financial gain that is passed on to funders. Unsurprisingly, given its opposition to third-party funding, the US Chamber of Commerce also had a representative at the meeting, with Vice President Page Faulk echoing Hammond’s critiques and asserting the Chamber’s recent claim that the practice is a threat to national security.These critiques did not find a unanimously warm welcome among the Committee, as Melanie Scheible, Chair of the Senate Judiciary Committee, questioned whether Faulk’s assertion about foreign exploitation of litigation funding was based on proven data. Scheible stated that “this committee does maintain the ability to ask you to back that up with some kind of evidence, some kind of proof, some kind of factual basis”.2News also reported that the Nevada Justice Association opposes this current bill.
The Indian litigation funding market continues to stand out as a hotbed of activity for new funding efforts, with startups and legal tech firms looking for opportunities to grab a share of this growing market. There is an equal appetite from investors in the country to secure valuable returns on litigation finance investments, with the launch of a new fund aimed at High-Net-Worth Individuals (HNWIs).Business Today covered the announcement by FightRight Technologies, an Indian legal tech startup, which has launched a new fund for HNWI investors looking to diversify their portfolios and explore litigation finance as an alternative asset. The Rs 100 crore fund will look to build a portfolio of 15-20 cases, with FightRight expecting an annualized ROI of 30 percent or greater. The startup confirmed that the fund, which is a special purpose vehicle, has already secured 100 percent of the committed investment required.FightRight was founded by Nitin Jain and Visha Mangal in 2020, utilizing its proprietary AI and machine learning technology to analyze litigation opportunities for potential investment and risk assessments. The funder is targeting claims brought by mid-market and MSME businesses, as well as individuals bringing commercial disputes, and has already funded Rs 250 crore worth of claims in the current financial year. Jain, who serves as CEO of FightRight, stated that the new fund is looking to take advantage of the “significant increase in demand for litigation funding” in India.
As LFJ reported last week, we are seeing one of those rare occurrences in which a funder and client’s relationship breaks down in a very public and contentious manner, as Burford Capital and Sysco have found themselves in opposition to one another. However, it appears that Sysco’s lawsuit against Burford was only the beginning of this conflict, as Burford’s subsidiary companies have launched their own lawsuit against Sysco.Reporting by Reuters details the latest developments, revealing that Burford subsidiaries: Glaz LLC, Posen Investments LP and Kensosha Investments LP, are requesting a court order from the New York Supreme Court, which would prevent Sysco from settling any of the existing claims that are at the heart of the original dispute. Burford’s latest lawsuit is an effort to reaffirm the previous ruling from an arbitration panel on March 10, which granted Burford’s request to stop Sysco from closing the settlement deals that Burford took issue with.Sysco responded to Burford’s lawsuit by stating that “The arbitration ruling and Burford's petition [do] not change our position that Burford is attempting to unlawfully seize control of Sysco's settlement rights and rewrite the terms of our contract.” Burford has maintained that its funding agreement with Sysco had always included a requirement for the funder to approve any settlement deals, with Burford’s CEO Christopher Bogart describing Sysco’s lawsuit as “frivolous”.
