Judge’s Rare Rebuke of Lawyers Shakes Up Patent-Funding Probe

Chief Judge Colm F. Connolly took an unusual step at a recent hearing in his long-running litigation finance investigation, telling a paralegal who owes his Delaware court a $53,000 contempt fine that her lawyers aren’t really working for her.

Lori LaPray, a recently widowed 37-year-old mother from Texas, owns Backertop Licensing LLC, one of many Texas entities Connolly has called “shell companies” that he says are used by patent-monetization firm IP Edge LLC to conceal the true beneficiaries of its litigation. The $200-a-day fine began accruing when LaPray first flouted Connolly’s July 2023 order to appear in his court and testify as part of his probe into whether the companies adhered to his disclosure requirements.

Connolly left the sanction against her intact after she finally appeared Sept. 18 to request leniency. But he reserved scorn for Backertop’s attorneys and suggested LaPray had been a “pawn” in a grander litigation-finance campaign. He advised her to consider hiring new, independent counsel to assess whether she should take action against IP Edge and Mavexar LLC, its related consultancy.

A judge publicly questioning the effectiveness or loyalty of a party’s legal representation in open court is rare, according to attorneys who discussed Connolly’s action in the hearing. The suggestion of potential ethical issues can lead to broader scrutiny of implicated attorneys and their practices—especially considering the context of litigation funding, already a contentious topic as some judges and advocates say it can obscure who is really directing litigation.

“The idea that this is sort of rampant would be really pathological to the justice system, because it does so depend on knowing what are the interests before the court,” said Alex Moss, executive director of the Public Interest Patent Law Institute. “The whole system of adversarial litigation is sort of based on this idea that lawyers have a duty to their clients, and they can be quite voracious in pursuing them. If a lawyer’s interest isn’t really with a client, and there are competing interests, that is very serious.”

At one point during the Backertop hearing, Connolly interrupted Backertop attorney David L. Finger’s questioning of LaPray to ask, “Who are you really representing here?”

Connolly suggested Finger’s question was favorable to Mavexar and adversarial to his client Backertop. He reminded the attorney that Backertop’s sole owner, LaPray, was on the witness stand and called the questions “quite remarkable.”

Finger, citing Connolly’s comments, asked no further questions.

The judge turned to LaPray. “I think you should consult with a lawyer about whether you have causes of action against Mavexar and IP Edge and the principals associated with those entities that led you down this road, that did not consult with you as we’ve established this morning,” Connolly told her.

Neither IP Edge nor LaPray immediately responded to requests for comments.

Arrangements like those IP Edge and Mavexar are alleged to have made aren’t atypical, Moss said, but Connolly’s “diligent performance of his duties as a judge” on the subject is “extremely uncommon.”

“Lawyers have duties to their clients and to the court, and it’s part of a judge’s job to look after the interests of represented parties, and of the adherence of counsels to their duties,” said Moss, who with PIPLI and two other advocacy groups filed a brief supporting Connolly in another IP Edge entity’s failed appeal of his disclosure orders.

Connolly on Sept. 24 issued an order of judgment formalizing the fine against LaPray. If she still doesn’t pay it, he said at the hearing, he’d refer the matter to the Justice Department for enforcement. It wouldn’t be his first referral in the IP Edge investigation.

Connolly’s Probe

Since late 2022, Connolly, a former federal prosecutor, has investigated entities connected to IP Edge and Mavexar for what he’s said are failures to comply with his standing orders requiring that plaintiffs disclose “every individual and corporation with a direct or indirect interest in the party” and any third-party funding arrangements. His inquiries previously led to referrals for discipline for three patent attorneys at IP Edge and four attorneys who worked on Delaware lawsuits for related patent-assertion companies.

The probe hit a speed bump when LaPray refused to travel from Texas to Connolly’s courthouse in Wilmington, Del., for a second round of questioning about Backertop’s structure and its connections to IP Edge and Mavexar. Connolly again ordered her to show up after the Federal Circuit in July upheld his authority to issue the summons.

Reducing the sanction against LaPray, officially Backertop’s sole owner, “would send a terrible message to the folks at IP Edge and Mavexar,” the judge said, according to a transcript of the hearing. He blasted actions the companies’ attorneys have taken to file new complaints in venues that don’t have similar disclosure requirements. “Somebody has to send a strong signal that this court will not tolerate that kind of deceit,” he said.

Multiple attorneys drew Connolly’s ire that day, including Ronald W. Burns Jr. of Burns IP Law for Backertop and David R. Bennett of Direction IP Law for Swirlate IP LLC, a separate IP Edge-related entity whose hearing followed that afternoon. The judge said he’d refer them to their respective state disciplinary bodies for taking actions on behalf of each plaintiff company without the informed consent of their owners. The judge also said he’d refer the matters to the Justice Department, as he’d done with a related IP Edge entity.

Neither Burns nor Bennett responded to repeated requests for comments.

The developments at the evidentiary hearings were “highly unusual—‘highly’ being an understatement,” said Florian Mueller, an intellectual property activist who founded Fray Media LLC.

“The fact pattern here is not representative of how litigation finance generally works,” Mueller said. “It’s important to distinguish third-party litigation finance, where a funder provides resources but does not control the litigant, from direct investment.”

‘Seven-Headed Hydra’

“Connolly should be given a medal,” said Carol Langford, an ethics lawyer in the San Francisco Bay area who teaches professional responsibility and ethics at the University of San Francisco.

“He is absolutely right in rolling over some of these rotten logs,” said Langford, a former chair of ethics committees at the American Bar Association’s Intellectual Property Section and the California State Bar.

“These type of suits and problems are going to get bigger, I guarantee you that,” she said. “The judge is trying to do the best that judge could do, to cut off one head of a seven-headed Hydra.”

Nearly two years ago, as Connolly closed his first evidentiary hearing in the now longstanding litigation-finance probe, he decried the “horrible implications” of having to preside over a case “without knowing who the parties really are.” Since then, Connolly has provided the Justice Department, the US Patent and Trademark Office, and the state bar disciplinary counsels the evidence he and his clerks have gathered.

That sets him apart from numerous judges who are less concerned with the ultimate beneficiaries of the litigation before them, and other potential enforcers.

“The Department of Justice has done nothing to combat abusive patent litigation,” Moss said. “I hope they will do something about this. But I am not optimistic.”