5 Things Patent Litigation Funding Companies Look for Before Investing in a Patent Case

Patent litigation can be expensive, often costing millions of dollars through trial. Because of this, many patent owners turn to litigation finance firms to fund enforcement efforts.

But funding firms are highly selective. They review hundreds of patent opportunities and only invest in a small percentage.

Understanding what litigation funders evaluate can help patent owners prepare stronger cases and increase the likelihood of securing funding.

1. Strength of the Patent

The first question investors ask is simple: Is the patent strong? Funders analyze:

• Claim scope

• Prior art risk

• File history and prosecution record

• Claim construction issues

• Validity risk under inter partes review (IPR)

If the patent appears vulnerable to invalidity challenges, funders will usually decline the investment.

This is why many patent owners obtain a Litigation Viability Report before approaching funding firms.

2. Clear Evidence of Infringement

Even strong patents will not attract funding without clear infringement evidence.

Funders look for:

• Claim charts mapping patent claims to accused products

• Public documentation showing product functionality

• Technical analysis demonstrating infringement

The more concrete and documented the infringement case, the more attractive the investment becomes.

3. Size of the Potential Damages

Litigation funders are investors. They must evaluate whether the case can generate sufficient financial return.

Funders examine:

• Market size of the accused products

• Estimated royalty rates

• Sales volume

• Duration of infringement

Cases with potential damages below $20–30 million often struggle to attract funding because litigation costs can be substantial.

4. Ability to Survive IPR Challenges

One of the biggest risks in patent litigation is the inter partes review (IPR) process at the Patent Trial and Appeal Board.

Many defendants file IPR petitions to attempt to invalidate patents.

Funders therefore analyze:

• Prior art landscape

• Prosecution History

• PTAB invalidation risk

• Claim language vulnerabilities

• Can the patent claim settled expectations and quickly avoid an IPR institution

If the patent appears likely to survive PTAB challenges, the case becomes significantly more attractive.

5. Quality of Legal and Technical Analysis

Before committing capital, funders want to see professional diligence materials.

These typically include:

• Claim charts

• Prior art analysis

• File Wrapper Analysis

• Litigation strategy assessments

• Damages modeling

• Risk analysis

Well-prepared diligence materials can dramatically increase the probability of securing litigation financing.

How Patent Owners Can Improve Their Chances of Funding

Many patent owners approach litigation funders too early, without the materials investors need to evaluate the opportunity.

Preparing a professional Litigation Viability Report or Investment Diligence Report can significantly improve funding prospects by providing investors with the technical and legal analysis required to assess the case.

For patent owners seeking enforcement capital, preparation and diligence are often the difference between rejection and funding.

Before you take your case to a Third Party Litigation Funder, have Patent Intelligence Group prepare an Investment Diligence Report for your patent.

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