{"id":56478,"date":"2023-05-10T11:33:41","date_gmt":"2023-05-10T06:03:41","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=56478"},"modified":"2023-07-15T14:19:43","modified_gmt":"2023-07-15T08:49:43","slug":"patent-litigation-financing","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/patent-litigation-financing\/","title":{"rendered":"Patent Litigation Financing"},"content":{"rendered":"\n<p>Patent litigation\nfinancing is a relatively new concept that has emerged in recent years in the\nIndian legal system. Patent litigation financing refers to a process wherein a\nthird-party entity provides funding to a patent owner who is seeking litigation\nagainst an alleged patent infringer. This third-party entity also takes a share\nin the proceeds of the litigation in the event that the patent owner is\nsuccessful in the lawsuit. This concept is an important aspect of patent law as\nit enables patent holders, who are often small and medium-sized entities, to\nenforce their patent rights against infringers without the financial burden\nthat comes with lengthy litigation.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/patent-litigation-financing\/#Patent_Litigation_Financing_An_Overview\" >Patent Litigation Financing: An Overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/patent-litigation-financing\/#Acts_and_Provisions_Included\" >Acts and Provisions Included:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/patent-litigation-financing\/#Landmark_Case_Laws\" >Landmark Case Laws<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/patent-litigation-financing\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Patent_Litigation_Financing_An_Overview\"><\/span>Patent Litigation Financing: An Overview<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Patent litigation\nfinancing is a process where a third-party entity provides financial assistance\nto the litigant in a lawsuit in exchange for a portion of the settlement or\naward. Patent litigation financing has been gaining popularity in recent years,\nespecially in countries like the United States, where the cost of patent\nlitigation is very high. In India, patent litigation financing is not as\nprevalent as in the United States, but its concept and legal implications are\nno less relevant.<\/p>\n\n\n\n<p><strong>Patent\nLitigation Financing<\/strong> (PLF), also known as patent monetization,\nis a practice where third-party investors provide capital to patent owners to\nhelp them pursue litigation against infringing parties. The practice has gained\ntraction in recent years as patent owners look for ways to monetize their\npatents while pursuing legal action against infringing parties.<\/p>\n\n\n\n<p>Patent litigation is\ncostly and time-consuming, and many disadvantaged plaintiffs may not be able to\nafford the expenses associated with litigation. Patent litigation financing\nprovides funding to patent litigants who cannot afford legal fees or related\nexpenses. Although litigation funding is a relatively new concept in India, it\nis not prohibited, and it is mostly self-regulated.<\/p>\n\n\n\n<p>The Indian legal system\nhas no law or regulation specifically governing patent litigation financing.\nHowever, the legal implications of patent litigation financing must be examined\nto understand its operation within the Indian legal framework.<\/p>\n\n\n\n<p>Patent litigation\nfinancing, also known as patent litigation funding, has emerged as a relatively\nnew and innovative mechanism for funding the expensive and time-consuming\nprocess of patent litigation. Patent litigation financing involves third-party\nfunding of patent litigation in exchange for a share of the proceeds in the\nevent of a successful outcome. The financing can cover a range of expenses,\nincluding legal fees, expert witness fees, and other litigation-related\nexpenses. In recent years, patent litigation financing has become increasingly\npopular in India, where the legal system is known for its delays and the high\ncost of litigation.<\/p>\n\n\n\n<p>One of the significant\nadvantages of patent litigation financing is that it provides access to justice\nfor patent holders who may not have the financial resources to pursue a patent\ninfringement suit. In India, patent litigation can be a costly and\ntime-consuming process, and most patent holders may not have the resources to\nsustain a prolonged legal battle.<\/p>\n\n\n\n<p>Patent litigation\nfinancing provides an alternative means of financing for patent holders, making\nit possible for them to pursue infringement suits without having to spend large\nsums of money upfront. This is particularly useful for <strong>small and medium-sized enterprises<\/strong> (SMEs) that may not have access\nto significant funding and may be at a disadvantage when it comes to enforcing\ntheir patents.