Navigating Due Diligence for Funded Patent Litigation

Erick

Welcome to the Litigation Funding Podcast. My name is Erick Robinson. I am a partner at Brown Rudnick and am based in Houston. I co-chair the Patent Trial and Appeals Board Practice at the firm and litigate and try patent cases. Although I litigate on both sides of the “V,” I generally represent patent owners, often against the largest technology companies in the world, such as Meta, Google, Apple, Sony, Samsung, and others. Many of my cases are funded by third-party funders. Often, insurers are also involved. This podcast is for inventors, patent owners, companies, corporate counsel, outside counsel, funders, insurers, and pretty much anyone interested in patent litigation and legal finance. Together, we will explore what litigation funding is, why it is needed, how it works, helpful hints, cautionary tales, ethical requirements, and everything in between.  So sit back and let’s explore litigation funding! Today, we are exploring the need for diligence by funders and insurers before they invest in patent cases. Further, we will analyze who funders should hire as diligence counsel, what experience such counsel should have, best practices, and potential hazards.  I hope you enjoy this episode!!

Erick

Alright, so let’s start with this—patent litigation is not for the faint of heart. We’re talking about a legal arena where a single case can swallow tens of millions of dollars in legal fees faster than you can say "inter partes review." And honestly? More than a few careers have been eaten alive trying to navigate these waters unprepared.

Erick

Why? Well, patent litigation is, without a doubt, the championship tournament of civil litigation. It’s long, it’s messy, and it’s wildly unpredictable. We're not just arguing over contracts or blurry agreements here. No, sir. In this game, you’ve got to unravel complex technical expertise, deal with aggressive prior-art challenges, and master the art of claim construction—trust me, that’s a circus all on its own.

Erick

So how do litigation funders fit into this madness? They’re the lifeline, really. I mean, let’s face it—when you’ve got a tiny innovative startup squaring off against a tech behemoth determined to crush anything resembling competition, funding becomes a make-or-break issue. The litigation funder is the one underwriting what could be a hundred-million-dollar battle to defend—or reclaim—a patent.

Erick

But—and this is a big "but"—this isn’t a game of blind bets. No sane litigation funder writes a check without doing their homework. And by homework, I mean diligence. Like, thorough, “search every one of your closets for skeletons” diligence. Is the patent valid? Has it run the gauntlet of prior art arguments? Does the defendant’s product actually infringe? And, fun question: Will the defendant even have the resources to pay if you win? These aren’t just sidebar questions—they’re the cornerstone of the whole investment decision.

Erick

Let me give you a quick example. Imagine this: you’ve got a startup with a groundbreaking semiconductor patent. Think cutting-edge stuff. And then here comes your nemesis, "MegaCorp Inc.," brazenly using that tech in their flagship products. The startup doesn’t have the resources to take this fight to court—there’s just no way. That’s where a funder steps in, but only if their team has vetted the case inside and out. Weak patents, poor enforcement strategies, or inexperienced litigators can flush all that money down the drain.

Erick

In short, for funders, it’s about reducing risk enough to make the odds of a solid return worthwhile. And it’s the same story with insurers. Nobody wants to be the sucker who funded—or insured—a lawsuit doomed to fail because of shoddy diligence upfront. I’ve seen it happen. More times than I’d like to admit, honestly. And it’s... not pretty.

Erick

The stakes in these cases are ridiculous. Companies throw everything they've got at winning: armies of attorneys, technical experts, whatever it takes. That means if you’re putting real dollars on the line, you’ve gotta walk through every advantage and disadvantage with a magnifying glass—twice. There’s just no room for “winging it.”

Erick

Alright, let’s roll up our sleeves and dive into the nitty-gritty of due diligence, starting with the cornerstone of any patent litigation analysis: claim construction. Now, for those of you who aren’t knee-deep in patent law, let me just say this—claim construction is where cases are won or lost. And yeah, it’s as much art as it is science.

Erick

Here’s the deal: infringement and validity both live and die by how those claims are interpreted. Think of claims as the blueprints for a patent. How detailed are they? Do they cover the invention you thought they did? Or did some sneaky competitor find wiggle room and slam a loophole right through it? That’s what we’re figuring out here. And trust me, it’s... not always straightforward.

Erick

We’ve got to dig deep into the patent’s prosecution history, which basically means retracing the steps of how it got approved in the first place. Did the patentee make any compromises with the USPTO, you know, just to get it through the system? Sometimes, those little “compromises” create giant weaknesses later on. Fun, right?

Erick

And let’s not forget about *Markman* hearings. If you’re not familiar, these hearings are where judges decide what the patent claims actually mean. And, believe me, there’s no universal guidebook for that. One judge might interpret a term as plain and ordinary, while another judge twists it into a pretzel. Wildly different outcomes, same exact patent. Uncertainty is never good, especially with such incredibly high stakes. So make sure diligence counsel understands the venue, including the court and judge.

