A Blog About Intellectual Property Litigation and the District of Delaware

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It seems like litigation funding is becoming a more active area for discovery disputes lately—a trend that is likely to continue after Judge Connolly granted a dismissal based on a litigation funding agreement late last year. See Uniloc USA, Inc. v. Motorola Mobility, LLC, C.A. No. 17-1658-CFC, 2020 U.S. Dist. LEXIS 244512, at *25 (D. Del. Dec. 30, 2020).

Last week, Judge Burke confirmed a previous denial of litigation funding discovery, offering some additional thoughts:

ORAL ORDER: The Court, having now reviewed the parties' supplemental letter briefs . . . in which Defendants ask the Court to reconsider its March 2, 2021 Order . . . , hereby notes as follows: . . . If the extent of the third−party funder's interest in the asserted patents is what Plaintiff says it is (i.e., that the funding agreement does not convey any license to the third−party funder and simply "include[s] a provision giving the funder a security interest in the patents to secure performance of that agreement" that "has not been exercised, and [] is not automatically triggered by any event"), . . . then the Court cannot see how (and Defendants have not persuasively explained how) the agreement would now be relevant to a viable lack−of−standing affirmative defense.

He also noted that ordinary discovery methods out to be enough to confirm the contents of the agreement:

The Court also notes that no such affirmative defense has actually been pleaded in the case, . . . and that Defendants otherwise have the ability to propound discovery in an attempt to confirm certain of the contours of or the status of any third−party interest in the patents (and that if circumstances change in the future regarding the substance of Plaintiffs answers to such discovery requests, that Plaintiff would then presumably be required to update those answers)

Finally, he took up the plaintiff's offer for in camera review of the litigation funding agreement to confirm that the plaintiff's representations about it were correct:

While the Court does not want to give the impression that in camera review should be a frequent occurrence, or a substitute for work that the parties can and should do themselves via discovery, here in light of our Court's precedent, see United Access Techs., LLC v. AT&T Corp., C.A. No. 11−338−LPS, 2020 WL 3128269, at *1 (D. Del. June 12, 2020), and Plaintiff's repeated offers to produce the agreement in camera . . . the Court agrees that it makes sense for Plaintiff to do so, in order for the Court to confirm that what Plaintiff says about the agreement is in fact correct. . . . Therefore the Court ORDERS that by no later than April 20, 2021, Plaintiff shall produce in camera to the Court the funding agreement in question (highlighting the relevant portions that the Court should direct its attention to). If the agreement is as Plaintiff says it is, the Court will thereafter expect to deny Defendants' request for reconsideration on lack−of−relevance grounds.

In Camera Review Is Not Unheard Of

The Court's note about in camera review is interesting. Often, the party offering documents for in camera review in a discovery dispute like this doesn't actually want that to happen; they would just prefer it to the Court ordering production of the documents, and they know that offering them up gives additional weight to their characterization of what is in them.

I did a quick search of patent case dockets in D. Del., and so far this year the Court has granted in camera review at least three out of five times a party requested it, including in one case where the judge noted that the material for in camera review was "voluminous." I'm guessing there were more requests made in letters that are not easily searchable, and the real grant rate may be lower.

I expect that the common advice is correct: more often than not, the Court doesn't grant in camera review. Nonetheless, the fact that there have been at least five requests and three grants in just four months gives a sense of how frequent these requests are.

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