Litigation Funding in Uncertain Patent Eligibility Times


A patent is an exclusive right. This means that the owner of a patent can prevent others from engaging in activities that are covered by an issued patent. But as is true with any right, a patent is only worth something if the owner is willing to take action to preserve the rights and litigate against those who are treading on the rights granted. In the United States, that means litigation in federal district court, which can easily cost millions of dollars.

Today, given the climate within the industry, being willing to take action when infringement is suspected is only the first hurdle. Yes, the decision to undertake litigation is a difficult one regardless of whether it is made by a company or an individual. Attention is diverted from other endeavors and opportunities, and there is a very real financial cost associated with litigating a dispute. Litigation is not free.

Litigation funding is critical for many patent owners, and as a result of the changes to the patent laws, patents have become easier to challenge and it has become harder to demonstrate patent infringement.  Even if a valid patent has been infringed, it can be exceptionally difficult, if not practically impossible to collect meaningful damages. Just within the past several weeks, the Federal Circuit has reversed another damages award, this time taking away a $64 million patent infringement jury verdict reached against Cisco. Even casual observers have to notice how difficult it has been for Apple to collect anything for patent infringement by Samsung. If these cases were isolated, it would be one thing, but there has been a decided pendulum swing in the industry away from patent owners.

According to Ashley Keller, Managing Director of Gerchen Keller Capital, speaking at the IP Dealmakers Forum in New York City, his company is funding 1 out of every 100 cases they are asked to review these days. Gerchen Keller Capital is the largest investment and advisory firm exclusively focused on legal and regulatory risk, providing capital and other financing solutions to companies and law firms involved in complex litigation, including patent litigation.

“Not to sound flippant, but what we look for has not changed – it remains the same. We are always looking for the same thing, we are looking for infringement, validity and damages,” says Ashley Keller. Keller did go on to acknowledge that whether the facts of any particular case meet the legal standard for infringement, validity and damages over time can and does change, but at the core you always must take into consideration those critical issues.

“A lot of innovation has been moving to the cloud and Alice has a lot of murkiness to it,” Keller explained. Keller would go on to explain that, in some of the initial cases, the claims may have been invalid under 103, so perhaps invalidating the claims under 101, although analytically incorrect, was ‘no harm, no foul.’ But with some of the cases that are coming out of the district courts, where the judges are identifying what are true innovations, if the Federal Circuit upholds invalidation under 101, it will be a different world for software.

Earlier in the day on a separate panel, Keller said that certainty is critical and that while he thinks it would be wrong for the courts to rule that software is patent ineligible, at least if they did so it would provide certainty and the market and industry could move on. Indeed, certainty is sorely needed.

The Federal Circuit does have several cases, including the McRo case dealing with lip synchronization technology for animated characters, which will be decided in 2016, that should shed some light on software patent eligibility. At the very least, we can hope that the Federal Circuit will give additional guidance on the appropriate application of the “abstract idea” doctrine under the Supreme Court’s decision in Alice v. CLS Bank.

Tags: , , , , , , , , , , ,

Leave a Reply

You share in the PLI Practice Center community, so we just ask that you keep things civil. Leave out the personal attacks. Do not use profanity, ethnic or racial slurs, or take shots at anyone's sexual orientation or religion. If you can't be nice, we reserve the right to remove your material and ban users who violate our Terms of Service.

You must be logged in to post a comment.