Secret Details of Litigation Financing Deal

The following is excerpted from a November, 3, 2009 article by Alison Frankel at The Am Law Litigation Daily:

One of the frustrations of reporting on the rise of third-party litigation financing funds...is the secrecy surrounding the practice. For the most part, litigation investment funds disclose neither the individual cases they've put money into nor the size of their investments in specific cases.

That lack of transparency makes Joe Mullin's latest Patent Litigation Weekly column at IP Law & Business a journalistic coup. Mullin found court records of an ongoing breach of contract case between a small, Texas-based network-security company called DeepNines and the $250 million IP litigation financing veteran Altitude Capital Partners, which backed DeepNines' patent infringement litigation against McAfee. It's a fascinating story and a truly rare glimpse into the mechanics of a third-party litigation financing deal.

As Mullin reports, in 2007 Altitude loaned DeepNines $8 million to fund its case against McAfee in the Eastern District of Texas. DeepNines' lawyers at Fish & Richardson won an $18 million jury verdict. Facing additional exposure, McAfee eventually agreed to a settlement that Mullin has calculated to be about $25 million.

Of that $25 million, guess how much DeepNines pocketed? Less than $1 million, according to Mullin. Fish & Richardson collected more than $11 million in hourly and contingent fees. Altitude got back its $8 million, plus 10 percent interest and a $700,000 "participation fee." The fund's total take, Mullin reports, was $10.8 million, a more than 30 percent return on its $8 million investment.

The story does not end there, read the full article here.

Comments

[Gena777]

This case makes it clear that patent litigation has, indeed, become big business and (for major players, at least) potentially a lucrative investment -- though perhaps a risky venture for start-ups. Perhaps suits such as this one will cause more companies to give more consideration to IP and how it fits into their business plans.
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