Intellectual Property, Litigation Finance

3 IP Takeaways From The 2021 LF Dealmakers Forum

Thoughts on what the content and tone of the conference can reveal to IP practitioners about the current state of play in the litigation finance industry.

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(Image via Getty)

Pulling off a successful hybrid conference — with both in-person and virtual presenters/attendees — in the midst of a pandemic is no easy feat for even the most skilled event organizer. But as is expected for a Dealmakers event, this year’s LF Dealmakers Forum made it work seamlessly. How? First, by unapologetically using virtual speakers to complement live panelists during presentation sessions. Second, by making the experience for live attendees feel as normal as possible, including by making sure that health considerations were never compromised. For all the good feeling engendered by sharing a room with fellow professionals, however, the ultimate barometer of a conference’s success is the quality of the content — both in terms of helping attendees understand how the litigation finance industry continues to adapt to the challenges of the COVID-19 era, as well as in terms of generating discussion and follow-on thinking about what the future holds for the industry. And by any such measure, this year’s LF Dealmakers was a resounding success. As in prior years, I had the good fortune to attend LF Dealmakers in my capacity as a columnist on these pages, including one day in person and the other day using the event’s virtual platform. And, once again, I am happy to share what I think are three very germane takeaways relevant to IP lawyers based on what I heard at the conference.

As an initial matter, however, I want to make it clear that what follows is in no way intended as a comprehensive recap of the goings on at LF Dealmakers. For that, I commend the in-depth coverage over at Litigation Finance Insider, which includes deep dives into a number of the panels. Instead, I would like to focus on what the content and tone of the proceedings can reveal to IP practitioners about the current state of play in the litigation finance industry.

To start, it is obvious that many funders have healthy balance sheets and are looking very hard for meritorious cases and portfolios to invest in. While it may sometimes seem that there is a deliberate effort by some funders to try to expand the universe of potential areas of litigation that could benefit from litigation funding, there is also no doubt that IP causes — particularly patent — remain an important source of potential dealflow for many funders. For good reason, since patent portfolios in the right hands can provide a number of risk diversification opportunities for funders — even as the challenge of getting to a successful result can be a daunting one for patent owners.

Still, diversification is the best tonic for risk, with patent litigation being no exception. For example, there are often a number of well-capitalized targets that may be infringing a given set of patents, just as there may be a number of different technologies being infringed with respect to a given patent portfolio. Likewise, patent cases can sometimes provide early opportunities to strike favorable settlements — perhaps after an incremental win at an early stage of a case. While also providing opportunities for funders to unwind a misguided investment before too much damage is done, if the early returns against a litigation target are not promising. Add it all up and it is clear that litigation funders remain ready and able to diligence prospective patent cases — or to step in with funding in ongoing patent cases that demonstrate some promise.

Second, it is apparent that as the litigation funding industry matures, the breadth and depth of financial products that will be made available to IP litigators will continue to expand. At the same time, the universe of potential funding sources continues to develop, fueled by the excellent job the litigation funding industry has done in convincing institutional capital of the merits of litigation funding as an asset class worthy of investment. In some ways, therefore, we may be in a heyday for the industry in terms of accumulating capital from outside investors. But that investor interest brings with it challenges — both in terms of funders flush with capital finding worthy matters to invest in, and eventually, for those funders to succeed in delivering returns for investors.

On the latter front, it was very interesting to hear the word “insurance” pop up multiple times at LF Dealmakers, in the sense that litigation funders remain interested in mitigating the downside risk of their investments — including by having insurance companies step in to insure a basket of funded cases, for example. Whether that idea has uptake in the market could go a long way to shifting funder preferences for the types of IP matters they are willing to invest in. At a simple level, however, it makes sense that as funders get more sophisticated and deploy more of their capital that the focus on downside protection will continue to increase. And given the risk profile of patent and other IP disputes, it may take some time before insurers feel comfortable either trusting the funder’s diligence in deciding whether to insure funded IP cases, or for the insurers to develop in-house diligence capabilities of their own. Definitely something to watch going forward.

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Lastly, the expanding number of potential sources for litigation funding reinforces the need for IP litigators and firms to keep abreast of the litigation funding space. More importantly, it continues to behoove IP litigators and firms to develop relationships with litigation funders, based on a mutual openness to learning each other’s businesses and goals. At the outset, that will probably mean a lot of listening on each side, followed by a lot of thinking about how litigation funding can benefit a certain litigator or firm’s practice. Assuming of course — which is not a given — that the profile of the matters handled by that litigator or firm meets the basic criteria for funding that the funder is looking for.

Ultimately, it was clear to anyone attending LF Dealmakers that litigation funders are committed to transparency whenever possible, particularly regarding their funding criteria. Put another way, funders by and large are not looking to waste anyone’s time — starting with their own. Accordingly, it is incumbent on the IP litigation community to do some of its own diligence on funders, starting with an understanding of how the source of a funder’s capital can be determinative about the types of matters they are willing to consider, much less fund. For their part, at least the funders presenting at LF Dealmakers were open about their investment of time and resources toward developing a deep understanding of the IP litigation market. The least we can do is to return the favor.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com 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 gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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