Fund II Capital commitment at A$79m as at 31 December 2022 and A$114m as at 28 February 2023. Fund I fully committed
Assets under Management (AuM) increased to A$506m by 31 December 2022 with further commitments in Fund II bringing our AuM to A$537m at 28 February 2023
Overall Capital commitments were up significantly on the same prior year period at A$107m
162 applications reviewed, made up of better quality, larger and more complex cases, with expectations of enhanced returns from these cases
Capital invested during the period increased from A$31.5m to A$56.9m
Total revenue A$3.0m with a further A$22.5m recognised post the period end
Adjusted loss for the period A$5.5m reflecting conservative revenue recognition. Post balance sheet resolutions would have increased LCM only performance to an adjusted operating profit of A$6.3m
Post period events and outlook
Post Year End first successful settlement from a Fund I co-investment, generating ROIC of 278% for LCM’s balance sheet contribution and expected to contribute A$6.3m to gross profit
Post Year End successful settlement on one of LCM's 100% direct balance sheet investments which was an Australian class action contributing approximately A$5.8m to gross profit
(Capital commitment means the total estimated budget of an investment)Commenting on the results, Patrick Moloney, CEO of Litigation Capital Management, said: “I am pleased we have continued to make progress on our Fund Management business, which has the potential to bring superior returns to LCM, as demonstrated by the first successful settlement from a Fund I investment, producing favourable outcomes both for the Fund and our balance sheet.”“Building on the increased levels of commitments in the period, we expect more investment opportunities to present themselves, in part due to the counter cyclical nature of our business, and as moratoriums against insolvency and restructuring disputes are relaxed. Our track record shows we are well positioned to capitalise on these opportunities, wherever they present themselves in the world.”LCM will be hosting a webinar for investors today at 11.00 a.m. The presentation is open to all existing and potential shareholders. If you would like to attend this presentation, please register using the following link:https://www.investormeetcompany.com/litigation-capital-management-limited/register-investorA webinar presentation for analysts will take place at 9.00am. Analysts wishing to attend should contact: lcm@tavistock.co.uk to register.The accompanying results presentation is available on LCM's website:https://www.lcmfinance.com/shareholders/investor-presentations-results/The Interim Financial Report is available at:https://www.lcmfinance.com/shareholders/annual-reports-financial-reports/
The International Legal Finance Association (ILFA), the only global association of commercial legal finance companies, today announced that Contingency Capital has joined the organization as its 20th member. “As the only global association representing the commercial legal finance industry, ILFA is excited to welcome Contingency Capital as the organization’s 20th member,” said Gary Barnett, ILFA’s Executive Director. “The addition of Contingency Capital serves as a landmark moment for the growth of ILFA as an organization, as well as the commercial legal finance industry at-large.” “Contingency Capital’s investment strategy leverages our litigation expertise to build diversified pools of legal assets,” said Brandon Baer, Founder and Chief Investment Officer at Contingency Capital. “As the asset class attracts increased interest from institutional investors, we look forward to working alongside our fellow members to build a broader understanding of the legal finance industry,” said Baer. Since ILFA’s inception in 2020, the association has grown from six to 20 members, representing the world’s leading providers of commercial legal finance. During this time, ILFA has established itself as the undisputed global voice of the legal finance industry, by lending its voice to major legislative and regulatory debates in a variety of jurisdictions and relevant bodies, including in Europe, Australia, the U.S. and international arbitration institutions. Further, the association hosted its inaugural International Legal Finance Conference at the historic Morgan Library in New York City, with plans to hold additional events throughout the world this year. About the International Legal Finance Association ILFA represents the global commercial legal finance community, and its mission is to engage, educate and influence legislative, regulatory and judicial landscapes as the global voice of the commercial legal finance industry. It is the only global association of commercial legal finance companies and is an independent, non- profit trade association promoting the highest standards of operation and service for the commercial legal finance sector. ILFA is incorporated in Washington, DC, and has local chapter representation around the world. For more information, visit www.ilfa.com and find us on Twitter @ILFA_Official and LinkedIn. About Contingency Capital Contingency Capital is a global asset management business focused on credit-oriented legal assets. For further information on Contingency Capital please see www.contingencycapital.com.
