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30 October 2017

How Longford Capital protects university IP

GUV speaks with William Farrell (pictured) of Longford Capital about the firm’s $500m litigation finance fund.

Author: Thierry Heles, editor

Litigation may not be at the front of everyone’s mind in the research commercialisation space, though it can produce memorable stories such as technology giant Apple being ordered to pay $506m to Wisconsin Alumni Research Foundation, the tech transfer arm of University of Wisconsin-Madison in July.

Apple, the court found, had infringed the institution’s intellectual property (IP) related to computer processor technology that boosts performance by predicting a user’s input. The corporate said at the time it would appeal and filed a brief just over a week ago.

The lawsuit is undoubtedly costing the university a lot of money and it raises the question of just how institutions can protect themselves from infringements – or fight them if they do occur.

Longford Capital, a US-based private investment company, offers an answer. The firm launched its second fund last month, Longford Capital II, with $500m in commitments.

The fund is “focused on equity non-recourse investments in the outcome of meritorious commercial legal claims”, William Farrell, managing director and general counsel at Longford Capital, told Global University Venturing. In other words, Longford puts up the cash necessary for wronged parties to pay a law firm and pursue claims in court.

While Longford does not focus exclusively on universities – it also supports commercial disputes such as breach of fiduciary duty cases and breaches of contract, or trade regulation matters – intellectual property cases are one of its core focus areas.

“All of the cases that we back are business-to-business disputes and involve a minimum of $25m in actual damages,” said Farrell. “That is a minimum number, although the average amount in controversy for our investments in fund I and fund II has been more than $100m.”

He continued: “We will support cases from small, medium and large companies, both private and public companies, from universities – particularly research universities – governmental agencies, and other organisations, non-profit organisations, companies in bankruptcy, and so forth.”

The firm helps clients pursue cases in US state and federal courts, as well as in domestic and international arbitrations and regulatory agencies. It also assists clients prior to filing lawsuits to investigate whether issues can be resolved without involving the legal system.

Longford is active internationally as well, including in Europe and Australia, though the US makes up the vast majority of its investments in both funds so far. The firm also backs international arbitration cases, which can be in any number of locations, from New York or Washington to London and Hong Kong.

Longford Capital sources potential claims through three channels – universities may contact the firm directly, lawyers representing universities may reach out, or the firm’s partners will identify opportunities through their network of university contacts.

While universities reaching out directly is rare, Farrell noted that approaches by attorneys are more common for the simple reason “that law firms are a little bit more aware of Longford Capital and the broader industry of litigation finance than universities at this point”.

Once Longford has identified a potential claim, the firm looks at some 50 characteristics to assess likely outcome.

“The first part of that underwriting is done internally at Longford Capital by a team of experienced trial lawyers with particular experience in different aspects and areas of the law,” said Farrell.

“We have a team of very accomplished business leaders and finance executives, and in combination with them we do our internal investigation of these 50 characteristics.

“When we find an attractive opportunity, following that analysis, in every instance before an investment we will conduct an independent legal review. This is an analysis conducted by an unbiased, outside law firm that has no other affiliation with the case or opportunity, to analyse the case and really provide us with a second opinion and ensure that our review is consistent with the independent legal review.”

Farrell underlined the importance of that assessment, adding that “if, and only if, all of that lines up, only then do we think we have a good investment opportunity.”

And when the company gets involved with a legal claim, Longford’s aim is to help transfer the economic cost and risk of pursuing another party.

Transferring that economic risk, Farrell said “is critical for universities just as it is for businesses. Universities have finite resources – they are limited and they are often being reduced – and the notion of entering into an enforcement campaign to pursue IP rights is a daunting notion and sometimes just economically infeasible”.

While Longford may be focused on litigation finance, the firm’s objectives actually go beyond that – the firm also endeavours to help technology transfer offices protect their innovations in the first place.

Farrell said: “The level of effort that universities have put into understanding their IP portfolios is wide-ranging. Some universities have a very clear understanding of their portfolio, its value, how it is being used either legally or illegally in the marketplace. Other universities have not dedicated the time, effort and resources to really understand the value of their IP portfolios.”

He added: “For example, a university that may be just getting started with a tech transfer program could rely on Longford Capital in combination with a law firm to really help them understand the portfolio that they have assembled, and to call through that portfolio – typically hundreds or thousands of patents – to understand its value, to organise according to industry such as medical devices, renewable energy, oil and gas – larger industries where this can be very lucrative for the university.”

Longford can even go a step further, actively recommending potential licensees for certain patents. In fact, the firm will assist the university with setting up the licensing agreements.

The dual approach has enabled Longford to target both large research universities and smaller institutions that are starting out in the technology transfer world.

Farrell noted that the fund’s investors include “institutional investors, ranging from state and municipal pension funds to large asset managers, single and multi-family offices, and also high-net-worth individuals” – though he would not disclose the identity of any investors apart from the members of the limited partner advisory committee.

Longford’s model is an intriguing one and it is that fascination that drove Farrell to join the firm after a two-decade career that included being a criminal prosecutor for Cook County state’s attorney’s office in Illinois and a partner at two private practices.

His interest was piqued shortly after the financial crisis in 2009, when clients were increasingly asking for alternatives to the billable-hour model – that is, charging clients by the hour no matter the outcome of a legal claim.

At first, litigation finance seemed to Farrell a sensible solution to dealing with a lawyer’s problem of not charging by the hour. But, Farrell said, “as I began to research it more and more, I realised that litigation finance has the potential to really improve the ability of many companies to benefit from the legal system, be that in the US or in the UK".

He added: “The price of pursuing, or defending against, litigation, is really a significant factor and an unfortunate factor in the outcome of many cases. I believe that the outcome of a controversy that has been presented to the court system should be resolved on the legal merits and the applicable facts of the situation and not on the economic might of one party over the other.”

He added: “Litigation finance really levels the economic playing field so that the focus can be on the merits of a case – and that is where justice should be decided. I became fascinated with it as a means of solving problems for companies – and when I say companies, I am including within that universities – and as a way of improving our legal system.”

That drive to level the economic playing field is working, Farrell noted. “We are so proud of the companies and the universities and the inventors that we represent, because without us they may not be able to pay the law firm that is best equipped to represent them, or they may not even be able to pursue the case at all because of an inability to pay all of the costs necessary to access the legal system.”

He concluded: “It feels really good when you can help a company that has been harmed achieve justice, so we are really proud of what we do.”

Copyright Mawsonia Limited 2010. Please don´t cut articles from or the PDF and redistribute by email or post to the web without written permission.

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