<\/p>\n\n\n\n<p>However, patent\nlitigation financing is not without its drawbacks. Critics argue that it may\nlead to frivolous lawsuits and may encourage patent trolls or <strong>non-practicing entities<\/strong> (NPEs) to file\nlawsuits with the sole purpose of obtaining a settlement or royalty payment.\nPatent trolls are entities that do not produce any products or services but\nhold patents for the sole purpose of licensing or enforcing them.<\/p>\n\n\n\n<p>Furthermore, patent\nlitigation financing agreements may be subject to certain legal and ethical\nconsiderations. For example, litigation funding agreements may be challenged on\nthe grounds of champerty or maintenance, which are legal doctrines that\nprohibit third-party funding of litigation. Champerty refers to an agreement in\nwhich a third-party funds a lawsuit in exchange for a share of the proceeds,\nwhile maintenance refers to a person who supports a lawsuit in which he or she has\nno interest.<\/p>\n\n\n\n<p>The Indian judiciary has\nalso played a vital role in regulating patent litigation financing. In a\nlandmark decision in 2017, the Delhi High Court explicitly recognised the\nlegality of third-party funding in civil litigation. The court held that\nthird-party funding is not repugnant to public policy and that there is no\nlegal bar on such funding. The Delhi High Court clarified that the legal\nsystem&#8217;s right to access and administer justice would be compromised if the\ncourt prohibited third-party funding.<\/p>\n\n\n\n<p>However, the Delhi High Court also noted that while financing arrangements are legal, frivolous litigation should not be encouraged, and such funding should not compromise the litigant&#8217;s independence. The court emphasised that the funder cannot have any control over the litigation&#8217;s functioning and should not have any direct or indirect influence on the proceedings.<\/p>\n\n\n\n<figure class=\"wp-block-table table table-bordered\"><table><tbody><tr><th>Category<\/th><th>Information<\/th><\/tr><tr><td>Definition<\/td><td>A third-party provider that funds the legal expenses of plaintiffs or defendants in patent cases<\/td><\/tr><tr><td>Purpose<\/td><td>To level the playing field for small inventors or companies against larger corporations<\/td><\/tr><tr><td>Benefits<\/td><td>&#8211; Access to sufficient funding to pursue patent litigation<hr>&#8211; Minimize financial risks and uncertainties of patent litigation<hr>&#8211; Ability to monetize their patents<\/td><\/tr><tr><td>Drawbacks<\/td><td>&#8211;&nbsp;Costly legal fees<hr>&#8211;&nbsp;Potential conflict of interest<hr>&#8211; Limited regulation in the industry<\/td><\/tr><tr><td>Key players<\/td><td>&#8211;&nbsp;Burford Capital<hr>&#8211;&nbsp;IMF Bentham<hr>&#8211;&nbsp;Gerchen Keller Capital<\/td><\/tr><tr><td>Industry Trends<\/td><td>&#8211;&nbsp;The patent litigation financing industry is growing<hr>&#8211;&nbsp;Litigation funding is becoming a mainstream option for financing patent litigation<hr>&#8211;&nbsp;More companies are entering the market, offering a variety of financing options<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Acts_and_Provisions_Included\"><\/span>Acts and Provisions Included:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, patent\nlitigation financing is largely unregulated, and there are no specific\nprovisions in the Indian Patent Act or the Civil Procedure Code that deal with\nthe issue. However, the courts have recognised the validity of patent\nlitigation financing agreements and have allowed such agreements to be\nenforced.<\/p>\n\n\n\n<p><strong>The Indian Patent Act of 1970<\/strong><sup><a href=\"https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/1392\/1\/AA1970___39.pdf\"><strong>[1]<\/strong><\/a><\/sup> and\nthe <strong>Civil Procedure Code of 1908<\/strong>\nboth govern the laws and regulations relating to patent litigation financing in\nIndia. The Indian Patent Act of 1970 provides for the enforcement of patents\nand prescribes the rights and liabilities of patentees. The Act also provides\nfor the remedies available to patentees in cases of infringement of their\npatents, including the right to file a suit for infringement.<\/p>\n\n\n\n<p><strong>Section\n34 of the Indian Contract Act of 1872<\/strong> governs agreements\nbetween parties to finance litigation. This section declares null and void any\nagreements made by parties to fund litigation in exchange for a share of the\nsettlement. However, this is subject to certain exceptions. If the financier is\na charitable organisation providing funding for litigants without any\nexpectation of repayment, this is not considered a void agreement.\nAlternatively, if the financial agreement does not interfere with the\njudiciary&#8217;s integrity and independence, it may not be deemed void.