Enforcing IP Rights: Legal Claims as an Asset Class

Recently, Premier Cercle, the company that produces the IP Finance Conference, interviewed Dr. Donald E. Vinson about leveraging litigation financing in helping companies protect their IP.

Below is the interview which was first featured as a special newsletter sent out to all IP Finance Conference attendees.

Carefully evaluated, financed and managed, meritorious legal claims to enforce and protect IP rights can unlock significant value.

An interview with Dr. Donald E. Vinson
Chairman & Chief Executive Officer – VINSON RESOLUTION MANAGEMENT

This year the IP Finance Conference includes a session dedicated to Patents & Trademarks Strategies: Raising the Value of the Company's IP. Given the value IP represents, it is critical that companies protect and enforce the rights associated with their intellectual property. But the costs associated with doing so are exorbitant and the risks of pursuing legal action are significant. Managing these costs and risks will form part of the discussions at the conference.
Dr. Donald E. Vinson, Chairman and Chief Executive Officer of Vinson Litigation Finance (VLF) – a litigation finance firm – agreed to answer 3 short questions asked by Premier Cercle.

Interview Questions


Question: Your firm, Vinson Litigation Finance, provides litigation financing for commercial claims. What is litigation finance and how can it help companies protect their IP?


Response: Litigation finance is a relatively new, but rapidly growing industry. It is a tool that allows businesses and other organizations to manage the financial risks of pursuing meritorious legal claims. As is well known, the costs of litigation can be substantial – and this is particularly true in the IP sector. Yet the value of patents, trademarks and copyrights is significant and must be protected. Formally, litigation finance is defined as the process in which a third-party company provides advanced capital to cover litigation costs in exchange for a return on any judgment or settlement. In practical terms, litigation financing offers companies the resources they need to protect their intellectual property and enforce their rights, and allows them to view legal claims as assets to be pursued rather than liabilities to be written off.

Importantly, litigation finance is not a loan. Loans, by definition, are recoverable. Litigation finance is a form of non-recourse debt. If the client fails to obtain a recovery, it does not have to repay the funds advanced. It is only when the client is successful in obtaining a settlement or a damages award that the third-party financier is entitled to recoup their costs and share in the proceeds. This, of course, means that the third-party funder must be extremely diligent in their evaluation of claims for which funding is sought.

In addition to financial support, litigation finance can offer other benefits as well when structured appropriately. For example, whereas the standard hourly billing practice for legal services creates misaligned incentives between lawyers and their clients, litigation financing terms can be designed to reward counsel for efficient resolution practices. This is critically important for any company that wants not only to enforce its rights, but also seeks to obtain an equitable recovery in a timely fashion and focus its efforts and energies on its business objectives.


Question: How do litigation finance companies analyze claims that are brought to them for funding? What criteria do they consider when evaluating matters for financing?


Response: Most litigation finance companies are run by lawyers. Their due diligence typically involves taking a very close look at the claims from a legal perspective. Depending upon the issues involved, they may even retain outside experts to provide an opinion on matters that are highly technical. Vinson Litigation Finance takes a different approach. We have developed proprietary tools and patent-pending technologies that allow us to rigorously analyze claims from multiple perspectives using sophisticated statistical and mathematical techniques. The VLF Evaluation ProtocolSM provides a multi-dimensional risk calculation that incorporates legal, judicial, expert and financial analysis. It weighs the costs of pursing a given piece of litigation against the likelihood of obtaining a recovery. And it provides an objective assessment of legal claims, their perceived merits and their potential financial success.

The procedures VLF uses for evaluating claims for funding protect not only our interests, but provide significant value to our clients. Our evaluation technologies significantly enhance the early case assessment process, provide improved clarity on the validity of potential claims, and can even help clients identify which claims are worth pursuing.

Given the complexity of many IP matters, the pre-funding analysis of such claims is critically important not only for the funder but also for the claimant, who is preparing to embark on an endeavor that is inherently uncertain, raises the possibility of counterclaims and additional legal expenses, and will require significant investments of time from key company personnel to provide documents, offer testimony and the like. Knowing, as early as possible, that an IP claim has a significant chance of resulting in a favorable outcome – or, conversely, knowing that there is a strong likelihood that it will fail – provides clients with important strategic benefits from both a legal and business perspective.


Question: How did you come to form a litigation finance company? What is your firm's track record in terms of selecting appropriate cases for funding?


Response: The VLF team has been involved in the legal services industry for over 35 years providing trial strategy, jury selection and consulting advice in hundreds of cases in both State and Federal Courts throughout the United States and in foreign venues. Our professionals possess extensive experience in business, insurance, litigation, risk management and finance. And our risk analysis tools are based on sophisticated social science techniques that we have successfully employed to develop effective models for assessing litigation-related matters. Providing capital to help clients pursue meritorious litigation is a natural extension of this experience.

The VLF Evaluation ProtocolSM has been rigorously tested across a wide variety of case types, in various jurisdictions, and has proved to be extremely accurate. We have such confidence in the techniques underlying our evaluation procedures that we are comfortable putting our capital at risk in order to help our clients pursue their claims.

Dr. Donald Vinson is widely considered the “founding father” of the trial consulting industry, and is internationally recognized as the world's leading expert in the field. He has founded three successful companies in the space, two of which were acquired by NYSE-listed corporations (he currently serves as Chairman of the third). Dr. Vinson has spent the last 35 years providing valuable insights and strategic recommendations to trial attorneys about juror behavior, and his record of success is unparalleled. He has consulted on hundreds of civil and criminal trials, including Pennzoil v. Texaco, USFL v. NFL, the Oklahoma City bombing case, the DuPont Plaza Hotel and MGM Grand Hotel fires, Dalkon Shield litigation, the O.J. Simpson murder trial, and the World Trade Center insurance case.

Original Interview can be found here