Financing the defense

Company challenge

ShaveLogic developed razor and shaving technology that utilized a perpendicular magnetic attachment between the razor and the handle, along with elastomeric pivots, to provide a more precise shave.

To advance its business, ShaveLogic hired former Gillette employees Craig Provost, John Griffin, William Tucker and Douglas Kohring, all of whom were involved in the design of the ShaveLogic razor. ShaveLogic obtained a patent for the magnetic attachment, with Provost and Griffin listed as co-inventors. ShaveLogic had nine other pending patent applications relating to its razor technology.

Gillette then filed a complaint in Massachusetts state court against ShaveLogic and the former Gillette employees, alleging that they misappropriated Gillette trade secrets and engaged in unfair competition, and that the employees breached their non-disclosure agreements with Gillette.

ShaveLogic argued that this was not a new tactic for Gillette, which had previously filed a lawsuit against Harry’s that was withdrawn shortly after filing. In addition to denying all of Gillette’s claims, ShaveLogic counterclaimed that Gillette intentionally interfered with ShaveLogic’s business relations and engaged in unfair trade practices.

Gillette’s suit left ShaveLogic without the financial resources it needed to build a business—or defend itself in court.

Burford legal finance solution

As the lawsuit proceeded, the cash strapped ShaveLogic sought a means of financing its defense. ShaveLogic met with a variety of litigation finance providers and ultimately chose to work with Gerchen Keller Capital, which was acquired by Burford Capital soon thereafter. Burford agreed to provide the resources needed to mount a vigorous defense as well as to pursue ShaveLogic’s counterclaims on a non-recourse basis. Without a successful outcome for ShaveLogic, Burford would lose its investment. Only with a successful outcome in which ShaveLogic prevailed in the litigation and maintained control of its patent and applications would Burford earn its investment back and a return, to be paid from a combination of a settlement, if any, and/or future razor sales.  ShaveLogic hired Bartlit Beck Herman Palenchar & Scott to represent it and the other defendants in the lawsuit.

After both parties filed motions for summary judgment, the court ruled in favor of ShaveLogic, denying Gillette’s motion and allowing ShaveLogic’s counterclaims to proceed. The remaining claims were dismissed after the parties reached a settlement, the terms of which remain confidential.

Legal finance impact

Even as it becomes increasingly commonplace in the business of law, litigation finance is often misunderstood. A frequent assumption is that litigation finance is always used by plaintiffs, never defendants. Another myth, stubbornly propagated by the US Chamber of Commerce, is that litigation finance is used to stoke “frivolous” lawsuits.

Gillette v. ShaveLogic belies both unfounded assumptions: Litigation finance was provided to the defendant, not the plaintiff—and ultimately, it was the unfunded party, not the one using financing, whose claims were dismissed on summary judgment as without merit.