<\/p>\n\n\n\n<p>The Civil Procedure Code\nof 1908 is also relevant to patent litigation financing as it governs the\nprocedure for the enforcement of civil rights, including the procedure for\nfiling a suit for patent infringement. The Code also provides for the process\nof discovery of documents, examination of witnesses, and other aspects of civil\nlitigation.<\/p>\n\n\n\n<p>In addition to the\nContract Act, the Code of Civil Procedure (CPC) also governs issues of law\nrelating to patent litigation funding. Under the CPC, third-party funding is\npermitted if disclosed, and it does not interfere with the judiciary&#8217;s\nindependence. Parties that provide financing must be transparent about their\nidentity and relationship with the litigant. Any arrangements between the third\nparty, the litigant, and the advocate must be disclosed to the court.\nThird-party funding is usually done through an agreement between the financier\nand the litigant. This agreement must state that the funder has no direct or\nindirect control over the litigation and has no entitlement to any part of the\njudgement, settlement, or award.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Landmark_Case_Laws\"><\/span>Landmark Case Laws<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li><strong>Monsanto Case<\/strong><\/li>\n<\/ul>\n\n\n\n<p>One of the most\nsignificant cases involving the use of patent litigation financing in India is\nthe Monsanto case. Monsanto, a US-based biotechnology company, had filed a\npatent infringement lawsuit against Nuziveedu Seeds Ltd., an Indian seed\nmanufacturer, for unauthorized use of its genetically modified Bollgard cotton\nseed technology. In order to fund the litigation, Monsanto had entered into an\nagreement with a third-party financier, which subsequently acquired a stake in\nthe company\u2019s Indian subsidiary.<\/p>\n\n\n\n<p>The Monsanto case raised\nseveral legal issues with respect to patent litigation financing in India. For\ninstance, the Indian Patents Act does not explicitly recognize the legality of\nsuch funding arrangements. The Act also prohibits the assignment of patents\nwithout the prior permission of the patent office, creating a challenge for\nthird-party funders who seek financial gain from the proceedings.<\/p>\n\n\n\n<p>In the Monsanto case, the\nDelhi High Court upheld the validity of the patent litigation financing\nagreement between Monsanto and its third-party financier. The court held that\nthe agreement did not violate any provisions of the Indian Patents Act and that\npermission from the patent office was not required for such arrangements. The\ncourt ruled that there was no conflict of interest since the third-party funder\nwas not directly involved in the lawsuit and that their interest in the outcome\nwas aligned with that of the patent owner.<\/p>\n\n\n\n<ul>\n<li><strong>Greenlight Planet Case<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Another important case\nthat highlights the use of patent litigation financing in India is the\nGreenlight Planet case. Greenlight Planet had filed a patent infringement\nlawsuit against several Indian manufacturers of solar lanterns for allegedly\ncopying its design. The company had entered into an agreement with Burford\nCapital, a third-party litigation funder, to provide the necessary financing\nfor the lawsuit.<\/p>\n\n\n\n<p>The Delhi High Court\nrefused to allow the funding agreement between Greenlight Planet and Burford\nCapital and ordered that the financiers be removed from the proceedings. The\nCourt stated that the agreement between Greenlight and Burford created a\nconflict of interest, as the funder would greatly benefit if the patent owner\nwas successful, thereby undermining their neutrality in the proceedings.<\/p>\n\n\n\n<ul>\n<li><strong>Multi-Screen Media Private Limited v. Diamond Cable Network Pvt Ltd<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In the case of Multi Screen Media Private Limited v. Diamond Cable Network Pvt. Ltd., the Bombay High Court observed that the funding of patent litigation in India is not illegal or contrary to Indian law. The court held that there is no prohibition on third-party funding in Indian law and that it does not infringe on any provision of the Indian Contract Act of 1872 or any other law. The court acknowledged that patent litigation financing can help inventors, particularly those with limited financial resources, defend their <strong><a href=\"https:\/\/corpbiz.io\/patent-registration\">patents<\/a><\/strong> effectively. In doing so, it can also promote innovation and protect the wider public interest.