David P. Fitzgibbon

The U.S. patent litigation landscape is being reshaped by the burgeoning industry of litigation funding, which has grown into a multibillion-dollar market. Initially met with skepticism, litigation funding has become a mainstream tool for patent enforcement. This growth is due, in part, to the increasing legal costs and procedural challenges faced by individual inventors, startups and small patent holders in asserting their rights. The acceptance of litigation funding has been driven by its ability to provide financial access for costly patent disputes, the rise of portfolio funding models, and a growing focus by institutional investors on intellectual property as a valuable asset class.

Key legal developments have influenced this trend. The U.S. Supreme Court’s decisions in Alice v. CLS Bank limited patent eligibility and in TC Heartland v. Kraft Foods Group Brands redefined proper venue, while the prevalence of inter partes review (IPR) proceedings have added complexity and risk to patent enforcement. In response, litigation funders have become more selective, focusing on high-quality patents in well-prepared cases. This has resulted in a more sophisticated and competitive funding landscape, which is expected to continue shaping U.S. patent litigation.

Trends Shaping the Future of Litigation Funding

Patent litigation funding offers a gateway to the potential value of patent infringement cases, which can yield significant settlements or damage awards. These returns are often outsized compared to traditional investments in fixed income or equity, and they are independent of stock market performance, interest rates and broader economic cycles. Looking ahead, trends in patent litigation funding over the next decade will be influenced by developments in innovation, finance and law. Growth and innovation are expected in high-value technology sectors such as AI, semiconductors, 5G/6G and biotech. This will create opportunities for significant business investment and the development of patents to protect high-value innovations. As the value of intellectual property assets increases, the costs to enforce patent rights are expected to follow.

The Potential of High-Value Technology Sectors

The future of litigation funding in the patent infringement space is poised to target those high-value technology sectors at the forefront of innovation, driving significant business investment and the development of patents to protect groundbreaking technologies. As these sectors continue to grow, the value of intellectual property assets tied to these sectors will increase, leading to more frequent assertions of patent rights. This trend presents lucrative opportunities for litigation funders, who can capitalize on the potential for substantial returns from patent enforcement in these cutting-edge fields.

The Importance of Venue Selection

Venue selection will continue to influence patent litigation due to the advantages and disadvantages offered by different jurisdictions. Some jurisdictions, such as the Eastern and Western districts of Texas, are known for their local rules that favor patent holders, often resulting in faster trial schedules and higher success rates for plaintiffs. Conversely, jurisdictions like the District of Delaware and the Northern District of California tend to favor defendants, offering more rigorous scrutiny of patent claims and a higher likelihood of patent invalidation. The choice of venue will significantly impact the outcome of a case, making it a critical strategic consideration for funder due diligence.

The Rise of Ex Parte Reexaminations

Recently, Patent Trial and Appeal Board (PTAB) discretionary denials to institute IPR have increased, so ex parte reexaminations may be used more as a preferred strategy for defendants seeking to challenge patent validity. The recent rescission of former Director Kathi Vidal’s 2022 memorandum by the U.S. Patent and Trademark Office (USPTO) in February 2025 has given PTAB panels more flexibility in applying Fintiv factors to deny IPR. While IPR will remain as a suitable aspect of a defensive litigation strategy, the outcome of IPR may become less favorable for defendants. Ex parte reexaminations, which allow third parties to request a reexamination of a patent by the USPTO without the need for a full trial, may rise in popularity for defendants as a feasible alternative to IPR. Ex parte reexaminations can be a cost-effective and faster means of contesting patent validity, providing defendants with an alternative strategy to navigate the complexities of patent litigation.

Portfolio Investment and Risk Management

Portfolio investment is becoming more favorable compared to traditional single-case funding. While single-case funding concentrates risk on the quality of a single case, portfolio investment spreads risk across multiple cases, involving various patent owners, technologies and defendants. This approach enhances diversification and the potential for return on investment. Portfolios can be structured to match an investor’s risk profile, including a mix of high-risk, high-reward cases and lower-risk cases to balance the overall risk of a portfolio. Funders are increasingly using insurance to protect their investments, with judgment preservation and enforcement coverage insurance helping to de-risk litigation outcomes.

As litigation costs continue to rise, funders will become more selective, focusing on high-quality cases with enforceable, valid and litigation-tested patents; clear infringement; and significant damages. Advancements in AI-based predictive analytics will further enhance funders' ability to assess portfolio risk and returns, integrating data analytics to improve efficiency in case selection.

An Emerging Alternative Investment Tool

The institutionalization of patent litigation finance funds is emerging as an alternative investment tool, with dedicated capital pools focused on patent enforcement and monetization. Pension funds, family offices, endowments and private equity firms are increasingly allocating resources to alternative investments, including litigation finance funds. The legal landscape is evolving, particularly concerning patent subject-matter eligibility under 35 U.S.C. Section 101 and the Alice decision, which will impact the patent landscape in high-value technology areas. The IPR process has undergone a significant change since the recent rescission of Vidal’s 2022 memorandum, which has provided PTAB panels more flexibility in weighing Fintiv factors to deny IPR. This change may lead to an increase in use of ex parte reexamination as an alternative or additive strategy for challenging patents. Finally, venue considerations will continue to play a crucial role in determining the trajectory of patent cases.

Since the success or failure of a patent case relies heavily on facts and applicable case law, funders should vet thoroughly the strengths and weaknesses of a case to determine if it is investment-grade and the related risk profile, especially if building an investment portfolio.