Getting US Patent Cases Funded
Martin Lueck, Chief Legal Officer and Senior Managing Director of Delta Capital Partners Management LLC, discusses US patent case funding.
Martin Lueck
Types of funding
There are two major types of funding available in the marketplace: non-recourse equity funding for patent holders and claimants and credit facilities made available to law firms, on a portfolio basis.
If the claimant has a single patent, or a single set of patents, and wants to finance a particular piece of litigation, they will seek equity financing where the funder will advance the costs and the return will be based on either a a percentage of the recovery or a multiple of the amount of advanced funds.
In credit facilities, the funder lends to a firm on a non-recourse basis secured by a number of contingent fee arrangement cases that the firm may have, including non-patent cases.
“US patent litigation is very expensive. Up to USD10 million is not uncommon.”
Funding is attractive to claimants because of the prohibitive cost of patent litigation in the USA, often running into eight figures. Funds that could otherwise be used for their business operations.
The uniquely high returns for investors explain the attraction for funders. Patent cases can generate very high judgments and settlements.
Specific challenges of patent cases
Patent cases are unique, US patent law is highly structured and very complex and there is an enormous amount of case law. The cases are both legally and technically complex, typically requiring top-level expertise.
The duration of patent cases is another important concern for funders. It can take a long time to move a case through a district court, this is often complicated by inter partes review. In addition, cases often need to be tried in both the district court and the Federal Circuit.
“Venue selection is also important; those with patent-specific rules, short timelines between filing and trial and where inter partes review is less likely to cause a stay are ideal.”
Given these challenges, it is vital for claimants and their firms to offer funds the best possible roadmap of the case upfront, giving funders comfort that the key offensive and defensive issues have been analysed.
Elements of a great patent case
Patent cases require an inventor who can tell a story that will resonate with the jury and communicate the spark of invention. In addition, claim construction issues, given that they will define the scope of infringement and invalidity, are vital when considering the merits of the case. In software cases, detailed Section 101 analysis will be expected by funders from the claimant firm.
“Trials are won by putting compelling stories in front of juries.”
As a rule of thumb, funders look for realistic, provable damages that are ten times the amount funded. They will also want to be able to evaluate the specific issues that impact patent damages: the royalty base and rate, how long will the patent be in effect and are retrospective damages possible.
How to get funding for a patent case
The credibility of a trial team is critical to getting a patent claim funded. Investors are looking for lawyers with actual experience of trying patent cases and a proven track-record of success. They will also need to be supported by skilled and experienced economist who can explain the damages theory to a jury in plain language.
Funders require reassurance that the claimant and firm will continue the case all the way to the conclusion of an appeal even if the funding runs out. Detailed budgets are demanded.
Claimants and firms looking for funding should come prepared with a detailed analysis of the merits of the case on both legal and technical terms, not expect the funder to have the capacity to analyse this themselves. They must also have a well-thought out strategy covering the length of the case and giving the funder confidence that the case will resolve within its duration window.
Delta Capital Partners Management LLC
