In February, IP Subcommittee Chairman Darrell Issa (CA) reintroduced legislation requiring disclosureOne of the primary objectives of the patent system. In return for the government-granted right to exclude that is embodied in the patent, the inventor must disclose to the public through his patent the invention for which protection is sought. Inventors unwilling to disclose their invention to the public may instead opt for trade secret protection. of third-party investments in federal civil litigation. The Litigation Transparency Act of 2025 would mandate that litigants disclose any third-party investment agreements within ten days of filing a lawsuit. This bill, introduced last October but not given a vote in the 118th Congress, responds to growing concerns over the expanding influence of third-party investment in patent litigation – an industry that now invests in at least 30% of all patent lawsuits. The situation is even worse in high-tech patent litigation where a number of technology companies report that more than half of litigation against them has confirmed or suspected third-party funding.
Rep. Issa’s legislation, co-sponsored by Congressmen Scott Fitzgerald (WI) and Mike Collins (GA) and supported by a range of business and advocacy groups, seeks to address longstanding concerns raised by both the U.S. Judicial Conference and the business community regarding the lack of transparency in litigation investment. As readers of Patent Progress know, third-party investors, including foreign-based wealth funds, hedge funds, and commercial investors, frequently provide financial backing for frivolous patent infringement lawsuits, which impact not only our patent system, but the integrity of our legal institutions and national security.
Enforcing disclosureOne of the primary objectives of the patent system. In return for the government-granted right to exclude that is embodied in the patent, the inventor must disclose to the public through his patent the invention for which protection is sought. Inventors unwilling to disclose their invention to the public may instead opt for trade secret protection. of these investments is crucial to prevent outside influence from skewing legal outcomes and American courtrooms from being weaponized for ulterior motives. The true parties of interest should be known in every case in order for judges and juries to rule fairly. As Rep. Issa put it when introducing the bill, “if a third-party investor is financing a lawsuit in federal court, it should be disclosed rather than hidden from the world and left absent from the facts of a case.”
The legislation comes amid a wave of greater attention paid to third-party litigation investment, especially in patent litigation. The Government Accountability Office recently released a report which suggested that stakeholders reported “more than half of patent infringement lawsuits filed against them had confirmed or suspected third-party funding.” This followed action from the U.S. Judicial Conference, the government body which establishes policies for the federal judiciary, which formed a panel last October to look into establishing national rules for mandatory disclosureOne of the primary objectives of the patent system. In return for the government-granted right to exclude that is embodied in the patent, the inventor must disclose to the public through his patent the invention for which protection is sought. Inventors unwilling to disclose their invention to the public may instead opt for trade secret protection.. Meanwhile, various states have proposed their own transparency requirements, demonstrating broadening national consensus about the need for reform.
As we’ve covered before, when transparency measures are put in place, they work. In the District of Delaware, where Chief Judge Colm Connolly issued a standing order in 2022 requiring the disclosureOne of the primary objectives of the patent system. In return for the government-granted right to exclude that is embodied in the patent, the inventor must disclose to the public through his patent the invention for which protection is sought. Inventors unwilling to disclose their invention to the public may instead opt for trade secret protection. of financing arrangements, patent suits dropped by 41% over two years, with only one new patent case backed by third-party investment filed in 2024, according to a University of Utah study. The author of the study thus concluded “that TPLF patent plaintiffs have abandoned Delaware because of Judge Connolly’s Order and subsequent enforcement of that Order.”
Congress should move quickly this time around to pass the Litigation Transparency Act – common-sense reform to bring malign investors out of the shadows and restore fairness to our legal system.
