The Venture Capital Model Applied to Litigation Funding: Misaligned Incentives and the Harm to Innovation

The rise of investor-backed patent litigation in the United States is imposing a significant cost on innovation. The venture capital model of funding—where 50% to 70% of investments are expected to fail but the few “hits” account for the bulk of the VC profits—has been an engine supporting the development of early-stage companies and American innovation. When applied to patent litigation funding, however, it is having the opposite effect. It creates misaligned financial incentives resulting in…
By: WilmerHale