A Patent Litigation I’d Like to Fund: What Litigation Funders Look for in a Patent Case

April 18, 2022

In our role as litigation funders, we evaluate hundreds of cases every year. While we decline to invest in the vast majority of them, about ten percent of the cases we see have the strength of claim and opportunity for recovery that make them attractive investments.

All patent cases have inherent outcome and duration risks. However, meritorious patent claims can have tremendous upside and certain venues are generally thought to be favorable to plaintiffs. So what makes a strong patent case presentation in the eyes of a funder? Here are some characteristics we like to see when a funding opportunity comes across our desks:

Well-developed infringement charts: The core of any patent infringement case is the patent claims and the alleged infringement. We like to see clear evidence of infringement by a target. We often prefer to see more than one patent proposed to be included in the suit to help reduce risk of an invalidity finding or summary judgment.

A compelling story: A key component of any patent case is a clear, compelling invention story. Whether you’re the inventor, the operating company, or a non-practicing entity in partnership with the operating company, convey your relationship to the invention. Explain how you might demonstrate the importance of the invention (and how it compares to what came before it) to a jury.

An explanation of the technology: An experienced funder of patent litigation will have a strong background in technology and IP, but that doesn’t mean they will immediately grasp the nuances, functionality, and value of your invention. Provide a clear, simple explanation of your invention and how it improved the landscape. If you’ve already conducted a prior art search, let the funder know what was included in the results.

A well-defined litigation strategy: Just as weapons and soldiers aren’t enough to fight a battle, a strong patent and obvious infringement don’t stand on their own in court. You need a strategy, and you will want to present it to the funder in a way that explains how the battle will play out. How will you execute your enforcement campaign? Who are you suing, and, if more than one party, in what order will you undertake the claims? What venue have you chosen in which to file your claim, and what guidance and case law exist that may affect the likely outcome of your case? Have IPRs already been filed, or are they likely to be filed? How do the patents look in terms of subject matter eligibility? Is the target likely to file counterclaims?

Reasonable damages analysis: Think through what constitutes a reasonable claim for royalties or lost profits, figuring apportionment into the equation. Don’t present irrelevant statistics about the size of the overall market and potential but abstract losses. Damages estimates often prove to be far greater than actual awarded judgments – be realistic. Let the funder know if the patents have been previously licensed or litigated, as that may affect the damages analysis.

Clear budgeting: In addition to the merits of the case itself, a funder will consider the economic aspects of your litigation. How much do you expect to spend on legal fees, court costs, and out-of-pocket expenses such as experts? What delays or other unexpected barriers might affect those estimates? Consider the worst-case scenario in terms of time to trial and expected recovery, as that’s what the funder will be doing.

Candidness about weak points in the case: Don’t try to hide problematic aspects of your case. Instead, be upfront about concerns you have based on the success or failure of previous challenges to the patent’s validity. Trials quickly reveal the weaknesses of your case, and the funder will work with you to strategize how to make the case as strong as possible. If you have a battle-tested patent, that may mean that the warts of the case have already been exposed in court and it is well positioned for trial, or it may mean that the patent has less life left on it and that it has been weakened to the point that eventual failure is inevitable. Either way, your funding partner will want to be prepared.

Litigation funders assess all aspects of a case, from the tiniest details (has the patent expired or been abandoned because no one bothered to pay the maintenance fees?) to the broadest implications (are you planning to sue Apple in a case involving mobile technology? Get in line). When pitching your case to a litigation funder, always be clear, honest, and reasonable. Remember that your litigation funder is your partner. They share your drive to bring a meritorious claim to court, and you should understand that if they decline to fund your case, there’s probably a good reason.