Erick

The venue matters a ton, too. Some jurisdictions are improperly seen as plaintiff-friendly—like the Eastern District of Texas, where I’ve done more than my fair share of battles. The reality is that because patent owners have closer to a fair shot, the Eastern District just appears plainfiff-friendly when compared to other venues that make litigation very difficult for patent owners. Knowing where you’re going to file or where you’re going to get dragged into court shapes your entire strategy. You don’t treat a Texas courtroom the same as, say, a California one. That’s just asking for trouble.

Erick

So, with claim construction, the diligence team needs to get hyper-focused. You’ve got to analyze every single word. What’s the scope? What’s the argument? And, crucially, what’s lurking in the shadows that the defendant might turn into a gotcha moment? Parsing language down to that level of detail is exhausting, but it’s non-negotiable. This is where the fight begins.

Erick

Alright, let me be blunt—if you wouldn’t trust someone to step in front of a jury and deliver a show-stopping closing argument, then they probably shouldn’t be the ones conducting your patent diligence. Simple as that. Diligence counsel is basically your sheriff in this legal wild west. And if they can’t shoot straight—or spot a shady ambush coming a mile away—you’re in for real trouble.

Erick

Now, let’s break down what makes someone worth that kind of trust. First up, courtroom experience. Have they been in the trenches? No resume, no matter how Ivy League polished, replaces trial work. You want someone who’s cross-examined witnesses, battled it out in *Markman* hearings, and has a track record managing all the twists and turns of a patent trial. If that’s not on their career highlights? Keep looking.

Erick

Then there’s technical expertise. Patent cases, especially high-stakes ones, often dance on a razor-thin line of detail. The kind of lawyer you want will either have a technical degree or, at the very least, the ability to break down the most complex semiconductor design or biotech process as if they invented it themselves. Believe me, a deep understanding trumps jargon any day when you’re making arguments that could literally shift millions of dollars.

Erick

But hey, technical chops and courtroom bravado aren’t enough if you can’t trust their ethics. This one’s huge. Diligence is where you need people who will tell you—no sugarcoating—if your "surefire winner" is actually an airball. Honesty here saves more significant headaches, trust me. You don’t want cheerleaders. You want straight shooters.

Erick

And let’s not forget objectivity. I’ve seen diligence processes derailed by conflicts of interest—some so sneaky they’d make a defense lawyer proud. Your diligence team shouldn’t have any ties to the case’s other players. None. No "we used to represent the defendant’s cousin’s holding company" nonsense. You need a clean slate.

Erick

Lastly, a great diligence attorney gets how litigation funding works. If they’ve never seen a funding agreement or aren’t crystal clear on forecasting budgets... ouch. Because without that insider knowledge, you’re just funding guesswork. And let me tell you, there’s no quicker way to lose millions than guessing wrong in patent litigation. Been there. Seen it. Regretted it.

Erick

So let’s talk some more about something that doesn’t always get the spotlight but can absolutely make or break a patent case: venue. And no, I don’t mean where you picked up your morning coffee—I’m talking about geographic jurisdictions, judges, and judicial quirks that can tilt the playing field faster than, well, a badly constructed patent claim.

Erick

See, patent litigation is a bit like real estate: it’s all about location, location, location. Where your case lands—sometimes literally, based on a defendant’s mailing address—can dictate the rules of engagement. Some districts are more attractive to patent owners; others, not so much. And trust me, you do not want to be the guy who waltzes into an anti-patent stronghold thinking you’re about to strike gold.

Erick

Now, let’s break it down. Take the Eastern District of Texas—my old stomping grounds. This court used to be the go-to for patent plaintiffs. Why? Quick timelines, a known jury pool, and judges who actually give cases a chance to see the light of trial. But even there, it’s not all smooth sailing because some cases can get knocked out earlier than expected. Meanwhile, head over to California and you’ll find judges who are, let’s say, a little more skeptical about patents. If you’re unprepared for that reality, well, you might as well frame your dismissal order now.

Erick

And let’s not ignore the human element here: the judges. Judges are people, not robots. They’ve got inclinations, philosophies—even pet peeves that can swing your case one way or another. Some genuinely believe in letting a jury decide everything; others, not so much. Some judges might tackle a *Markman* hearing with blazing speed, while others drag their feet like they’re strolling through Texas barbecue pits on a summer day.

Erick

But it’s not just about filing in the “right” district. Delays, local rules, and judge-specific idiosyncrasies all mean your diligence has to account for the local climate. Knowing how long it might take to get to trial—or even whether you’ll survive a judge’s motion to dismiss—isn’t just trivia; it’s the backbone of your strategy. If you ignore this stuff, well, you’re setting yourself up for some hard lessons on how geography can turn a strong case into a total train wreck.