The following article was contributed by Lionel Martin (Partner, August Debouzy), Pierre-Olivier Ally (Counsel, August Debouzy), Ben Quarmby (Partner, MoloLamken LLP) and Jonathan E. Barbee (Counsel, MoloLamken LLP). Europe’s Unified Patent Court (UPC) is on the cusp of launch, confirmed for this June 1, 2023. It has been eagerly anticipated by the patent litigation community across the member states—starting with 17 European countries, but expected to extend rapidly to all of Europe minus Poland, Spain, Croatia, and, most notably, the UK. The UPC has been long in the making: over ten years have passed since the agreement was first signed. What is to be expected of this new court, and what opportunities does it present for litigation funders? Uniformity and Scale. The principal goal of the UPC is to offer a single, consistent, and coherent court system in Europe for the litigation of patents. Historically, procedural differences in the member states’ national patent and court systems meant that the timeline of patent litigation could vary wildly from one jurisdiction to the next. The jurisdictions also differed on substance: infringement, validity, and injunctive relief rulings were not consistently applied across the board. And the one way in which the national jurisdictions were similar—comparatively low damages models—acted as further disincentive for patent owners looking to enforce their rights. The UPC promises to overhaul that system entirely. It is expected to issue speedy judgments on both infringement and validity. It should set the scene for damages verdicts that are not only more consistent across jurisdictions, but also generally much greater in size—as one would expect for verdicts covering at least 17 member states. And it promises greater accessibility and uniformity insofar as English will be the preeminent language of infringement proceedings in any matter involving allegations of infringement extending beyond a single member state. The UPC must now live up to that promise, and there is some uncertainty as to how the system will play out in its early stages. Will the court be able to keep up the expected pace? What standards will the court rely on when imposing preliminary injunctions? How will damages awards be limited or expanded? How will the appellate process work? How will early litigants help shape the law and jurisprudence of the UPC? Those questions and many more will have to be answered in the coming months and years. But if the UPC delivers on even part of its promised mandate, it may represent an exciting new arena for litigation funders working with patent owners to enforce their rights. Indeed, there is reason to believe that the court will strive to be patentee-friendly—at least at the outset—in order to attract its “customers”. Opportunities for Litigation Funding. Many of the key features of the UPC as currently contemplated, align neatly with the incentives and priorities of litigation funders and patent owners.
Broader Geographic Reach. The UPC makes multi-jurisdictional patent campaigns cost-effective and efficient by allowing plaintiffs to target infringement across at least seventeen countries in one court proceeding. Plaintiffs no longer need to pick and choose the countries in which to enforce their patents. The reach of the UPC is likely to expand further: the UPC is expected to be integrated into European mutual recognition mechanisms that will allow the UPC’s jurisdiction to extend not only to the EU but also to Switzerland, Norway, and the UK. While these mutual recognition mechanisms have long existed, national courts have historically been reluctant to rely on them. The UPC, by contrast, is expected to do so much more regularly.
Reduced Transaction Costs. Reliance on a single proceeding across multiple countries will cut down on the costs of litigating in multiple European countries in parallel. The UPC will therefore dramatically reduce the resources necessary to launch and maintain a multi-jurisdictional campaign in the EU. The UPC will also cut down on the logistics and transactional costs associated with such campaigns. A plaintiff, for example, no longer needs to hire three separate teams to enforce patents in, for instance, France, Germany, and Italy, and pay additional fees for those three teams to coordinate to ensure coherence across jurisdictions.
Short Time to Trial. UPC proceedings will expedite the pace of patent campaigns. Some commentators suggest that proceedings will only take 12-15 months from complaint to final ruling—a significant boon for patent owners looking to promptly and efficiently enforce their rights. If this holds true, and if sustainable, this pace would rival the speed of some of the fastest dockets among U.S. district courts.
Efficient Evidence Gathering Procedures. Unlike the U.S., there is no formal discovery in the UPC, which significantly reduces litigation costs and can expedite proceedings. But the UPC offers several key features that will be of value to patent owners: (i) plaintiffs may move to seize evidence of infringement from a defendant’s premises, and (ii) they may obtain court orders to force defendants to produce documents.
Larger Damages Awards. Since UPC judgments will cover more countries and consumers, the potential damages awards should be considerably larger than they would be in a single jurisdiction. This should help drive up the value of settlements, and put more pressure on defendants to settle earlier. It also radically tips the scale on the economics of patent litigation funding in the EU. Suddenly, the EU becomes an attractive venue in-and-of-itself for funders—not just an ancillary venue in support of higher-stakes U.S. litigation.
Broad Injunctive Relief. The UPC will allow patent holders to seek injunctive relief across multiple countries in one shot. This too should help drive bigger and earlier settlements—a boon for funders looking for a rapid return on their investment.
