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JUNE 2008

Why it pays to spread the litigation risk

Litigating to protect your IP rights can be a multi-million dollar exercise. Emma Barraclough outlines some funding options to ease the financial pain

One-minute read
The high cost of litigating IP disputes has led entrepreneurial investors to offer their financial services to plaintiffs unable or unwilling to bear the risks of funding legal actions themselves. Although the UK courts have been slow to countenance third-party funding, a recent shift in judicial attitudes looks set to make the practice far more widespread than it has been up to now.

This article considers the range of funding options open to would-be plaintiffs, and considers the advantages – and potential pitfalls – of sharing the financial risks of litigation with city financiers looking for a return on their investment.

In the middle of April, lawyers at London-headquartered corporate law firm Allen & Overy found themselves in a position that few of their peers would envy – caught in the media spotlight over the size of the bill they presented to a client. The firm had charged BlackBerry device maker Research in Motion £5.18 million ($10.3 million) for advice in a patent dispute with Visto in which RIM was ultimately victorious. But less than two months after Mr Justice Floyd revoked Visto's '905 patent on the grounds of obviousness, the case hit the headlines when the judge issued a critical costs order in which he said that a breakdown of Allen & Overy's bill revealed some "shocking statistics". Among these, he pointed to two associates at the firm who had spent a total of 4,543 hours on the case in the course of 15 months, racking up a bill of almost £2 million between them. "For these sums of money one would be entitled to expect each of them to be able to recite all the documents in the case by heart," he said.Allen & Overy defended its bill by declaring that the firm's client had asked it to "leave no reasonable stone unturned" in finding evidence to prove the invalidity of Visto's patent – a task that it ultimately achieved. Given that two years earlier the Canadian company had agreed to pay patent licensing company NTP more than £300 million to settle a four-year dispute over its BlackBerry product in the US in order to avoid a country-wide shutdown of its service, the company may well have viewed Allen & Overy's bill as a bargain.



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