I have written a suite of articles recently, each addressing the problem of how to enforce intellectual property rights given the high (and, for many SMEs, prohibitive) cost of litigation in Australia.
This issue has been of concern to me as a citizen of a nation that’s legal system is meant to be accessible to all, not just to the mega-rich. If the cost of enforcing intellectual property rights means that those rights are for all intents and purposes not enforceable, what is the point of acquiring them in the first place? This can deter many SMEs from bothering to protect their intellectual property rights. This is detrimental to them, as they are not protecting, and therefore cannot leverage to their maximum advantage, the assets that they have worked hard to develop. It is also detrimental to intellectual property solicitors and patent and trade marks attorneys, as we have less people desirous of our services.
So, I have been exploring various solutions to this problem. Some of the solutions have been a bit wishful, such as overcoming the separation of powers issues that currently prevent the Trade Marks Office from setting up a dispute resolution branch that could cheaply and quickly resolve infringement disputes. Others have been existing practical solutions, such as taking out intellectual property insurance. The solution I propose today is akin to this, an existing practical solution that is being repackaged, through technological advances, into a format that is easily accessible and suitable for mainstream use. The solution is litigation finance.
Litigation finance is the act of making a contribution towards the cost of a plaintiff’s intellectual property based court case in exchange for a promise that, should the plaintiff win and be awarded damages, you will receive a percentage of those damages.
Today it is thought that actions for maintenance and champerty are no longer supported by the common law, and indeed many states including New South Wales, South Australia, Victoria and the Australian Capital Territory, have expressly legislated for this. (One exception to this is that lawyers still cannot work on a contingency basis.)
This development gives lawyers the opportunity to invest in cases being prosected by other firms and see returns of the ilk of US lawyers who are permitted to work on a contingency basis. Moreover, it gives hedge funds and other institutional investors the opportunity to diversify their portfolio, creating a new market that lacks correlation to the broader capital markets and macroeconomic activity. That means that they don’t have to worry about unpredictable international developments such as Brexit and Trump’s election, since these won’t have impact on their investment. The court case operates in a relative bubble. And finally, and most importantly, it gives SMEs a chance to initiate proceedings in instances where they would not otherwise have the capital or cash flow to do so.
Litigation finance organisations have been around for decades. IMF Bentham is one of Australia’s largest, and was founded in 2001. However, the format used by these organisations is changing, and becoming more user-friendly. So, they are suddenly accessible and relevant to a lot more people. One such example of this is LexShares.com. Based out of New York City, it was launched in 2014 and operates as a kind of KickStarter for court cases. Others are popping up too, such as Boston and Los Angeles based company Trial Funder.
With these kinds of developments, the litigation finance market is moving into the mainstream. Conferences are being held, to educate plaintiffs and potential investors. There is a Litigation Funding Conference to be held in New York in April 2017. For those of you that cannot make it over there, please do not hesitate to reach out to me, Hayley Tarr at Minter Ellison - Gold Coast, for more information on litigation finance generally and your options specifically.
With increasing accessibility and increasing interest, litigation funding is likely to surge in popularity over the next decade, meaning SMEs will have access to money to take the requisite action to stop third party infringement of their rights. This is definitely good news!!!