High-Quality Decisions. It is expected that the Court will render first-rate decisions for two principal reasons: (i) it has attracted seasoned IP judges from across Europe, and (ii) the judges consist of a mix of legally and technically qualified judges. Furthermore, due to the high specialization of the Court, the number of judges will be quite limited (<100), which may help contribute to greater respect for precedent from fellow judges, which in turn leads to greater predictability for litigants.
Will the UPC be able to deliver on all of these fronts? Only time will tell. But for a savvy funder looking for an early mover advantage in a relatively underdeveloped market, and with the opportunity to potentially help shape early UPC jurisprudence in ways that will benefit patent owners for years to come, these are exciting times indeed . . . .
Many industry observers, surveys and reports have found that ESG litigation and particularly climate litigation will continue to grow as a dominant force in the legal landscape, and there will undoubtedly be a major role for litigation funders to play. A recent article provides an overview of the current state of third-party funding of climate litigation, looking at some of the most notable cases as well as the growing pool of opportunities available to investors.In a feature for The Wave, Isabelle Kaminski speaks to industry leaders and looks at the growth of litigation finance as a tool for empowering legal cases against those entities that violate environmental protections and regulations. Assessing the unique nature of third-party funding, Anna Carolina Salomão, partner and head of litigation finance at Pogust Goodhead, states that the differentiating factor is that funders are willing to take on the significant risks of funding litigation. As a result, third-party funders are creating “a vast ocean of opportunities for those that have their rights abused.”Kaminski highlights the fact that whilst litigation funders can choose to pursue whichever type of cases they choose to, many are actively seeking out ESG-focused cases, and avoiding those which would be representing claimants on the opposing side of environmental issues. Thomas Kohlmeier, co-founder and co-CEO of Nivalion, highlighted an example where the funder considered a case being brought by a mining company against a state government, and declined to move forward despite the fact that the “case looked at first glance meritorious”.Salomão also took aim at critics of litigation funding, particularly the lobbying efforts from the likes of the Chambers of Commerce and large multinational corporations seeking to curtail third-party funding. In particular, she questioned why these entities are opposed to funders supporting financially poor communities seeking justice, and suggested that the reason is “because it's not beneficial for the big polluters that people now have ways to seek redress.”
The UK’s Competition Appeal Tribunal (CAT) has become a hotbed of activity for class action style lawsuits, as consumers look to achieve legal and financial redress against powerful companies. Many of these claims would not be able to succeed without the support of litigation funders, as is once again being demonstrated in a claim brought against British rail firms, which is being funded by Woodsford.Original reporting by the Evening Standard provides details on the claim brought against Southeastern and South Western Railway, as it attempts to expand its targets to include Southern, Thameslink and Great Northern, as well as these firms’ parent companies. The focus of the claim centers on alleged failures by these rail companies to offer customers with Travelcards lower-cost ‘boundary fares,’ instead selling them more expensive tickets from central London.The hearing before the CAT will also examine whether the case should allow for the intervention of the Department of Transport, and whether the claim should include ‘season ticket holders’ as well as the existing ‘single ticket’ customers. The claim’s existing scope covers approximately 240 million train journeys dating back to November 2015, with an estimate of 3.2 million customers who were supposedly charged higher fares.
The topic of litigation funding as it relates to patent litigation has most recently been dominated by discussions around court battles over disclosure, with critics of the industry honing in on this area as one they claim is most at risk of abuse from third-party funding. However, as a recent podcast highlighted, these arguments overlook the benefits provided to those seeking to acquire or enforce patents to protect their technology.In the latest episode of IPWatchdog’s Clause 8 podcast, this perspective was shared by Lillian Shaked, a founding partner of Shaked & Co., and the vice president of licensing for Transpacific IP. In the interview which covered a wide range of topics, Shaked noted that litigation funding had a transformational impact on the patent monetization industry. This was due to the fact that patent acquisition and licensing had become a process that could take three to five years to complete, and without the financial resources provided by third-party funders, it would have been extremely difficult for both businesses and individuals to adequately assert and license their patents.Shaked also stated that one of the biggest changes she has witnessed in the activity of litigation funders is a switch from a passive to proactive approach to securing deals. Funders are actively seeking out deals that align with their own interest and experience, rather than waiting to be approached by those seeking capital.
