This week, I continue my written interview with John Garda of Longford Capital, regarding his experiences leaving a Biglaw partnership to join a leading litigation funder. Please see below for John’s answers to my second and third questions, focused on how clients and law firms can best position their matters to attract investment from litigation funders like Longford.
As usual, I have added some brief commentary to John’s answers below but have otherwise presented his answers as he provided them.
Gaston Kroub: How can clients, and not just law firms, take advantage of the opportunities presented by litigation finance?
John Garda: Longford Capital provides several funding options directly to our corporate clients. We are currently experiencing an increase in demand for our capital as the impact from the COVID-19 crisis continues to negatively impact individual companies and industries. In this uncertain and stressful landscape, our capital may provide a critical resource for businesses, and our industry continues to quickly evolve and innovate along the way to provide additional offerings. These offerings should prove especially useful in the current business climate. For example, in addition to traditional litigation funding of attorneys’ fees and expenses involved with bringing the claims, Longford Capital also provides a lump-sum catch-up payment to the business claim owner for attorneys’ fees and expenses that were previously incurred in the litigation before entering into a funding arrangement.
In addition, we are experiencing an increase in demand for ordinary working capital needs from businesses. As certain businesses struggle with short-term and long-term cash flow needs and other budgetary challenges, they can take advantage of the availability of our capital to overcome these challenges. We are now increasingly capable of stepping in and providing working capital to not only help these companies remain operational — but also to allow them to thrive — while also pursuing their legal claims.
Moreover, we are experiencing an increase in businesses wanting to monetize their existing legal claims before those claims are finally resolved in the underlying litigation. Many businesses want to take advantage of our available capital and recoup some of the losses in the form of cash now, not later. In the right circumstances, Longford Capital offers to pay the claim owner a portion of the claim’s perceived value up-front, so the company can earn a return at any stage of the litigation, including before even filing the claim, or after trial when a favorable judgment is currently pending on appeal.
GK: If anyone had any doubt that incorporating a discussion with litigation funders is a good idea for IP lawyers, John’s answer should dispel any such doubts. Even without the increased stress on law firms and clients due to COVID-19, funders like Longford are positioning themselves as true financial partners for companies with meritorious legal claims — no matter where in the life cycle of those claims the funder gets involved. At bottom, Longford seems committed to offering financial support for claimants and their counsel when and where it is needed. Getting access to that support, however, comes with an obligation to do some real work. For how best to do so, read on.
What advice would you give to practicing IP lawyers interested in seeking out litigation funding on either a case or portfolio basis?
JG: Before approaching the funder, the IP lawyer should prepare a set of documents including the key information that the funder will need to help expedite the due diligence process. In addition to a full case budget and a damages analysis, the IP lawyer should include claim charts involving the top three to four patents aimed at the top three to four targets and any information related to validity including the results of any prior art searches and a re-examination. It is critical that the IP lawyer take ownership of the claim charts that are presented to the funder and be able to explain them in great detail.
Scheduling an initial conference call with the funder at the very beginning of the process is strongly recommended to introduce yourself, discuss the case and the package of information provided, and allow the funder to ask some preliminary questions. This is a very good first step toward establishing effective communication with the funder. The best way to position yourself for success is to be very attentive to the funder’s specific requirements and responsive to any requests for additional information. Maintaining effective communication throughout the process will help ensure the best chance of obtaining a successful funding arrangement.
One common mistake that IP attorneys make when presenting a case to a funder is focusing almost exclusively on liability and ignoring, for the most part, any meaningful damages analysis. Worse yet, providing a pie-in-the-sky damages analysis quickly falls apart when put to the test by the funder. This may cause a funder to quickly pass on an otherwise promising opportunity.
As with any business transaction, maintaining credibility is paramount. To that end, a practicing IP lawyer seeking funding should be very candid when assessing the strengths and weaknesses of the case. Using a matter-of-fact tone in presenting the case and shooting straight with the funder goes a long way in building trust. Proactively addressing the challenging aspects of your case while explaining how best to deal with those challenges is extremely helpful to better position your case for funding.
GK: I have long been a proponent of a “damages first” approach to evaluating claims. Taking that approach necessitates an honest appraisal — by both client and law firm — of the likelihood of the case or cases achieving the client’s financial goals, while sticking to the agreed-upon terms of any engagement between the client and their counsel. If the decision is made to try to involve a funder like Longford, it makes complete sense to recognize that at bottom there are financial metrics that must be met — both in terms of potential case recovery relative to the investment, as well as with respect to controlling the matter’s costs. As John correctly notes, a relationship with a funder is exactly that — a relationship — and common sense dictates that the foundational aspects of any relationship (e.g., candor, pragmatism, etc.) hold true in interactions between counsel and a funder. It may still be early days for many IP lawyers when it comes to litigation funding. But, in my view at least, the time to start thinking about your firm’s relationship with potential funders was yesterday.
My thanks to John for the insights and cooperation, and I wish him continued success at the cutting-edge of litigation funding’s inroads into the legal industry. It is always a privilege to hear from someone who is engaged in interesting and timely work of deep interest to IP lawyers and their clients, and I thank John for agreeing to this interview. I am always open to conducting interviews of this type with other IP thought leaders, so feel free to reach out if you have a compelling perspective to offer.
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.