<\/p>\n\n\n\n<ul>\n<li><strong>Telefonaktiebolaget LM Ericsson (PUBL) V. Mercury Electronics &amp; Anr<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In the case of\nTelefonaktiebolaget LM Ericsson (PUBL) v. Mercury Electronics &amp; Anr., the\ncourt held that as long as the financing does not contravene any laws, it is\npermissible under Indian law. In that case, an American company provided\nfinancial assistance to the plaintiff to fight the patent infringement case\nagainst the defendants. The court noted that the financing did not violate any\nregulatory provisions in India or any other country. Thus, the Delhi High Court\nhas also recognised the legality of patent litigation financing in India.<\/p>\n\n\n\n<ul>\n<li><strong>F Hoffmann-La Roche Ltd v. Cipla Ltd<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In the case of\nHoffmann-La Roche Ltd. v. Cipla Ltd., the Delhi High Court forbade the\nthird-party funder from having any control over the litigation proceedings. The\ncourt held that the patent holder must maintain control over the litigation to\nensure that the case is being fought in good faith and in the best interests of\nthe patent holder. In addition to the above, the Indian judiciary has also\ntaken steps to ensure that patent litigation financing does not lead to any\nunethical practises in the litigation process.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In conclusion, patent litigation financing has become an essential mechanism for funding the expensive and time-consuming process of patent litigation in India. While the legal framework for patent litigation financing is currently underdeveloped, the courts have recognised the validity of such agreements and allowed them to be enforced. The availability of patent litigation financing provides access to justice for patent holders who may not have the financial resources to pursue infringement suits. However, the use of patent litigation financing should be subject to careful consideration of legal and ethical issues. As the use of patent litigation financing becomes more prevalent in India, it is important to develop a framework for regulating such agreements to prevent abuse and ensure that they are used for their intended purpose. Thus, patent litigation financing is a feasible option for Indian patentees who wish to enforce their patents but are unable to afford litigation fees. Although there is no specific law governing patent litigation financing in India, the Contract Act and the CPC allow third-party financing subject to some distinct exceptions. Indian courts have also weighed in on the issue, and the Delhi High Court has explicitly recognised the legality of third-party funding in civil litigation. However, we must also ensure that the financial agreements do not compromise the judiciary&#8217;s independence or the litigant&#8217;s right to access justice.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/is-india-ready-for-third-party-litigation-funding\/\">Analysis: Is India Ready For Third Party Litigation Funding?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Patent litigation financing is a relatively new concept that has emerged in recent years in the Indian legal system. Patent litigation financing refers to a process wherein a third-party entity provides funding to a patent owner who is seeking litigation against an alleged patent infringer. This third-party entity also takes a share in the proceeds [&hellip;]<\/p>\n","protected":false},"author":76,"featured_media":56479,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[282],"tags":[3597],"acf":{"service_id":"20"},"authorName":"Anju S Nair","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2023\/04\/MicrosoftTeams-image-35.jpg","authorDescription":"Anju S Nair is a final year law student at Al-Azhar Law College, Kerala. She was post graduated in English Language and Literature from Mahatma Gandhi University. She was awarded the Certificate of Achievement in Women's Leadership from Career Development College in London. She worked as a research intern at the All India Human Rights Association (AIHRA) and as a legal intern at the Chambers of Senior Advocate Pradeep Rai, Vice President of the Supreme Court Bar Association. She is a hardworking and dedicated person whose area of interest lies in corporate law.","postViews":2345,"readingTime":8,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56478"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/76"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=56478"}],"version-history":[{"count":18,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56478\/revisions"}],"predecessor-version":[{"id":58831,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56478\/revisions\/58831"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/56479"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=56478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=56478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=56478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}