In August, Delaware Chief District Judge Colm Connolly denied Apple’s request for access to details on the litigation funding arrangement between the Finnish company MPH Technologies, which is suing Apple for alleged patent infringement, and the litigation financing entity Omni Bridgeway LLC, its third-party funder. While Connolly cited jurisdictional issues in his denial, this latest setback for the litigation transparency movement demonstrates that American technology innovators will continue facing opaque foreign threats so long as Congress fails to pass universal 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. requirements for third-party funding arrangements.
Readers of Patent Progress remember Judge Connolly as a trailblazer for the TPLF transparency movement. In April 2022, Judge Connolly introduced a standing order requiring that all parties which appear before him must disclose any third-party funding they receive. The groundbreaking rule not only exposed the abuses of non-practicing entities IP Edge LLC and Mavexar LLC, but paved the way for similar transparency efforts in Florida, California, and New Jersey.
However, in his August 6th decision, Judge Connolly refused to require that Omni turn over documents regarding its financial relationship with MPH Technologies, instead returning the case to the Northern District of California, which is adjudicating the underlying infringement lawsuit. Although Omni’s agent was registered in Delaware, Connolly expressed hesitation “expend[ing] precious judicial resources making a decision” that could be “effectively nullified by the rulings of the judge who is overseeing the underlying litigation.”
This is precisely the problem with a lack of universal 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. requirements for third-party litigation funding arrangements in federal court. Even when individual courtrooms and states adopt much-needed regulations mandating transparency, plaintiffs and their funders can still skirt these rules by moving their litigation to other jurisdictions, leaving even transparency-minded judges like Judge Connolly powerless to address the problem. Making the problem worse, non-practicing entities routinely “judge shop” to find favorable courtrooms for their cases, exploiting any trick in the book to place their case in the forum which benefits them most.
In Apple’s case, it sought 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. regarding “important issues in the underlying lawsuit, including patent damages, patent valuation, standing, infringement and validity, and pre-suit diligence,” after having discovered Omni’s involvement in their case only during the discovery process. Being sued for alleged infringement of virtual private network and secure messaging technologies, Apple should be afforded the basic right to understand who is taking them to task for potentially billions of dollars. Omni and MPH Technologies’ refusal to release any information on their financial interests raises many questions – first among them what don’t they want the public to know?
As this infringement case returns to the Northern District of California where no transparency requirements exist—at least, not yet—it serves as a reminder of the threat posed to American companies nationwide by undisclosed litigation finance. Patent trolls consistently go after innovators—whether in technology, medicine or other critical industries—with frivolous claims of infringement that force innovators into costly settlements. In roughly one-third of all patent cases, third-party financiers—litigation entities like Omni, private equity firms, and sovereign wealth funds—provide the backing for this litigation in a bid to game our courtrooms for a quick return on their investment. Or, in the case of some sovereign wealth funds, in a bid to overtake our nation’s technological lead.
Third-party funding arrangements not only empower these trolls, but pose a national security threat to the United States when the entities have opaque ulterior motives in pursuing legislation. Already, Chinese-based litigation entities have been found behind infringement cases against leading technology companies, while Russian oligarchs have been shown to use litigation finance as a way to skirt Western sanctions.
Recognizing this threat, Congress has finally gotten the ball rolling on legislation to address third-party funding, most notably through IP Subcommittee Chairman Darrell Issa’s recently introduced Litigation Transparency Act of 2024, which would require litigants in any federal civil lawsuit to produce any arrangements between them and the commercial enterprises which support them within ten days.
Until reforms like this are passed, however, leading American companies like Apple will remain subject to the uneven patchwork of 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. requirements that govern our country’s judicial jurisdictions. For our economy to remain the envy of the world, we cannot allow our innovators to be abused by this shadowy threat any longer.
