A lot of people are interested in Chief Judge Connolly's Friday hearing about litigation funding. Here is a chart of this blog's traffic for its entire existence through this weekend:
And here is a chart for that same period of time, plus one day—the day we circulated the post about Friday’s hearing:
The Court clearly hit on an issue that people care about!
Why an Entity Like Mavexar Might Want to (Supposedly) Operate This Way
Watching some of the comments on yesterday's post, one of the questions that came up was why a patent assertion entity would be interested in giving away 5-10% of their settlement revenue to what seems to be a random person, in exchange for that person owning the patent and accepting "liabilities."
Here are some guesses on why the original patent-owning entity might do this:
- Defendants sometimes want a portfolio license—i.e., a "go away" license. By splitting up the patents among entities and keeping itself hidden, an entity like MAVEXAR could potentially direct the "owner" LLCs to keep filing serial suits against the same targets so that they can keep receiving more expensive "global" settlements. Because there are different names on the entity formation papers, defendants are less likely to realize that it's the same entity reaping the benefits over and over again behind the scenes.
- Obviously, having these individual LLCs "own" the patents potentially helps dodge liability for attorneys' fees, since the entities have little or no money. That said, I'm not sure you need separate sole members for each LLC to accomplish that—fees are already tough to collect from purpose-built patent assertion entities, even without the entity-owner gymnastics.
- It may also decrease the chances of a fee award generally, because potential bad behavior by an attorney for one LLC is less likely to be attributed to another of the LLCs if there is no common owner.
- It reduces the risk that the patent assertion LLC will have documents to produce or an FRCP 30(b)(6) witness with useful answers in deposition. If one individual was the sole member of multiple LLCs, it would be more difficult to keep that person's custodial documents separate and to prevent answers at a deposition. I imagine having a completely separate LLC with its own individual sole member, who may not know what is really going on, makes it easy to control discovery.
Those are just some ideas—I may be missing something obvious here. Feel free to let me know if so!
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