Putting on a successful virtual conference in the midst of a worldwide pandemic is not easy. But this year’s LF Dealmakers Forum pulled it off with aplomb. How? A combination of things, starting with a steadfast refusal to broach any compromise on the quality of the conference’s content. From the informative introductory interview with Ashley Keller — which highlighted the continued evolution of litigation finance from single-case “lottery ticket” — funding to a sophisticated asset class — to the various panels focusing on all aspects of modern litigation finance, there was a lot to learn. Since I had the good fortune once again to attend in my capacity as a columnist on these pages, I am happy to share what I think are three very germane takeaways relevant to IP lawyers based on what I heard at the conference.
There is much more to say of course, as it is hard to encapsulate eight panels, plus keynotes, in a single column. That said, there were a couple of recurring themes that arose across the different panels, particularly with respect to how litigation finance firms are thriving across a number of fronts, spurred on by the economic challenges facing their investor and customer base in the current pandemic. Flush with funds as institutional investors look to litigation funders as a noncorrelated play, funders are also enjoying an insatiable demand from law firms and claim holders for their attention. Which allows them the freedom to deploy their capital selectively, while also maintaining the favorable pricing terms they need to obtain in order to generate returns commensurate with the level of risk they take on. And even as competition increases among funders, they continue to work together to properly market, self-regulate, and set standards for responsible litigation finance practices.
So times are good on the litigation funding aside, at least in terms of enthusiasm for what the industry promises to provide to investors and customers (law firms/claim holders.) For IP lawyers hoping to make the most of the opportunities presented by litigation finance, however, there is an increased onus to get to work — both in terms of educating themselves on how the industry operates and in developing relationships with funders. The latter brings us to our first takeaway from the conference, namely the importance of developing good relationships with funders.
But time is short on that front, at least in my views, as funders are more pressed for time than ever just dealing with the influx of matters they are presented with for diligence purposes. At a minimum, IP lawyers should be doing what they can in terms of helping funders understand their practices and client base, especially when presenting a case to a funder for potential funding. It can be helpful to think of funders in the same way Biglaw partners are taught to think of in-house counsel they are pitching in a beauty contest for litigation defense work. You want the audience for your presentation to like you personally, at the same time as they learn about your experience, and most importantly, about your approach to the legal matter at hand. Because alignment of interests is so important to a successful funding relationship, it is absolutely critical that a level of trust and comfort develop between the funder and lawyer. Getting a head start on developing that personal relationship, ideally even before submitting a matter for funding, is a worthy goal for IP lawyers hoping to use litigation finance in their practices. Considering that most relationships where funding is committed are contemplated to last for years — as the case or cases being pursued make their way forward — it was not surprising that multiple funder panelists talked up the value of personal relationships between lawyers and funders. IP lawyers should take heed and consider giving funders the same level of attention as they give legal recruiters. Both can be important to one’s future prospects after all.
Next, and in line with the idea that funders are swamped with “opportunities” (especially IP matters) based in part on the economic turmoil engendered by the pandemic, is the importance of managing both client and colleague expectations as to the odds of getting a funding arrangement in place. While the demand for funding may be going up, the standards of funders evaluating cases are (rightfully) not going down. In fact, it is realistic to expect that with the increased investor focus on the funding sector that funders will become even more selective in terms of allocating the capital they have raised. And they are plenty selective already — to the tune of funding less than 5% of the opportunities they are presented. Put another way, you have a 95% chance of getting rejected by any given funder, even with a strong presentation on the merits. Yes, just like Ivy acceptances the most meritorious will “get in somewhere,” but it is important not to oversell the odds of getting funding to existing or prospective clients. Or even to colleagues who may be counting on you to deliver revenue, or at least justify the amount of time you are spending submitting potential matters to funders. This is not meant as discouragement, only a reminder that being honest when conveying prospects of success remains an important obligation for lawyers when dealing with clients and partners.
Third, IP lawyers must remember their obligation to turn the increased competition among funders to their clients’ advantage at every turn. As important as it is to maintain good relationships with funders, it is also just as important to make sure that the client’s interests are paramount. Which means tough negotiation on funding terms for those rare submissions that get to that stage. And intensive consideration and negotiation of every key term in the litigation funding agreement for the client’s benefit. Believe me, the panelists at the conference know they are in a competitive industry and expect to negotiate terms. At the same time, however, funders also expect that the lawyers they deal with are generally familiar with how litigation funding works — including with respect to the types of financial structures and terms funders need to use to give themselves a fighting chance to generate returns for their investors.
In short, realistic and respectful negotiation, built on a framework of mutual knowledge of the needs of the client and funder, is often the path to successful deals. That said, it is hard to see how an IP lawyer can properly represent their client’s (or law firm’s) interests before a funder without making the investment in learning as much as possible about the current realities of funding. Which makes the time at information-packed conferences like LF Dealmakers Forum — even in a virtual setting — well worth it for IP practitioners. While there is much more to convey about the conference, I hope these three takeaways give a flavor of what was on offer. And hopefully inspire everyone to get as educated as possible about this exciting and increasingly important part of the IP litigation space.
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.