How do I get funding for my patent infringement litigation?

Here are 8 Steps to Obtain Patent Litigation Funding

Document the merits of your patent case

The first step is to clearly articulate how the defendant is infringing on your patent. The best way to show this is by using claim charts. These charts lay out each claim you are asserting and present how the defendant is performing/manufacturing what the claim covers. https://en.wikipedia.org/wiki/Claim_chart

If you are having trouble drafting the claim charts, there are resources to help you. At Protego LLC we offer this service. At this stage, simply making an attempt at dissecting your patent and identifying points of infringement will get you started. Alternatively, if you are working with a patent attorney, they can help create a compelling document that is sufficient for funders. Keep in mind that when the complaint is filed, detailed, clear and accurate claim charts are crucial to the success of the case. 

List the risks of the case

It may be counterintuitive, but one important step is to list all the reasons that may cause you to lose the case. Think of the different ways the defendant could fight back against your suit. Once you have this list, write down how you can address each of these roadblocks. Informing a potential funder of these challenges at the start will not only build trust but will also expedite the process and enable you to get funding quickly. It is not worth trying to hide anything as the funder will eventually discover any issues through their due diligence. If the issue is uncovered later, even if it is not a dealbreaker, the funder may back out because you were not transparent. At that point, you would have wasted months in working with a particular funder. Getting to a “no” quickly is better than wasting time trying to trick a funder into investing when without informing them of the risks. No case is perfect and there is always a risk of losing. If you indeed have a meritorious case, there will likely be a funder out there who will take the case, warts and all. 

Find a patent infringement litigation attorney

This step can be done now or after you have your claim charts and clear infringement contentions in place and interested funders. As you determine the strategy for your litigation, consider the venue of where you would like to sue. Districts in Texas, for example, may be more attractive for patent owners than other districts for a variety of reasons. It can be advantages to have a firm that is familiar with the district and the judges.

There are different agreement options to consider. You may want an attorney that will take the case on contingency. This means that you will not have to pay the legal fees for the lawsuit, but the attorneys get a percentage of the winnings. In most cases, the contingency fee arrangement does not include defending against inter partes review (IPRs) that will likely be filed by the defendant as a challenge to the validity of your patent. 

Depending on the deal you strike with the funder, there may be an option for a “hybrid” model. This is where only a portion of the legal fees are paid and there is some percentage of the winnings that the firm will get. This model is more attractive to funders because the attorneys are “fed but are still hungry.” The attorney continues to collect a portion of their fees, while also having a stake in the outcome.

Another consideration when choosing an attorney, is that many funders prefer certain attorneys. Therefore, it can be advantages to find a funder first and then work together on the right attorney. The funder may actually turn you down for funding simply because of the attorney that you hired.

If you are in a hurry to lock in a damages window, you may decide to go ahead and file your claim as you are still seeking funding and/or an attorney. Here is a resource to help you file your claim: https://www.law.cornell.edu/cfr/text/48/227.7004

There are several considerations with this step. Protego has the expertise and the network to help you navigate your options.

Create a compelling presentation

You will need a well-written, comprehensive presentation that can quickly tell the story of your case and answer key questions. The presentation is the first document to provide the funder after you have an NDA in place. The following should all be included in the presentation:

  • Background of the invention and company
  • Previous litigation
  • Explanation on how defendant(s) are infringing
  • Strengths and weaknesses of the case
  • Damages estimate
  • Attorney agreement (if in place)
  • Claim charts
  • Patent numbers
  • Estimated budget & financing needs

As you develop your presentation and “pitch”, it is helpful to understand the motivations of funders and why they would take a risk on your case. Depending on what they currently have in their portfolio, the funder may want to balance with a high risk/high return case that is a certain technology area.

Identify the right funders

Not all funders are created equal. You may waste countless hours of your time with funders who are not familiar with patent infringement cases and are not able to effectively estimate the risks. Ideally, you will want a funder who has in-house patent law experts. These experts are usually attorneys who previously litigated themselves and are now working full-time to assess the cases for these funders. There are several resources to find funders including, references from attorneys, associations, online searches, and brokers or third-party companies that specialize in patent lawsuit funding, such as Protego, LLC.

Select a term sheet

If you have a good case, funders will provide you with a term sheet that outlines the amount of money and the terms of repayment. There are several structures that different funders use. Some may ask for a multiple of the amount funded and others may want a percentage of the winnings. Depending on the case, many funders will ask for both. Because the risk is high for funder as they will not get paid if the case is lost, they tend to ask for quite a bit in return for cases that go well. The financing deal will likely be structured as a non-recourse loan. It is best to get multiple term sheets and carefully compare them to determine which funder to choose. Remember, the terms are usually negotiable, too. If you’re case is strong, don’t be afraid to ask for a reduction in multiple and/or percentage of winnings. 

One thing to note is that with this type of non-recourse loan, there may be tax consequences even if you lose. You may want to consult with a tax adviser, so you are prepared. 

Participate in due diligence

Once you select the funder, there will be a period of 4-6 weeks where they perform due diligence on the case. If the funder does not like what they learn, they still can back out. Usually, you will need to commit to the funder and allow them the time for completing the due diligence. 

Negotiate final terms

After due diligence is complete, there still is time to negotiate on the terms. If the funder finds weaknesses in the case that they did not see before, they may ask for more return in the event of a win. Alternatively, the case may appear even stronger after due diligence. In this case, the patent owner may be in a position to ask for additional concessions.

Seeking funding for a patent infringement case can take several weeks. There are resources that can help. Protego, LLC offers assistance in all the steps outlined in this article. If you would like to speak to a consultant about your options, contact Protego today.

*All cases are different. These are just general guidelines based on experience of the Protego, LLC team. Content should not be taken as legal, financial, or tax advice.