IP litigation is expensive and risky. A patent owner relies on costly experts and attorneys, and confronts the possibility that the entire case could be dismissed at any point during a lengthy litigation process (likely against a well-heeled, seasoned opponent). The patent legal landscape has continued to become more challenging, with patent owners now virtually guaranteed to be required to dual-track Patent Trial and Appeal Board proceedings alongside litigation.

Given increased demand for litigation finance in the IP space, it’s more crucial than ever for patent owners to understand their financing options so they can secure the optimal solution. Below, is an overview of what patent owners need to know about securing financing for IP matters.

There are many ways in which claimants can prepare to seek financing. Specifically, claimants should be prepared with:

• Brief overview of the proposed litigation, including likely defendants, patents to be asserted, where the case (or cases) will be filed, any relevant prior litigation, licensing, re-examination, sales discussions, etc.
• Draft claim charts for key claims to be asserted.
• High-level litigation budget through trial, broken down by fees and costs and inclusive of inter parties reviews.
• Explanation of the financial risk sharing.
• Litigation counsel’s estimate of the trial damages per defendant.
• If the patents relate to computer-implemented technology, a thorough Section 101/Alice analysis.

In addition to these preparations, claimants and their counsel should develop the litigation strategy. Given the technical and jurisdictional complexities associated with IP litigation, developing such a strategy will take work — but it’s a prerequisite to obtaining funding.

The best candidates for IP financing should also meet certain criteria (see below).

• Capital requirement: The matter under consideration requires at least $1 million in financing.
• Damages: There is a clear path to more than $20 million in damages at trial — the minimum amount required to satisfy the economics of funding.
• Invention: The invention is in a field with high, established royalty rates, or where the value of the patented technology is easily quantifiable.
• Risk: The opportunity presents a compelling mix of risk and reward. Matters best suited to funding are high-risk and high-reward, as they can be the hardest for a litigant to self-fund.

It typically takes at least 60 days to conduct a thorough analysis of yet-to-be-filed suits and/or patents that have not yet been tested.  Securing IP financing can be challenging for those unfamiliar with the process. Patent owners can benefit from partnering with professional counsel who understand the complexity of patent matters and have the knowledge and capability to support the arduous IP litigation process.

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