In December of last year, the GAO published its report on third-party litigation finance, detailing the current trends and characteristics of the industry in the U.S. The report aimed to provide a much-needed resource of publicly available data on the market, and examine the potential policy implications of its result, which has led to industry commentators looking to analyze what, if any, impact the report will have.In a new piece of analysis by Lake Whillans on Above The Law, the GAO report is praised as being ‘a generally helpful and balanced overview of the state of the funding industry’, both in terms of providing a factual resource, as well as its value to future policy discussions. Importantly, the analysis notes that while this report came about due to the requests of legislators at the federal level, the actual findings of the report avoid dictating any prescriptive regulatory recommendations. This stands in stark contrast to the European Union’s Voss Report.Regarding the potential impact of the report, this article suggests that the report will be a disappointment to those parties looking for ‘ammunition’ to bolster their calls for increased disclosure requirements, and that it instead demonstrates the US regulatory structure as being broadly aligned with other prominent jurisdictions. Lake Whillans argues that the most notable aspect of the report are its findings on the lack of publicly available and accurate data, which may prove beneficial by incentivizing other industry bodies and third-party organizations to increase their research into the litigation funding industry.
Whilst the relationship between funder and client is usually mutually beneficial and harmonious, like any type of business partnership there are going to be examples where the opposite is true. In one of the more high profile examples in recent times, one of the world’s leading litigation funders has found itself on the receiving end of a lawsuit from a client, which is claiming the funder is stopping it from settling a number of cases.Reporting from Bloomberg Law reveals that Sysco, an American wholesale food distributor, is suing Burford Capital for blocking its attempts to resolve cases, alleging that Burford is “prioritizing its greed over Sysco’s rights and interests as the plaintiff.” In response to the claim, Burford stated that the settlement amounts are not sufficient in comparison to the value of the claims it had funded, having previously secured an arbitration rule that blocked Sysco from closing these settlement deals.Burford asserted in a statement to Bloomberg that Sysco had broken the terms of the funding agreement, which led to Burford enforcing its right to block the settlements. Burford’s CEO, Christopher Bogart, stated that the breach of the funding agreement had “led to a fundamental economic misalignment between Sysco and Burford of no fault of Burford’s, that in turn led to a unique set of contractual provisions and ultimately to this dispute.”Sysco’s lawsuit aims to secure a court order to set aside the arbitration panel’s ruling, arguing that “Sysco has been forced to litigate against its will against key suppliers who have offered fair and reasonable settlement payments.” Boies Schiller Flexner is also involved in this lawsuit as the original law firm that represented Sysco in the antitrust claims that Burford had funded, with the law firm stating that it “strongly disputes” the allegations made by Sysco in the lawsuit against Burford.
With the global litigation funding industry growing to new heights each year, the world’s leading funders are keen to ensure that they stay at the head of the pack by looking for the best opportunities now and in the near future. In a new interview, one of Omni Bridgeway’s senior leaders offers his view on what key areas define litigation finance at present, and where the biggest growth opportunities are located.In a wide-ranging interview with Global Restructuring Review, Jim Batson, co-chief investment officer for Omni Bridgeway, provides an overview of the firm’s involvement in bankruptcy and insolvency activity. Speaking on the evolution of financing for bankruptcy litigation, Batson highlights that parties have become increasingly comfortable with the practice as awareness and experience has evolved. He also notes that Omni has become involved with more complex bankruptcy proceedings in jurisdictions such as Texas, New York and Delaware, where there is more familiarity with third-party funding. Outside of bankruptcy litigation, Batson argues that whilst litigation funding has always been an ESG investment product due to its focus on widening access to justice, there are now more opportunities for focused ESG investment, and Omni is exploring the creation of a fund exclusively dedicated to ESG legal funding. Outside of Omni’s core markets, Batson sees opportunities for growth in both the Latin American and Asia Pacific regions, as countries such as Hong Kong and Singapore continue to evolve their regulatory approach to litigation funding.In terms of other sectors that Omni Bridgeway is focusing on, Batson spotlights the antitrust arena which has benefitted from the Biden Administration’s policies. In addition, it is no surprise to hear that patent litigation remains a top priority, with Batson emphasizing that it is particularly active in both the US and in Germany.