Erick

Bottom line? Venue isn’t just a footnote in your patent litigation strategy—it’s a giant, fluorescent sign screaming “PAY ATTENTION.” Because if you don’t analyze every venue variable, from judge temperament to the speed of the docket, you’ll spend more time cursing the system than arguing your case.

Erick

Alright, let’s put this out there: patent pitch decks. Glorified PowerPoint slides with a shiny logo, some epic bullet points promising you’ve got the next multi-million-dollar case in the bag, right? Wrong. Dangerously wrong. Those things are practically the siren song of litigation funding.

Erick

Here’s the deal—these decks love to cherry-pick just enough to sound convincing. You’ll see things like: "Clear infringement," "Massive damages opportunity," or my personal favorite, some fancy graphic of a market share takeover. It looks impressive, sure. But if that’s your diligence process? Wow, you’re in deeper trouble than a junior associate tasked with decoding semiconductor schematics.

Erick

Look, the reality is, snippets of information are just that—snippets. They don’t tell you about the late-night skeletons lurking in that patent’s history. Did the plaintiff make any weird, career-limiting compromises during the patent’s prosecution? Or, let’s get spicier—are there invalidity bombs buried in prior art? Great litigation funders—or insurers—don’t just take surface-level assurances at face value. They hire professionals to rip through those claims like a wrecking ball combing for weak links.

Erick

And don’t think defendants won’t capitalize on anything you missed. Forget to thoroughly check out whether the damages calculations have actual merit? Boom, they’ll have your so-called expert in a verbal pretzel on the stand. Found a patent that slipped through prosecution without tough prior art examination? Bang, invalidated before you even have time to blink. See what I mean?

Erick

And look, I get it, full diligence costs money and time—two things none of us want to throw around lightly. But what’s the alternative? Fund a case based on a polished pitch, only to watch opposing counsel systematically dismantle your arguments one by painful, excruciating one? You’d better double-check your funder contract if you think ‘winging it’ is an option—that’s just betting blindfolded in a high-stakes game where losing isn’t cheap.

Erick

Here’s the rule: you do diligence, proper diligence, every darn time. No excuses, no exceptions. Because in patent litigation, incomplete information isn’t just a blind spot—it’s the iceberg that takes the entire ship down.

Erick

Alright, let’s address one of those under-the-radar gems of effective patent litigation: jury profile analytics. Now, I know what you’re thinking—"What does a patent case have to do with jury profiles?" Well, let me tell you, they have everything to do with it. Because, at the end of the day, if your case makes it to a jury trial, those jurors hold the keys to the kingdom—or, in this case, the verdict.

Erick

Think about it, patent law is, frankly, intimidating to most people. You’ve got these highly technical claims, arguments about prior art, some guy in a suit talking about Markman proceedings—and none of it sounds remotely like everyday life. Now, throw a group of jurors into the mix. How do you think they’re going to react? Sympathetic to the plucky startup fighting a corporate giant? Or cold to a patent holder they view as, I don’t know, a professional litigator just looking for a payday? Knowing their potential leanings can be a game-changer.

Erick

This is where jury analytics shines. Some firms—mine included, if we’re naming names—use experts who analyze local jury composition, past verdicts, and even community temperament toward patent plaintiffs. Yeah, that’s right, we’ve got data on whether folks in a specific district are more likely to back the little guy—or roll their eyes at the "big bad patent troll" narrative. It’s less "how the sausage gets made" and more "how you don’t accidentally serve raw sausage at trial."

Erick

And it’s not just the verdict statistics that matter. Jury analytics can tell you how persuasive certain arguments might be. For example, presenting the horrors of intellectual property theft might hit differently in Silicon Valley—where it reads as a standard corporate battle—than it does in a jury pool from a manufacturing-heavy district that values innovation as sacred. You’ve got to know your audience, plain and simple.

Erick

Here’s an example. Let’s say you’re trying a case in the Western District of Texas. It’s one of the go-to spots for patent litigation, but you need to take into account the local vibes. Are jurors predisposed to side with the patent holder, particularly if they’re from a nearby company? What about the judge—do they allow certain types of evidence that could sway those jurors? I mean, details like this might seem small, but they add up to a major strategic advantage.

Erick

You know who this kind of analysis really helps? Counsel. Look, I’ve been at this a while, and having that jury insight keeps you from tossing spaghetti arguments at the wall, hoping something sticks. It lets you fine-tune your messaging. You can craft a narrative that resonates, that makes those jurors not just understand your case but feel why it matters. And when they care, well, let’s just say, verdicts have a way of leaning your direction.

