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Private equity fund bets on litigation finance, sees high potential in university patents

By Jesse Schwartz
Published: November 29th, 2017

Litigation financing holds appeal for universities trying to protect valuable IP because they typically can’t afford to gamble on a complex patent case against a deep-pocketed corporation. At the same time, universities and their TTOs are no strangers to infringement, and several recent cases have proven that huge settlements and verdicts are not beyond their reach.

Given those dynamics, a new fund is eyeing universities as fertile ground where litigation finance could pay off big, and it has generated about $500 million from investors who are betting on the fund’s ability to assert and monetize university patents.

Longford Capital is the company behind this venture, and it now boasts the largest private equity fund of its kind in North America. And before you dismiss the idea of litigation finance as an option for your TTO, it might be beneficial to first review your portfolio for potentially valuable assertion opportunities. Or, let Longford do it for you. In many cases, the fund managers will help you scour your portfolio for property that can be monetized, and they may even assist in the commercialization process — which may include litigation, but not necessarily.

The Longford Capital Fund II was started in mid-2017 and is currently invested in $100 million of litigation on behalf of a dozen universities. The size of the fund reflects the growing interest from the investor community in litigation finance, says Managing Director and General Counsel William P. Farrell Jr. Fund II attracted more than $1 billion of interest from investors, he says.

Longford Capital investors include institutional groups like state and municipal pension funds for firefighters, police, and other public employees, along with high net worth families and the principals of the company. Their funds are used to make nonrecourse equity investments in the outcome of commercial legal claims, which means the company pays for the litigation expenses of the claim in return for owning a portion of any award or settlement. The company takes a gamble by paying for the litigation up front and gets nothing from the university if the claim fails.

“There are a lot of organizations that can’t pay for the attorneys to pursue a meritorious legal case, or they prefer a better option in terms of not putting that money at risk in case the claim is not successful,” Farrell explains. “This includes tech transfer departments of universities in particular, because they often are in exactly that situation with claims that are of significant value and which have substantial merit.”

A university can bring a specific case to the fund for consideration, and Longford Capital also works with universities to identify intellectual capital that can be monetized.

A detailed article on litigation finance appears in the November issue of Technology Transfer Tactics. To subscribe and get the full article, plus gain access to the publication’s 10-year archive of best practices and success strategies for TTOs, CLICK HERE

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