Impact of Litigation Financing Disclosures on Patent Litigation

Abstract

This paper investigates the impact of mandatory litigation financing disclosures on litigation outcomes, particularly in patent litigation. Despite the increasing importance of litigation funding, transparency regarding funders’ involvement remains limited. Using a differences-in-differences model, the study examines the effects of recent disclosure mandates implemented in federal courts. The findings unveil a notable reduction in the volume of cases instigated by Non-Practicing Entities (NPEs) following the mandate, alongside indications of strategic forum shopping aimed at circumventing disclosure requirements. Furthermore, the study finds reductions in settlement time for cases filed by likely financially constrained plaintiffs after the introduction of mandatory funding disclosures. In summary, this paper illuminates the complex relationship between disclosure regulations and NPE activities, highlighting the potential unintended consequences arising from seemingly well-intentioned reforms within the legal system.