“Trolls demanding tolls”: thoughts on markets where third parties invest in legal assets

The Economist, Sept. 12, 2009 at 84, explores the emergent field of investments in patent portfolios. Citing Coller Capital, Intellectual Ventures, and Fortress, as active purchasers of patents, the article foresees patent investments as entering the financial mainstream. Brokers such as iPotential and ICAP Ocean Tomo help investors value, acquire and monetize patents.

Ultimately, however, for investors to reap their returns they will have to negotiate licenses or litigate rights. In-house patent lawyers will bear the brunt of either course (See my post of March 27, 2009: more detail on patent investors; and April 9, 2009: AT&T sale of fallow patents.).

Along with third-party capital invested in intellectual property assets there has emerged the fledgling entrepreneurialism of third-party capital that invests in lawsuits (See my post of May 21, 2009: lawsuit financing by groups with 8 references.).

A variation on this theme of third-party capital in the legal industry will gradually spread as law firms are deregulated to sell shares to the public or accept private capital in return for a share in profits (See my post of Sept. 22, 2008: the “Tesco” prospect of publicly-traded law firms.).

Too much money is at stake in legal disputes for outsiders – non-lawyers with more astute business skills – not to find investment opportunities. Over time, the allure of capital erodes all barriers. These law markets, and others that will develop, will burden in-house legal teams.

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