House IP Panel Focuses on Transparency for Litigation Funders

June 13, 2024
House IP panel

The House Intellectual Property (IP) panel is considering measures to increase transparency in litigation funding. This initiative aims to shed light on the financial backers of legal cases, particularly those involving intellectual property disputes.


The Growing Influence of Litigation Funding

Litigation funding, where third parties provide financial support to litigants in exchange for a portion of any financial recovery, has become increasingly prevalent. This practice can level the playing field, allowing parties with limited resources to pursue meritorious claims. However, the rise of litigation funding has also raised concerns about the potential for conflicts of interest, undue influence over litigation strategies, and lack of transparency regarding the true stakeholders in legal battles.


Calls for Greater Disclosure

Lawmakers and legal experts have highlighted the need for more stringent disclosure requirements. Representative Darrell Issa, Chair of the House IP Subcommittee, has been a vocal advocate for greater transparency. He argues that knowing the identity of litigation funders is crucial for ensuring fairness in the legal process. “We need to ensure that justice is not only done but seen to be done,” Issa stated. By mandating disclosure, the panel aims to provide courts and opposing parties with a clearer understanding of who is financing and potentially influencing a lawsuit.


Potential Legislation on the Horizon

The House IP panel is considering several legislative proposals to address these concerns. One proposal would require litigants to disclose any third-party funding agreements at the outset of a case. This measure aims to prevent any hidden financial influences from swaying the course of litigation. Additionally, the panel is examining whether specific rules should apply to IP litigation, given the high stakes and technical complexities often involved in such cases.


Balancing Interests and Privacy

While there is broad support for increased transparency, there are also calls to balance this with the privacy interests of funders and litigants. Critics of mandatory disclosure argue that it could discourage funding for valid claims and expose funders to unnecessary scrutiny and potential harassment. They advocate for a measured approach that protects legitimate privacy concerns while promoting transparency.


Industry Reactions

The proposal has sparked diverse reactions from various stakeholders. Legal professionals and industry groups are closely monitoring the developments. Some, like the U.S. Chamber of Commerce, support increased transparency, arguing it will promote fairness and integrity in the legal system. Others caution against overly burdensome regulations that could stifle access to justice for smaller entities or individuals who rely on third-party funding to pursue legitimate claims.

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