Australia has always been one of the most prominent markets for litigation funding, with a healthy array of major funders operating. And the funding industry has recently been bolstered by the Aussie government’s plans to relax regulation around the practice. As a result, it is no surprise that we are seeing the emergence of new funders, as well as other fintech companies now looking to diversify and take part in third-party funding.A feature by Australian FinTech reveals that there is a new entrant to the Australian market, as an existing fintech company, Capital & Centric Funding (CCF), announced that it would be dedicating resources to pursuing litigation funding opportunities. Mona Chiha, CEO of CCF, stated that the firm is aiming to achieve ‘a positive impact on our community’ through its litigation funding activities, and will continue to partner with leading Australian law firms.CC&F had previously launched its Litigation Disbursement Loan product in October of last year, which will now be complemented by the Litigation Fund. Chiha emphasized that the fund would prioritize financing litigation for ‘victims of crime and negligence,’ and that its engagements with third-party funding would enable it to pursue ‘both financial gains and social responsibility’.
The demand for third-party litigation funding continues to remain high, and there are no shortages of providers out there. However, there are those in the industry who see an opportunity for an intermediary party who can connect funders, investors, brokers and other parties, in order to create more opportunities for access to justice. An article by Commercial Dispute Resolution covers the launch of the Lexolent network, which is aiming to be the ‘world’s first globally coordinated origination network for legal finance professionals’. Lexolent was officially launched in January by Nick Rowles-Davies, who brings vast experience in the industry having previously co-founded Vannin Capital, founded Chancery Capital and held senior positions at both Burford Capital and Litigation Capital Management.Rowles-Davies intends for Lexolent to play a pivotal role connecting investors to obscure or niche litigation that they might not have otherwise found, whilst also creating opportunities for the established funders. Lexolent also boasts its own Early Execution Fund, which will enable the network to finance a number of cases by itself, with the aim to sell these claims after 12 to 18 months, unless they conclude beforehand.
As litigation funding continues to grow in size and impact, a vibrant conference and event circuit is beginning to materialize. Now in its second year running, LITFINCON returned to Houston and provided two days of engaging discussion and insights from industry leaders and analysts.Reporting from Above The Law provides an overview of the event, with Gaston Kroub, founding partner at Kroub, Silbersher & Kolmykov, highlighting it as a ‘conference best not to be missed’. The article highlights the event’s judicial panel as a standout feature of the agenda, which included current and former judges from both federal and district courts. The presence of Judge Alan Albright from the Western District of Texas was particularly highlighted, as he shared his insight into the huge volume of patent cases on his docket in 2022, around the topics of disclosure and damages presentations.Kroub also emphasized the collegiate environment at LITFINCON, noting that despite the presence of industry figures who would consider one another competitors, there was a ‘cooperative spirit’ among panelists which enhanced the event. Finally, Kroub pointed out that the event stood out for the differing and creative approaches to litigation funding demonstrated by those in attendance, and stated that ‘the litigation funding space is in no danger of becoming a stale segment of the broader legal landscape’.
