Burford Capital New York Office.
A $2 billion patent suit against Intel Corp. that was shut down this week by a jury in Delaware was backed by a third-party litigation funder. And all signs point to Gerchen Keller Capital, which was acquired last year by publicly-listed Burford Capital.
The case offers a glimpse of the kinds of legal matters that litigation funders are investing in, and how they can sometimes go south. Most deals are kept hush-hush by non-disclosure agreements between the parties, although the existence of funding is sometimes disclosed for regulatory reasons or when a firm or party feels it serves their interest.
In the Intel case, a company called AVM Technologies LLC sued for alleged infringement of a patent dealing with microprocessor circuit technology. The suit was the second iteration of a years-long legal battle by Joseph Tran, the inventor of the patent and founder of AVM.
Although he originally sought more than $300 million in a suit dismissed in 2013, Tran came back with similar claims in a case filed in 2015 seeking as much as $2 billion.
The trial before U.S. District Judge Richard Andrews of the District of Delaware got underway on May 1. AVM’s attorneys included a high-octane team from Boies Schiller Flexner and Irell & Manella, facing off against veteran patent attorneys William Lee and Joseph Mueller of Wilmer Cutler Hale Pickering and Dorr.
Even before trial, references to the litigation funding agreement had surfaced in public court orders. But the identity of the funder itself remained under seal. It wasn’t until voir dire that there was a public indication of who the financiers were.
In reading a list of individuals involved in the case—to determine whether any of the jurors knew them—Andrews read off four giveaway names: Adam Gerchen, Ashley Keller, Travis Lenkner, and Adam Gill. “Are you personally familiar with any of these potential witnesses?” Andrews said, according to a transcript.
Gerchen and Keller are—unsurprisingly—two of the co-founders of Gerchen Keller Capital, which until its acquisition last year was the largest rival to Burford in the U.S. litigation funding industry. Lenkner is another co-founder and now managing director at Burford. Gill, according to his LinkedIn profile, “led the investment selection, underwriting and ongoing monitoring of patent opportunities” at Gerchen Keller. It also says he left Burford in March.
None of them actually ended up testifying at the trial. And Andrews said he would not allow discussion of the funding agreement before the jury unless AVM’s counsel brought up the issue of how the case was financed or tried to portray Tran as an inventor struggling on a shoestring budget, Lee said in an interview Thursday. (He did not name the funder.)
"One of the hard parts if you’re a big institution going against an individual, you by definition have a David-and-Goliath issue. And laypeople are suspicious of David-and-Goliath situations," Lee said.
"If they hadn't tried to portray the issue sort of incompletely, [we] wouldn’t have brought it in,” he added. “But when you try to portray a lone individual fighting a giant, it’s only fair to complete the picture.”
After Tran testified during trial that he had to take out a mortgage on his house in pursuing the case, Andrews reluctantly allowed Lee to press the AVM founder on the funding arrangement during cross-examination.
In his testimony, Tran never names the third-party investor. But what’s clear is that the funder, described by Lee as a “hedge fund”—is actually part of AVM as a member of its LLC. Investing in a patent holder and essentially becoming a party to patent litigation is a litigation funding strategy Gerchen Keller is known to have used.
Tran, in his testimony, also offers a hint that the funder may have invested $2 million in the suit.
Q. Mr. Tran, has the hedge fund, who is a member of AVM, ever invested a single dollar, a single dollar in research and development by AVM?
A. They do it in case of AVM, there's one, yes.
Q. How many dollars?
A. Two million.
Q. No, I didn't ask you that. I asked have they invested anything in research and development?
A. In case of AVM, that's what I say.
Q. Set AVM aside. Have they ever invested a dollar in research and development by any other scientist or engineer anywhere on the earth?
A. I don't know. I didn't check with them with that.
Lenkner, contacted by phone on Thursday, declined to comment when asked whether Gerchen Keller invested in the case.
A jury on Wednesday found that Intel had not infringed on the patent at issue. Typical litigation funding deals are made on a non-recourse basis, meaning that AVM would not have to pay back any of the money it received from the funder because of the loss.