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Inventor Leverages Litigation Funding to Beat Microsoft

One of the great benefits of third-party legal funding is the ability for small companies and even individuals to fight on a level playing field against the world’s largest corporations. This dynamic was made evident in a recent case, where a US inventor was able to achieve a $10 million award for patent infringement from Microsoft, after enlisting the support of a litigation funder.

Detailed in an article by Bloomberg Law, inventor Michael Kaufman has been in a decade-long struggle to receive compensation, after he alleged that Microsoft infringed his technology patent by using it in their Visual Studios Software. However, it wasn’t until he and attorney Ronald Abramson sought funding from Woodsford Litigation Funding that he was able to take Microsoft to court with previously inaccessible financial resources to fight the case.

Whilst Microsoft initially claimed it had not used the patented product to a significant degree in 2019, lawyers for Abramson discovered that this was only true for the previous year, and Microsoft had in fact been substantially using the product in prior years. After an appeal in federal court, the panel opinion stated that Kaufman should have received royalties from the product usage dating back to 2011.

Whilst victories in patent infringement cases for individual inventors is rare, Nicole Morris, a professor at Emory School of Law, highlighted that in situations where they can receive third-party funding, inventors are determined litigants due to their desire to see their own invention and work recognised.

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SEC Sues Father and Son over Fraudulent Mass Tort Funding Scheme

Whilst litigation finance is now a mature and established industry, this does not stop rogue actors from engaging in fraudulent schemes to try and reap personal benefit at the expense of unwitting investors.

Reporting by Bloomberg Law provides details on a lawsuit brought by the Securities and Exchange Commission (SEC) against a father and son in Florida who are accused of using a supposed litigation funding scheme to defraud investors out of $125,000. The lawsuit filed last Friday alleges that Michael Chhabra and Vineet “Vincent” Chhabra set up Tort Fund LLC in April 2019, claiming that the company would provide litigation finance to law firms, when in reality the pair used it as a personal fund for their own legal fees and miscellaneous expenses.

The SEC’s suit, which was filed in the United States District Court for the District of Columbia, claims that Tort Fund LLC’s owners had advertised the fund as a way for investors to support mass tort cases being brought against medical device and household product manufacturers, but did not enter into any funding agreements with law firms to do so. The $125,000 raised was then used to cover legal costs in Michael Chhabra’s own bankruptcy proceedings, paying for the pair’s personal expenses, with around $40,000 spent on maintaining the fraudulent scheme by paying individuals who solicited new investors. 

In its lawsuit, the SEC is asking the court to impose civil penalties and pay out the profits from the scheme, and to prohibit the pair from running any companies that have a class of securities registered in the future. The SEC’s filing can be read here.

Case Developments Commercial

Dutch Supreme Court Denies Sulu Heirs’ Appeal to Enforce Arbitration Award

The long-running dispute between Malaysia and the heirs to the Sultanate of Sulu has been one of the most high-profile cases in recent years, and one that has generated plenty of debate about the role of litigation funders in legal proceedings targeting national governments. A new development in the dispute has seen the Sulu heirs receive yet another unfavourable judgement, with potentially negative implications for their litigation funder, Therium Capital Management.

Articles in Bloomberg Law and Solicitors Journal covers last week’s ruling from the Supreme Court of the Netherlands, which dismissed the Sulu heirs’ appeal to enforce the disputed arbitration award given out by arbitrator Dr. Gonzalo Stampa in Paris. As a result of the Dutch Court’s ruling, the Sulu claimants will now have to cover the legal costs for the appeal and have lost the opportunity to enforce the award by seizing Malyasian assets in that jurisdiction. The finality of this ruling represents a blow to Therium, which invested $20 million in the Sulu heirs’ claim.

Azalina Othman Said, minister in the Malaysian Prime Minister’s Department (Law and Institutional Reform), stated: “Malaysia welcomes this landmark ruling as a momentous victory for the rule of law, representing a further step towards the end of the Sulu case and the preservation of the sanctity of international arbitration as an alternative form of dispute resolution.”

Therium did not respond to Bloomberg Law’s request for comment at the time of publication.

Case Developments Commercial

FORIS AG Announces Settlement in Dispute Over Deutsche Bank’s Postbank Takeover

By Harry Moran |

Whilst third-party funding is less commonly seen within the various European Union jurisdictions, a landmark case in Germany that dates back to a 2010 takeover of Postbank has finally achieved a settlement according to the litigation funder that provided the financial backing for the claim.

An announcement from German litigation funder FORIS AG revealed that a settlement has been reached in the legal proceedings brought against Deutsche Bank related to the bank’s takeover of Postbank in 2010. FORIS had financed two claims that represented a total of 19 Postbank shareholders, and following the agreement with Deutsche Bank, all that remains is for the plaintiffs to decide whether or not to accept the settlement.

The claims which were first brought in 2017 focused on allegations that Postbank shareholders had been underpaid for their shares, when they were forced to accept 25 euros per share. The settlement provides for each shareholder in the claims to receive an additional payment of 31 euros per Postbank share they held at the time of the takeover, with the total value of the dispute estimated at around 4.5 million euros.

Dr. Anke Warlich, senior legal counsel at FORIS, said that the funder was pleased with Deutsche Bank’s willingness to settle and that there was already a high approval rate for the settlement amongst the shareholders whose claims FORIS has financed. Warlich emphasised that without third-party litigation funding, the risk and costs involved in pursuing such a claim would have meant that the injured parties would not have been able to take on these legal proceedings.

The plaintiffs in the claims were represented by the law firms AWARR.legal/Schirp &Partner and Nieding & Barth.