How to Get Outside Investors to Fund Your Patent Litigation Expenses

A small stationary products manufacturer used it to successfully defend its self against a large competitors claims. A small computer game company used it to defend an infringement suit by a major entertainment studio. And a small company used it to sue some of the largest US telecommunications companies for patent infringement.

Patents are valuable business assets.  Someone infringing on your patent costs you lost revenue opportunity, and a potentially costly litigation to enforce your rights.

Patent litigation is a billion dollar business. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit is $1 – $ 3 million, and takes years to get to trial. In a 2014 study just released by Price Waterhouse Cooper (PWC) confirmed that patent litigation favors big intellectual property owners.

The study broke the types of patent litigants into three categories.  Of these three Non Practicing Entities (NPE) were successful 31% of the time in patent cases brought since 1995.  The success rate for universities and non-profits was 48%.  But for small companies and inventors, it was only 18%. You can view this report at this link:

http://www.pwc.com/en_US/us/forensic-services/publications/assets/2015-pwc-patent-litigation-study.pdf

Large companies with big budgets can afford these types of patent cases. But smaller companies often don’t have the financial resources to afford a costly infringement lawsuit.

Within the last few years, a new breed of company in the intellectual property space has appeared. Sometimes known as “litigation venture capital firms” these companies make direct investments in patent litigation. These outside investors offer to pay for a lawsuit, in exchange for a share of the payout: from 30% to 60%.

The growing demand for outside patent litigation funding is outstripping supply. The global litigation-finance industry is estimated to generate more than $1 billion. While that’s currently only a small part of all litigation that’s funded by outsiders, patent litigation is projected to grow much more.

The firms work with patent owners for a percentage of any award. Some of the higher profile companies include Burford Capital, Juridica Capital Management, Arca Capital Partners, Juris Funding and even a unit of Credit Suisse. These firms raise hundreds of millions of dollars from inventors. They “invest” $2 – $15 million in legal fees, and typically focus on cases with claims of $25 million or more.

If you’re facing a patent dispute against a more powerful and well-funded entity, working with a litigation financier can help level the playing field, especially if you’re a small business up against a large entity. Rather than bearing the entire financial risk, a litigation fund pays the legal proceeding costs giving you the resources to “go the distance” in defending your IP rights.

Leave a Reply

Your email address will not be published. Required fields are marked *