After the Event (ATE) insurance is a crucial tool for those pursuing litigation who are looking to reduce their risk of financial exposure, whether it is the litigants themselves or the funders who are backing the legal action. However, as one industry expert has highlighted, it is not simply a matter of securing ATE insurance when engaging in litigation, but also ensuring that there is a sufficient level of cover to protect against those scenarios where a case is unsuccessful.In a new insights piece by Rocco Pirozzolo, managing director at Harbour Underwriting, the issue of quantifying the right level of protection needed is addressed. Mr Pirozzolo points out that attempting to make an accurate assessment for costs exposure is never ‘a precise science’, but lays out several factors that can be used to make a reasonable determination, such as the claimant’s budget and the number of defendants.The article highlights that the best practice for assessing the level of cover required is to ‘assume the worst-case scenario’, to ensure that both the claimant and litigation funder are protected from any punitive orders. Pirozzolo emphasizes that the initial purchase of insurance is not the end of the story, and that litigants should continuously review the position, especially when an action proceeds to trial and therefore increases the financial risk that needs to be covered.
As LFJ recently reported, despite the gradual relaxation of rules around Alternative Business Structures (ABS) for law firm ownerships in some states, we have yet to see a wider adoption of the practice across the U.S. However, one investment company is already taking advantage of the new rules in Arizona to form a business that acts as both a patent database and a law firm designed to offer an end-to-end service for new tech startups. Reporting in Bloomberg Law details how MDB Capital Holdings, a Dallas-based investment company with a focus on intellectual property, secured approval from Arizona’s ABS committee to launch PatentVest as an approved law firm. MDB’s chief executive, Chris Marlett, described how PatentVest is designed to provide inventors with all the services they need to nurture their technology, protect those inventions with strong patents, and provide an opportunity for some of these startups to go public. Marlett notes that by combining the investment facility and legal services in one business, this will allow clients to reduce the cost of legal services whilst also unifying the entire technology development and patent strategy process in one place. Whilst some critics of outside ownership of law firms have pointed to potential conflicts of interest between the investment incentive and the legal process, Marlett suggests that traditional law firms are incentivized by generating a high volume of billable hours, whilst PatentVest is focused on developing successful technology leaders.
Litigation funding is perhaps most powerful when it is deployed to support consumer claims against large corporations, leveling the balance of power in a way that was previously impossible. One industry that may be ripe for such legal actions is the videogame industry, which includes a massive consumer market and has been the site of repeated allegations of exploitative business practices. An ongoing series of class action lawsuits in Austria highlights this potential, as reporting from GamesWirtschaft covers a series of cases brought against Sony Interactive for its selling of ‘loot boxes’, which the claims allege should be considered as gambling. Five lawsuits were brought on behalf of consumers by the law firm Salburg Rechtsanwalts and financed by Vienna-based funder, Padronus. The class action cases alleged that the value of these digital items is based on chance, and therefore would fall under the Austrian Gaming Act. A ruling from the District Court of Hermagor on February 26 stated that the sale of these loot boxes constitutes ‘illegal gambling’ due to the fact that Sony Interactive does not have a gaming license. The court ordered that without this license, any contracts with consumers are void and Sony must refund the consumer for the loot box purchases. Padronus’ managing director, Richard Eibl, highlighted the significance of the case and said that “the verdict is a bang for the entire video game industry”, as it will have implications for other videogame companies that sell these in-game loot boxes. Whilst the ruling may still be appealed by Sony Interactive, Eibl stressed the importance of these claims in shedding light on how companies are allegedly exploiting the addictive nature of these loot boxes to target consumers.
The development of technology and media channels the support law firms connecting with potential plaintiffs has made it easier than ever to launch mass torts. In combination with the growing availability of litigation funding, this has created an environment that one industry commentator fears is encouraging ‘questionable claims’ and burying defendant companies under massive settlements. In an op-ed for Bloomberg Law, Philip Goldberg, managing partner of Shook Hardy & Bacon, argues that the tremendous volume of these mass tort claims is creating an atmosphere where courts are more likely to give the benefit of the doubt to these claims, rather than diligently assessing their merits. Simultaneously, the large sums of outside investment through third-party legal funding is also driving up the value of settlements, as the emphasis for funders and law firms is on maximizing the financial return. Goldberg also highlights that this litigation is becoming increasingly dominated by multi-district litigation (MDL), with the number of MDLs rising from 73 active cases in 2013 to over 300 at present, with mass torts comprising 90% of those active cases. Goldberg argues that companies turning to bankruptcy procedures, such as in the J&J talcum powder litigation that LFJ covered, is not being done for cynical reasons, but instead as a last resort to resolve these claims. It should be noted that the Appeals Court denied J&J’s attempt to use bankruptcy protections in this case. In closing, Goldberg argues that MDL judges must take a thorough approach to this wave of mass tort litigation, and diligently assess the merits of each of these claims as a starting point, to ensure that the system is not abused.
