Intellectual Property

3 IP Lessons From The LF Dealmakers Forum

The time is now for IP lawyers to educate themselves as thoroughly as possible about litigation finance.

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(Image via Getty)

As readers of this column know, I believe that the rise of litigation finance may be our generation’s single most important development in legal practice. Litigation finance has already demonstrated serious potential to alter the dynamics of the attorney-client relationship, as well as how law firms raise and deploy capital for generations to come. It was a privilege, therefore, that I was graciously allowed to attend the LF Dealmakers Forum in New York City on September 18, 2019, in my capacity as an IP columnist for AboveTheLaw.com. (In the interest of full disclosure, there was no cost to myself or my firm for attending. I was physically present for most of the day on the 18th, even though the conference ran two days.) Having attended the IP Dealmakers Forum in a business (rather than journalistic) capacity in the past, I knew what to expect in terms of conference quality — namely, that everything would be top-drawer. And it was, from the venue to the speakers to the thoughtfully placed phone charger station that gave my phone the emergency charging it needed to allow me to catch up on important calls on my way home. Details matter, and define a premium rather than pedestrian experience. This forum, as expected, was the former.

So what takeaways from the conference do I think are of greatest interest to IP lawyers? Three stick out, which we will address in turn. First and foremost, however, IP lawyers must recognize they should be starting the process of establishing relationships with funders, whether by submitting cases for funding or just reaching out to discuss how funding can benefit their firms. At the same time, IP lawyers must also be cognizant of the potential distortions to the attorney-client relationship presented by litigation funding — distortions that may be particularly acute for those IP lawyers finding themselves representing individuals or smaller companies with IP disputes that the clients can’t fund on their own. In short, the time is now for IP lawyers, irrespective of firm size or whether they are practicing in-house, to educate themselves as thoroughly as possible about litigation finance.

Back to the three takeaways from the conference. The first key takeaway is that litigation funders (unlike nearly everyone else in society) actually want to work with lawyers. Many of the funder representatives speaking at the conference had significant prior practice experience, heavily weighted towards litigation in most cases. And they want to develop relationships with lawyers and law firms, in part to increase their odds of being presented fundable cases and portfolio funding opportunities. But also to increase their knowledge of the market, as they try and craft “products” that are more palatable to law firms looking for funding. 

There has already been significant innovation in terms of the litigation finance products available to Iitigators, even as at least one panelist admitted that there is a lot of opportunity for more by funders, particularly in terms of creating funding products for the lower end of the market — cases and firms that handle smaller matters, or perhaps do more volume, rather than lottery-ticket type cases. Over and over, speakers at the conference reiterated just how much of a desire funders have to establish relationships with lawyers. That would include, therefore, IP lawyers and firms that attract the types of cases that might be of interest to funders. Time to start the conversation, if you haven’t already.

Next, it was interesting to hear how the various funder representatives articulated their message around patent cases. On the one hand, a number of the speakers indicated that patent cases had “fallen out of favor,” due to a legal environment that has wrought “tremendous devaluation” in the expected return from those types as cases. At the same time, however, those very same funders admitted that they were very comfortable with reviewing patent cases — and more importantly, that patent cases continue to command a significant share of the dollars actually invested by their funds. In short, everyone agrees that winning patent cases is harder nowadays, but that hasn’t discouraged investment, in part because patent cases have been a part of litigation finance since the earliest days of the business. Either way, it remains an interesting dynamic for patent litigators seeking funding, who often have to overcome much skepticism on the merits from funders, as well as a general unwillingness of funders to further expose themselves to patent risk — particularly if their investment portfolio is already overweight patent matters. But it can be done, especially if lawyers are willing to help spread the risk around a number of cases, or if the patents at issue have earned some litigation credibility, such as by surviving an Alice motion or an IPR.

Finally, the discussion at the conference reinforced for me the critical importance for firms to have serious internal conversations — starting yesterday — about how the firm plans to approach litigation funding. Even representatives from elite firms at the conference admitted that certain types of cases (such as riskier ones than the firm’s contingency committee would tolerate) require funding, and that relationships with funders were important to cultivate as a result. Add in the ongoing outreach by litigation funders directly to corporate clients, and firms of all sizes must consider that they may be in a position of needing to pass muster with funders in order to retain business from existing clients. Or that litigation funders may help rival firms poach promising talent by taking a more active role in hinting to certain lawyers that more funding may be available for them if they switch to a different firm. 

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Change is afoot, so the least that firms can do is to align their messaging and approach when dealing with funders and clients interested in funding. It was humorous, but also indicative of how not to deal with this changing landscape, to hear a funder describe how different partners at the same firm took contradictory positions when dealing with the funder — with one partner saying the firm never takes funding, while the other partner was actively soliciting funding for another matter. Again, these were partners from the same firm. Firms, and individual lawyers, need to accept that litigation funding is here, and here to stay. Which means having a strategy for dealing with this new reality, along with buy-in from the partnership as to the firm’s approach. This is as true for IP litigation as it is for any other discipline.

Ultimately, the best conferences — and I unabashedly put the LF Dealmakers Forum in that class — raise questions in our minds that linger lost after we step away from the cocktail reception. When it comes to litigation finance, there are many more questions that will continue to command our attention — from whether the industry will face more regulation, to how much silly capital will enter the market backing risky cases, to how much discovery judges will allow into funding relationships. What is no longer a question, however, is that any IP lawyer practicing today needs to get educated quickly on litigation finance. Because even if you never take a dollar of their money, it is silly to ignore that they are spreading that money around. To your peers — and perhaps soon, your clients.

Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome. 

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.

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