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Litigation Funder Backing Patent Suits Against Major Retailers

July 30, 2019, 7:16 PM

Longford Capital has announced it is the financial backer of a spate of patent infringement complaints filed against major retailers on behalf of the University of California at Santa Barbara in an unusual instance of a litigation funder going public with its role in a suit.

The university on Tuesday filed claims against major retailers Amazon.com Inc., Bed Bath & Beyond Inc., Ikea, Target Corp. and Walmart Inc. in Los Angeles federal court alleging rampant violation of patents related to filament LED lightbulb technology. The school separately asked the U.S. International Trade Commission to halt the companies from importing the lightbulbs until an agreement is reached.

Longford Capital, a Chicago-based fund, is paying for the campaign’s lawyer fees and expenses. The funder will only be paid back from a portion of proceeds generated by the campaign, which is a typical agreement for “non-recourse” loans in the litigation finance industry.

Lawsuit financiers are typically loath to discuss their involvement in cases. When third-party funding is known, defendants often ask courts to force financiers to hand over copies of their agreements during discovery. Those requests have often been unsuccessful, including in a 2014 ruling involving earth-moving manufacturer Caterpillar.

But Longford co-founder Mike Nicolas said the funder was willing to go on record, in part, because of the public university’s involvement and concern the university could be seen as misusing its funds to pursue litigation.

“We are always looking to invest in the most highly meritorious matters, and this is the perfect example of that,” Nicolas said. “Couple that with the fact that we have in UCSB a public university that is constrained in the way it uses public funds. And we saw a way to support an institution where one of its social charges is to create technology that changes our lives, and that’s what we’ve done here.”

University Litigation

UC Santa Barbara professor Shuji Nakamura won a Nobel Prize for Physics in 2014 for his work on energy-saving LED bulbs.

Nakamura and the University of California Board of Regents were involved in a 2016 patent infringement claim brought against retailer Kmart Corp. The parties in that case agreed to a joint dismissal in 2017.

Longford said the market for filament LED bulbs will reach $1 billion this year. The alleged infringement dates to when the new style of LED bulbs, which are more energy efficient and produce less heat than predecessors, went on sale around 2014.

Nixon Peabody is handling the lawsuits and the ITC work for the university. The law firm said that it was one of the first instances of a university appearing as the sole claimant in an ITC case.

“The goal of this campaign is to ensure that UC’s patent rights are respected so it can reinvest in education and research to create more world-changing technologies,” Seth Levy, a Los Angeles-based partner at Nixon Peabody, said in a statement. “It also is a message to entities throughout the private sector that university intellectual property rights cannot be infringed with impunity.”

Other universities and their research arms have pursued patent claims.

The University of Wisconsin’s patent and licensing arm this month asked the Supreme Court to overturn a Federal Circuit ruling that tossed a $506 million award it won in a 2015 trial against Apple Inc. The University of Chicago was a plaintiff alongside Bio-Rad Laboratories Inc. in a recent case that resulted in a $24 million ruling and an injunction to stop sales of some gene analysis devices by competitor 10X Genomics Inc.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com