In what has become a recurring topic on Patent Progress, another dispute between a patent trollAn entity in the business of being infringed — by analogy to the mythological troll that exacted payments from the unwary. Cf. NPE, PAE, PME. See Reitzig and Henkel, Patent Trolls, the Sustainability of ‘Locking-in-to-Extort’ Strategies, and Implications for Innovating Firms. and a litigation funder has emerged. This time, it is between the Irish NPENon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More, Arigna Technology; its law firm, Susman Godfrey; and the litigation funder, Longford Capital. Arigna is one of a number of NPEs run by a hedge-fund backed entity called Atlantic IP. (For more on Atlantic, see this post about some of their other shell companies.) One target of Arigna’s lawsuits, BMW, has also needed to get involved.
What is striking about this dispute is how complicated it is. First there is the conflict between Arigna and Longford, by way of Arigna’s law firm. In 2023, Arigna and more than a dozen other patent holders entered a settlement and licensing agreement with an unnamed defendant. In those cases, the payment was made to the monetization entity Atlantic IP, which was then tasked with distributing funds to all the investors. Longford believed that it was entitled to payment based on the entire settlement pot, not just Arigna’s share of it. Hence the dispute between the patent trollAn entity in the business of being infringed — by analogy to the mythological troll that exacted payments from the unwary. Cf. NPE, PAE, PME. See Reitzig and Henkel, Patent Trolls, the Sustainability of ‘Locking-in-to-Extort’ Strategies, and Implications for Innovating Firms. and the investor. To complicate the case even further, it was Arigna’s law firm, Susman Godfrey, not Arigna itself, that secured funding from Longford–reportedly in order to reduce its own risk.
In comes BMW. Arigna has sued BMW six times in recent years across multiple countries and venues. In a filing with the US District Court for the District of Delaware, BMW claims that Arigna owes the car manufacturer between $380,000 and $1.1 million in fees after the company fought–and won–two patent infringement suits in Germany. BMW has not been able to receive payment, resulting in them pushing to intervene in Arigna’s dispute with Longford. BMW asserts that it is entitled to payment first, before settlement funds (from the separate case) are distributed between Arigna and Longford.
Adding another wrinkle, a clerical error resulted in the funding agreement between Susman Godfrey and Longford becoming public. The agreement revealed the financial stakes underlying decisions about case strategy, including that, per reporting by IAM, “Longford would receive a smaller percentage of the proceeds if there was an early settlement. Longford was set to receive 30% of the proceeds if the case ended before the first scheduled claim constructionSee Markman hearing hearing, or four months before a scheduled evidentiary hearing at the ITCInternational Trade Commission. If the case continued beyond that, Longford was set to receive 42.5% of the proceeds.”
Litigation investors routinely claim that they have no influence over legal strategy, but each time a funding agreement becomes public, the less believable these assertions become. We shouldn’t need a clerical error or squabbles over payment to see who is pulling the strings on cases being decided in US courts. The complicated web of financial interests and payments shows the legal manipulation that can happen behind the scenes and also demonstrates how these agreements can make it more difficult for operating companies to be compensated when they are targeted with baseless claims.
We need mandatory litigation funding disclosureOne of the primary objectives of the patent system. In return for the government-granted right to exclude that is embodied in the patent, the inventor must disclose to the public through his patent the invention for which protection is sought. Inventors unwilling to disclose their invention to the public may instead opt for trade secret protection. in the courts and at the ITCInternational Trade Commission. Until we have it, these shell games will continue, rewarding hedge funds and private equity at the expense of American industries.
