Litigation Financing in Limine | Above the law
One of the funny things about modern patent litigation is that there is, at least on the non-pharmaceutical side of things, a pretty narrow stable of “big” defendants that patent owners are targeting. I don’t have to name the usual suspects, but they tend to share a number of characteristics. Whether these are consumer brands, operating their own multi-unit retail stores or a nationwide mass market retail presence (Walmart, Best Buy, etc.) , or both, is a major asset for a large defendant. Add the top vendors for these brands, along with the top social media and web search providers, and you have pretty much the top targets list, especially for well-funded NPEs looking for a big paycheck. Supporting these NPEs is a veritable multitude of funders, ready and able to deploy capital in support of the rare patent case which they deem fundable. To counter this threat, most, if not all, frequently targeted defendants tend to have a roster of talented internal and external litigation lawyers, as well as a willingness to argue harshly in the face of what they are facing. deem unreasonable claims of patent applicants. With these capabilities complemented by third party patent defense impresarios, we end up with a fairly level playing field when it comes to NPE-funded patent litigation against prominent defendant.
Other than a level playing field, cases that result in a lawsuit against a major defendant are relatively rare. Whether it is because the parties have reached a settlement or because the defendant has been successful in an IPR or through the practice of motion, it is unlikely that there will be a trial in the great majority of patent cases. While I have consistently put forward the idea that a lot can be learned from how these rare trials involving high-profile defendants played out, there is also a lot that we can learn from the parties’ pre-trial maneuvers. – in particular in a case involving a disclosed financial backer. (Regarding the latter, it becomes easier than ever in some jurisdictions to know if there is a funder involved in a certain capacity since disclosure of financially interested parties is mandatory under certain local rules at the time. of the filing of the case.)
One such case currently pending in the Central District of California, Pinn vs. Apple, corresponds to the bill as the one in which a funder – qualified as an “investor” on mandatory disclosure – was identified at the outset of the case. And as the case nears trial, various pre-trial issues, including the disposition of motions limit, took place. Of great interest, in a July 14 decision rendered by the Hon. David O. Carter, a number of decisions on motions limit made by a special prothonotary were addressed, particularly with regard to the discussion of the presence of litigation funding in the case, among others. While we will discuss a bit of the court’s comments on the litigation financing aspect, it was also interesting that the plaintiff’s request limit regarding the location and size of the law firms involved were granted – possibly reflecting Pinn’s concern that the Texas-based trial attorney commented by Apple in a California case. In any event, the court concluded: “The location and size of lawyers and their law firms are irrelevant”. This is not a surprising decision on the part of the court, given the wide variety of more important issues to be tried in a patent case.
What about litigation funding? There, Pinn had filed a petition limit seeking to ban evidence or arguments on “lawyers’ compensation, litigation funding or emergency arrangements”. The Special Master recommended that the motion be granted “concerning: (a) the financing of the litigation (if, however, the defendant believes at trial that the plaintiff has” opened the door “by presenting evidence or arguments which are calculated to say to a so-called “David against Goliath’s tale,” the defendant should raise the issue at trial so that the court can assess the issue at that time); and (b) indemnification provisions for the plaintiff’s lawyer (including any financial interest that the plaintiff’s lawyer may have in the plaintiff or in the outcome of this litigation). Carter confirmed the special master’s finding, adding “that the financing of litigation and the terms of remuneration of lawyers are ancillary matters and would unduly consume trial time.” In short, Carter said he had no appetite for discussing financial interests at trial, regardless of his district’s local rule requiring disclosure of those interests. At a minimum, his ruling suggests that the usefulness of early disclosure of financial interests is more pronounced at the start of a case, but as the time trial is imminent, such disclosures are a side spectacle.
This latest ruling on the eligibility of funding agreements will be encouraging for litigation funders, as it provides further evidence that there is little appetite in many legal circles to make funding agreements a centerpiece. patent cases. Informed perhaps by the recognition that patent litigation is often sufficiently compressed due to the myriad of issues requiring attention, it is clear from Carter’s decision that allowing additional time at trial to deal with interests financiers – whether it’s a litigation funder or a contingency lawyer or both – is a non-starter, at least in his court. Considering how the weight of discovery decisions regarding litigation financing agreements continues to illustrate how little interest most courts have in the matter, this decision is in line with a growing consensus that patent cases are cluttered enough with issues requiring adjudication that spending time on litigation funding arrangements is a hard sell, both during discovery or at trial itself. In other words, if the case itself is the show you have on your DVR, litigation funding is the ad you are moving fast forward.
Ultimately, decisions like that of Pinn There is even more evidence that major defendants need to take a strategic approach to funded plaintiffs, at least when it comes to allocating discovery resources to litigation finance agreements. Yes, it is good to know as a grand defendant that the case against you is funded; even better when you know who the funder is. But unless there is reason to believe that the funder has control or a contribution to the settlement, or that a separate agreement with the funder that would require it to withdraw funding is desirable or even possible, there’s really little point in spending defense dollars to lobby the issue, at least under the current legal framework. Better to take this knowledge and see if you can come to a settlement early, before the expensive capital of the donor fund changes the financial landscape of the dispute too much. At the same time, due to the lack of empirical evidence regarding the deployment of litigation financing in patent cases, the prevailing view that patent cases are more difficult to settle if a funder is involved could also be found. support in the fact that Pinn heading for the trial. For now, however, we know for a fact that at least in a California court, litigation funding is a “side matter” and not worth a minute of trial.
Gaston Kroub lives in Brooklyn and is one of the founding partners of Kroub, Silbersher & Kolmykov SARL, an intellectual property litigation store, and Markman Advisors LLC, a leading patent advisory firm for the investment community. Gaston’s practice focuses on intellectual property litigation and related advice, with a particular emphasis on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.