Burford Capital Logo Light Burford Capital Logo Dark

IPWatchdog features an article by Katharine Wolanyk on the benefits of legal finance for IP

October 22, 2019

There are many reasons that it makes sense for companies, law firms and other entities with valuable IP assets to utilize legal finance. Most are well understood: The cost of litigation is rising, the IP landscape continues to be ever more fraught with risk, and fewer firms are willing to take IP matters on contingency. As the co-chair of Intellectual Property at an AmLaw 100 firm commented in the 2017 Litigation Finance Survey, “In my field of intellectual property, there’s an increasing degree of uncertainty… [and] an increasingly high-risk, high-reward dynamic that’s well-suited for litigation finance.”

Shifting costs from litigants and law firms to finance providers whose core business is  managing and monetizing legal risk is no doubt a reason why IP litigation is the most commonly requested type of financing by practice area in our experience (based on the last 12-month period for which data is available).

However, there’s another, less understood but quite compelling reason for IP litigants to use legal finance: Its positive impact on accounting outcomes.

The accounting and financial reporting impact of litigation is clearly a pain point: The 2017 Litigation Finance Survey shows that a noteworthy 76% of in-house respondents identify as a business challenge that “ongoing legal expenses depress financial results.” However, neither clients nor their counsel currently appreciate how legal finance can help address this issue: Fewer than one in three respondents (29%) say that improving accounting and other reporting outcomes would be a trigger for them to use legal finance.

The account impact of legal spend applies across all areas of commercial litigation and arbitration, but it’s especially relevant in IP. Clients with strong IP assets—whether they be corporations, startups or private equity backed entities—are also focused on optimizing their financial results. IP assets represent a major investment—in the R&D required to obtain them and the ongoing costs to maintain them.  However, companies then face the dilemma of not being able to generate value from those IP assets without enforcement.  That means it’s essential for them—and the law firms they work with—to understand the key role that legal finance can play in solving for the otherwise negative accounting and reporting impact of litigation spend.

Read the full article