Erick

So yeah, jury analytics matters—whether it’s saving you from deploying the wrong tack, or showing you the narrative gaps your team needs to fill. And barring all that? Well, let’s just say you’re betting against a group of people who, statistically speaking, probably didn’t plan on spending their week deciphering patent diagrams. Not exactly an ideal situation.

Erick

So let’s talk about the love triangle—or maybe the “necessary evil triangle”—that is, the relationship between lead counsel, diligence counsel, and insurers or funders. And here’s the reality: navigating these partnerships is like walking a tightrope, with flaming hoops and probably a shark tank somewhere beneath you. No pressure, right?

Erick

Here’s the thing—you need cooperation, honesty, and absolutely no game-playing. Everyone has to be in lockstep, or the whole thing falls apart faster than a botched deposition. The diligence team? They’re like the bridge between the litigation team and the insurers and funders. They’ve got to juggle all the personalities and moving parts, and somehow keep the funding arrangement from turning into a bad courtroom drama episode.

Erick

Now, let’s add some spice. Insurers, in particular, aren’t just handing over blank checks with a wink and a smile. Oh no. These folks usually have their own set of premium demands—think specialized risk assessments, second-opinion analyses, or even minimum thresholds for claim value. Some of them are practically allergic to risk, and you’ve got to prove to them that this case isn’t some pipe dream cooked up by overenthusiastic counsel.

Erick

One fun wrinkle? The early damages analysis. Let me tell you, that’s a tightrope walk all on its own. These calculations are speculative, sure, but they’d better be grounded in reality. Nobody wants a pie-in-the-sky promise of billions when the actual value could barely buy a fleet of e-scooters. It’s all about balancing optimism with the cold slap of reality—and trust me, insurers pay more attention to the latter.

Erick

And let’s pause here for a second. Some funders and insurers think they can slap together a cookie-cutter approach to every patent case—they can’t. Every case is unique, every calculation a blend of art and science. You need input from a damages expert who can back those numbers up in a room full of skeptical underwriters. If your damages analysis wouldn’t survive coffee-room ridicule, then you’ve got bigger problems than justifying it to a funder.

Erick

So, to wrap this up, the relationship between diligence counsel and insurers or funders is all about trust, transparency, and some good old-fashioned humility. Both sides have to keep their egos in check and their eyes on the prize. Because at the end of the day? If you’re not working as a team, you’re just handing your opposition an easy win.

Erick

Alright, let’s bring it all together. As we’ve said, patent litigation isn’t just high stakes—it’s a rollercoaster with loops, drops, and the occasional heart-wrenching freefall. For insurers and funders, success boils down to one thing: diligence done right. Skimp upfront, and you’re basically lighting money on fire. Thorough diligence, on the other hand, is your parachute.

Erick

So, what’s the playbook? First, find attorneys you’d bet your entire reputation on in court. If they can’t hold up in cross-examination or see a killer flaw before it’s weaponized against you, they’ve got no business leading your diligence process. Trust me, this can’t be overstated.

Erick

Second, invest in technical expertise. Patent cases rise and fall on highly specific details, from prior art to claim construction. Your team must be fluent in the subject matter, whether it’s semiconductors, biotech, or the newest AI innovations. And by fluent, I mean they need to speak the language better than most engineers.

Erick

Third, demand honesty. No puffed-up projections, no hand-waving over weaknesses. Just smart, candid analysis that calls out risks even when it stings. Overconfidence might feel good today, but it’ll shatter when you’re face-to-face with a defendant ready to exploit every oversight. You don’t want yes-men, you want straight shooters who’ll tell you the bad along with the good.

Erick

Fourth, think beyond the single patent. Look at the fuller portfolio, the potential design-arounds, and even what settlement might mean for licensors or competitors. And if you’re not weighing the risk of IPR or parallel proceedings, well, you’re not doing diligence—you’re doing half-baked guesswork.

Erick

At the end of the day, patent litigation is less a gamble and more a calculated risk. You’ve got to build your foundation on solid assessments, smart partnerships, and people who’ve walked this path before. Because when you do it right, it’s not just about reducing the risk—it’s about stacking the odds in your favor. And when the odds are in your favor, that’s where the money is.

Erick

So, here it is, plain and simple: diligence isn’t optional; it’s survival. Hire the best, trust in data, anticipate every twist, and don’t, and I mean don’t, ever cut corners.

Erick

And that’s all I’ve got for today. Until next time, stay smart, stay sharp, and don’t sign the check without kicking the tires. Hopefully, you enjoyed it and picked up some useful ideas. Please reach out if you have any comments, criticisms, praise, or recommendations for future episodes! My email is erobinson@brownrudnick.com. Thanks again, and I hope you join us for future episodes! Stay safe and have fun – life is short!! Be well!!!