Context: Litigation finance enables small and “poor” companies holding valuable patents to get their day in court against large corporations. The founder of ip fray is active in that field as well (April 3, 2024 ip fray article), and proudly so as access to justice matters.
What’s new: On the eve of Independence Day, Apple filed in the United States District Court for the District of Delaware a motion to compel litigation funder Omni Bridgeway to provide information concerning its relationship with a non-practicing entity named MPH Technologies that sued Apple in the Northern District of California in 2018, and whose case was unstayed last year after waiting for various decisions by the PTAB and the Federal Circuit.
Direct impact: Apple’s discovery request amounts to a fishing expedition. The pretext is that in the absence of comparable licenses, Apple wants to find out what Omni and MPH really think of the value of the patents-in-suit. But the courts in Delaware (for the motion to compel) and California (when it comes to what may be used in the infringement proceedings, particularly in a jury trial) will have to weigh the probative value of any of that against the importance of reasonably protecting the secrecy of relationships between lenders and the companies they back.
Wider ramifications: There have been other discovery requests targeting litigation funders. Also, there was litigation in California against Fortress Investment that Intel brought and Apple temporarily joined, but it went nowhere. At some point, all Fortress-funded companies suing Apple simultaneously settled their cases.
The infringement action in California started with a September 27, 2018 complaint by MPH Technologies Oy (a Finnish company) against Apple over the following patents, all of which go back to (claimed) inventions made by a Finnish company named Intrasecure Networks Oy in the late 1990s, with some later applications going back to the original inventions being filed in the 2000s:
- U.S. Patents Nos. 8,346,949, 9,762,397, 9,712,494, 9,712,502 and 9,838,362 (“method and system for sending a message through a secure connection”)
- U.S. Patents Nos. 7,620,810, 7,937,581 and 8,037,302 (“Method and network for ensuring secure forwarding of messages”)..
On July 1, 2016 — more than two years before filing suit — MPH reached out to Apple to discuss licensing, but couldn’t get a deal done. That is precisely the situation in which litigation finance is the only chance for legitimate innovators and their successors in title to get compensated fairly (and often their only chance to get compensated at all).
The intial case number was Case 5:18-cv-05935 (by now, the initial 5 has changed into a 3), stayed in April 2019 (due to Apple’s PTAB IPR petitions), reassigned to Judge Trina L. Thompson and unstayed further to a January 23 motion by MPH. Against a couple of the patents-in-suit, no inter partes review was instituted. Some others held up reasonably well. In the end, the whole PTAB process primarily delayed the case. In order to avoid further delays after a remand by the Federal Circuit, MPH even dismissed one patent voluntarily with prejudice just so as to be able to move forward with the other patents-in-suit.
The following declaration attached to Apple’s motion to compel contains a letter by Omni Bridgeway’s lawyers that explains why they reject all those discovery requests relating to their valuation of MPH’s patents and their relationship and communications with MPH:
For your convenience, here are Apple’s requests for production:
- All Documents (including communications) related to any assessments, including financial assessments, of one or more of the MPH Patents.
- Any Documents (including communications) concerning the value of any one or more of the MPH Patents (including, without limitation. for licensing purposes).
- All Documents (including communications) concerning any valuations, audits, or financial assessments of MPH.
- All Documents (including communications) concerning Your financial interest in this Litigation.
- All Documents (including communications) concerning the scope of the claims, potential infringement or non-infringement by any entity, validity or invalidity of the MPH Patents.
- All Documents (including communications) related to Your relationship with MPH.
- All Documents (including communications) related to any assessments, including financial assessments, of any actual or potential litigation, including this Litigation, against any entity involving one or more of the MPH Patents.
- Your communications (including emails) related to this Litigation, or any other litigation, including potential litigation, involving MPH or the MPH Patents.
- Your agreements with MPH related to this Litigation, or any other litigation, including potential litigation, involving MPH or the MPH Patents.
There are also ten deposition topics, but they are materially consistent with the requests for production.
Litigation funders will increasingly have to consider how to shield their communications with the companies they fund, and their internal valuations, such as by proceeding in a way that will later support assertions of attorney-client privilege.
Discovery is particularly far-reaching in the U.S., but it is only a question of time when the Unified Patent Court (UPC) will have to decide on similar requests. But the procedures and standards are different in various ways.