Coverage of litigation funding often focuses on activity in major Western markets, but there continues to be a growing ecosystem of third-party financing in other jurisdictions around the world. This is especially true in the world of international dispute resolution, where complex cross-border disputes often necessitate outside financing in order to bring cases against foreign entities.In a post on LinkedIn, Indian litigation finance provider Lawsuit Ventures, revealed that it had reached a successful resolution for an international dispute brought by an Indian claimant against a Saudi Arabian entity. Lawsuit Ventures had provided funding for the claim, which focused on a breach of contract by the Saudi Arabian respondent, who had allegedly failed to meet its payment obligations under the contract.Hiren Thadeshwar, founder of Lawsuit Ventures, stated that this case highlighted the value of litigation funding for Indian claimants and that the funding had removed “the significant financial and legal barriers that would have made this otherwise impossible.”
As the litigation funding industry continues to mature, there has been a lot of discussion about how funders can build relationships with in-house counsel and legal teams within companies of all sizes. With funders stressing the benefits of legal departments taking advantage of third-party funding, a new report provides insights into the current state of the relationship between funders and in-house legal teams in the UK.Crafty Counsel and Exton Advisors have released their white paper on ‘Dispute management and litigation funding - an in-house perspective’, which provides an overview of the challenges facing legal departments, as well as the opportunities available to improve their litigation management strategies. Most notably, the report found that “less than 7% of legal teams have used litigation funding”, demonstrating both a lack of awareness with the availability and differing use cases for outside funding.However, the report also highlighted that those legal departments who had experience working with litigation funders came away with a positive impression, as 86% of those who had accessed third-party financing expressed interest in using it again. In one particularly interesting insight, 64% of legal teams noted a desire for law firms to provide additional support and education for in-house counsel around options for litigation funding and alternative fee structures.
Class actions remain a popular target for litigation funders as 2023 progresses, driven by developments in countries’ regulatory framework for these actions, as well as particularly active sectors such as securities litigation. A new report by Broadridge Financial Solutions has found that not only is the volume of securities class actions on the rise, but the value of settlements resulting from these cases has experienced an even more dramatic increase.An article by The Global Legal Post provides an overview of Broadridge’s Global Class Actions Report for 2022, which highlights the factors powering this continued growth in class action activity. Broadridge identified that whilst new securities class action filings have yet to reach their pre-pandemic levels, 2022 saw an increase of 22% for a total of 160 individual filings, and the total value of settlements increasing by 142% to reach over $7.4 billion.Broadridge put the spotlight on both cryptocurrency and ESG-related litigation as drivers for growth, as well as the evolution of legislation around the process for opt-in class actions, such as the EU’s Representative Action Directive. This has also been supplemented by countries looking to develop new regulatory structures for the involvement of litigation funders in class action litigation, including New Zealand and Singapore, where the involvement of funders has been a key consideration.
Given the rapid pace of innovation and expansion in the global litigation funding space, it is helpful to engage reference tools to separate the wheat from the chaff. Mondaq's new Litigation Funding Comparative Guide guide spans 12 chapters, serving as an interactive tool for worldwide litigation franchise comparisons. Mondaq's new guide includes a bevy of options, including 12 global jurisdictions with subgroups, such as ethical considerations, legal framework, tips and traps. From there, additional information allows for comparative analysis by including a list of 60 subjects that are key to litigation finance business systems and processes for each jurisdiction. The guide aims to engage internationally recognized litigation finance professionals as subject matter experts to provide responses for comparative research. Mondaq claims that over time, the guide will expand to offer more detailed analysis of the litigation investment landscape globally.
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