Why Litigation Funding is Crucial for Small Patent Owners
Introduction
Small patent owners, including individual inventors and small businesses, face significant hurdles in protecting their intellectual property (IP). Enforcing patent rights through litigation is prohibitively expensive, and the Inter Partes Review (IPR) process often works unfairly against them. Litigation funding, such as that provided by firms like Stratton Street Litigation Funding, has become a vital tool to level the playing field, particularly for meritorious cases. This article explores why litigation funding is essential for small patent owners, the unfairness of the IPR process, the significance of a recent ruling by Acting USPTO Director Coke Morgan Stewart, and how these factors support innovation, access to justice, and economic equity.
The High Cost of Patent Litigation
Patent litigation in the United States is notoriously costly, with average expenses ranging from $1 million to $4 million per case, depending on complexity and stakes. For small patent owners, these costs are often insurmountable, forcing them to abandon valid claims or settle for unfavorable terms. Litigation funding, such as that offered by Stratton Street Litigation Funding, provides the financial resources needed to pursue meritorious cases, ensuring small patent owners can protect their IP without facing financial ruin.
The Unfairness of the IPR Process Against Inventors
The IPR process, established under the America Invents Act (AIA), allows third parties to challenge patent validity before the Patent Trial and Appeal Board (PTAB). While intended to streamline patent disputes, it has been criticized for disproportionately harming small inventors. The PTAB has received far more petitions than anticipated, up 25% in Q1 of 2025 alone, which is overwhelming small patent owners who lack the resources to defend their patents. Large corporations often exploit the IPR process, filing multiple petitions to invalidate patents held by smaller entities, knowing that the cost of defense (often $300,000–$500,000 per IPR) can cripple them. Additionally, the PTAB’s broad claim construction and lower evidentiary standards compared to district courts increase the likelihood of patent invalidation, undermining inventors’ confidence in their IP. Many inventors have stated they would not have sought patents had they known about the IPR risk, as it destabilizes their "trusted" IP assets.
The Coke Morgan Ruling: A Win for Inventors
In a recent precedential decision on May 19, 2025, Acting USPTO Director Coke Morgan Stewart clarified the application of the Advanced Bionics framework, requiring IPR petitioners who rely on prior art previously submitted to the USPTO to demonstrate a material error by the Office in assessing patentability. This ruling raises the bar for initiating IPRs, reducing frivolous challenges, and protecting inventors from repetitive attacks on their patents. Additionally, Stewart’s March 2025 interim policy shift toward increased discretionary denials under 35 U.S.C. § 314(a), as seen in cases like Motorola Solutions, Inc. v. Stellar, LLC, emphasizes factors like parallel litigation timelines, discouraging late IPR filings that exploit small inventors’ limited resources. By prioritizing meritorious petitions and reducing the PTAB’s workload, this policy helps restore balance, giving small patent owners a fairer chance to defend their IP. Critics argue this shift may steer the IPR process “dangerously off course,” but for inventors, it mitigates the systemic bias favoring well-funded challengers.
Leveling the Playing Field
Large corporations often use their financial advantage to outlast smaller opponents in both litigation and IPR proceedings. Litigation funding enables small patent owners to counter these tactics by covering legal fees, expert witnesses, and other costs. Firms like Stratton Street Litigation Funding rigorously evaluate cases to ensure they are meritorious, meaning they have a strong legal and factual basis. This focus on merit aligns with Stewart’s efforts to curb abusive IPR practices, ensuring disputes are resolved based on patent strength rather than financial endurance.
Encouraging Innovation
Small patent owners are often the source of groundbreaking innovations, but the inability to enforce patents—or defend them in IPRs—can discourage inventors from pursuing new technologies. Litigation funding supports innovation by providing the confidence to protect IP. By backing only meritorious cases, funders like Stratton Street Litigation Funding ensure resources are allocated to strong claims, complementing Stewart’s ruling, which reduces the risk of unwarranted patent challenges. This dual support incentivizes inventors to take risks, contributing to technological progress and economic growth.
Access to Justice
The legal system aims to protect all patent holders, but without financial support, small patent owners are often denied access to justice. Litigation funding bridges this gap by providing resources to navigate complex legal and PTAB processes. Stratton Street Litigation Funding’s due diligence ensures only meritorious cases are funded, promoting judicial efficiency. Similarly, Stewart’s ruling discourages weak IPR petitions, preserving the integrity of valid patents and ensuring small inventors can access justice without being overwhelmed by baseless challenges.
Risk Mitigation for Small Patent Owners
Litigation funding is often non-recourse, meaning small patent owners are not personally liable for repayment if the case is unsuccessful. This arrangement, used by firms like Stratton Street Litigation Funding, mitigates the financial risk of pursuing litigation or defending against IPRs. By backing only meritorious cases, funders reduce the likelihood of losses, while Stewart’s ruling further protects inventors by limiting frivolous IPRs, allowing small patent owners to focus on their core operations without fear of bankruptcy.
Economic and Market Benefits
Supporting small patent owners through litigation funding and fairer IPR processes has broader economic implications. When small entities can enforce their patents, they attract investment, license technologies, or compete in the marketplace, fostering a dynamic economy. By funding meritorious cases, firms like Stratton Street Litigation Funding help secure fair licensing agreements, generating revenue for inventors. Stewart’s ruling complements this by reducing the threat of invalidation, enabling small patent owners to leverage their IP for economic gain.
Addressing Criticisms of Litigation Funding
Critics argue that litigation funding may encourage frivolous lawsuits or give funders undue influence. However, reputable funders like Stratton Street Litigation Funding conduct thorough due diligence to ensure cases are meritorious, aligning with Stewart’s focus on meritorious IPR petitions. Funding agreements typically preserve the patent owner’s control, ensuring alignment with their interests. For small patent owners, the benefits of funding and a fairer IPR process far outweigh potential drawbacks, providing a viable path to defend their rights.
Litigation funding, exemplified by firms like Stratton Street Litigation Funding, is a critical lifeline for small patent owners, particularly in the face of an unfair IPR process that favors large corporations. By focusing on meritorious cases, funders provide the resources needed to protect IP in a legal landscape marked by financial disparities. Acting USPTO Director Coke Morgan Stewart’s recent ruling strengthens this support by curbing frivolous IPR challenges, restoring balance for inventors. Together, these mechanisms level the playing field, mitigate financial risks, and empower small patent owners to enforce their patents, fostering innovation and economic growth in a competitive market.
