January 25, 2024

Patent Litigation Funding and Insurance: What to Know and How to Succeed

Subscribe to Our Newsletter

Newsletter


W. Tyler Perry

|

January 25, 2024

When I was in law school, my business associations professor began the semester by telling the class that debt and equity are essentially the same thing.

In her view, both involve money going from one organization to another ( i.e., the parties exchange “capital” or “debt”). And both are concerned with how the receiving organization will ultimately compensate its counterparty ( i.e., do they get a fixed payment or a share of profits). From this perspective, debt and equity exist along the same continuum, with the primary difference lying in the allocation of risk between the parties through the distribution of control and economic rights.

Litigation finance and insurance are quickly approaching a similar moment of conceptual and practical unity in which the dividing line between the two products is blurring and they are increasingly used together. The purpose of this article is to explain the practical significance of this development while also providing some tips of the trade on how to navigate the process of securing funding or insurance.

Funding and Insurance are Tools for Capturing Value and Hedging Risk

Over the last 10 years, litigation funding has become a significant product within the litigation ecosystem. As a result, most lawyers know that litigation funding can be used to pursue a single case, a portfolio of cases, or even the creation of a new law firm (in certain jurisdictions and where there is a sufficiently strong underlying thesis).

Practitioners are also increasingly aware of the reality that litigation insurance is now rising in prominence, particularly in the form of judgment preservation insurance (a product, which, as its name suggests, insures a trial-level award on appeal).

The really interesting work, however, starts when you combine products, merging the features of finance and insurance. For example, imagine that your firm wishes to litigate three IP disputes on full contingency ( i.e. , no fees or expenses unless you settle or win). Pre-suit insurance for a portfolio like this will be difficult to secure, so if you need risk-sharing, you will likely start with litigation funding. While every transaction is bespoke, a traditional structure would be a funder providing capital to cover 50% of your fees and expenses (on a cross collateralized, non-recourse basis), while the other 50% of fees would be at risk. In exchange, the funder would be entitled to a portion of the eventual recovery (if any).

Assume that all three cases eventually defeat inter partes review (IPR) motions and survive Markman. At that juncture, you might consider buying a “work in progress” or “WIP” insurance policy for a portion of the firm’s 50% contingency fees at risk in the case, which allows the firm to guarantee that it will receive—at the very least—a contingent fee equal to the total number of hours ultimately billed. And if liquidity is an issue, you could even obtain litigation funding to pay for the insurance premium.

Similarly, we increasingly see funders and complex commercial litigation firms wrap their best cases or portfolios with insurance as a means of guaranteeing that they will see at least some of the value inherent in their docket. Not only does insurance create a floor for the plaintiff, it also makes it cheaper for the funder or firm to secure additional capital given that it now has a guaranteed cash influx on the horizon.

Marshal the Facts and the Law in an Easily Digestible, Honest Submission

Once you have decided that it makes sense for your firm or business to explore funding or insurance, the question inevitably becomes “what does the process look like” and “how do I make sure I get what I want for the best price?”

The answer is that it’s generally a four-part process:

  1. The party seeking funding or insurance should prepare a detailed case submission, summarizing key facts, legal theories, potential damages, and collectability issues;
  2. Sign an NDA with the funder or insurer;
  3. Give the funder or insurer time to conduct an  initial  assessment ( g. , any issues with jurisdiction, collectability, etc.), which hopefully yields a term sheet to which the firm or business agrees;
  4. Allow the funder or insurer time to put the case into underwriting to  fully  diligence the risk with the goal of ultimately binding an insurance policy or funding agreement.

The party seeking funding or insurance should be willing to address with full candor both the strengths and weaknesses of the case during the diligence process.

The key to success in this process is the creation of a detailed and honest submission.  Across the market, litigation funders and insurers tend to be experienced and well-credentialed lawyers who spent years in the trenches litigating complex issues. They are, in short, people who have witnessed the ebbs and flows of litigation, including the big wins and “interesting” developments, and they want your submission to accurately account for litigation’s inherent risks. You put your best foot forward when you submit a memo that (1) clearly identifies the procedural posture of a case and its relevant facts, (2) outlines the applicable law and explains why liability will attach, (3) discusses your theory of damages and why your figures are justified, (4) addresses any concerns relating to collectability or judgment enforcement, and (5) honestly addresses and explains away any weaknesses with the case. Although they are considered summaries of the case, the submissions should be sufficiently detailed. On average, these documents tend to range from 10 to 20 double-spaced pages. And the best ones are essentially “bench memos” that a clerk would prepare for a judge or a “case assessment memo” that an associate would prepare during intake at a plaintiff boutique. They acknowledge the weaknesses in the case and show how they plan to resolve them.

After the insurer or funder has conducted its full diligence, and assuming they continue to like the risk, you begin negotiating a funding agreement or insurance policy. On the funding side, the key terms that require negotiation are often the waterfall, return-related questions, and the amount of money allocated to fees (money for lawyers) vs. costs (money for court reporters, etc.). On the insurance side, some of the key negotiating points tend to be the amount of the premium ( i.e., the “rate-on-line”) and exclusions under the policy. Particularly in the funding space, the final negotiations are often facilitated by deal counsel for one or both sides.

All told, the crucial thing to remember is this: be honest, direct, and detailed, and you set yourself up for success in seeking the product(s) that fit your risk profile.

This article was first published by IPWatchdog.

Certum Group Can Help

Get in touch to start discussing options.

Recent Content

By Patrick Dempsey September 1, 2026
This is the first post in Certum Group's seven-part series bringing our Trade Secret Litigation Playbook to the blog. It draws on Part I of the Playbook, Why Trade Secret Claims Matter Now. Read or download the full Playbook here . In 2025, federal trade secret filings reached an all-time high — roughly 1,551 new cases in U.S. district courts, up from 1,203 just two years earlier. 1 That is not a blip, and it is not a quirk of the docket. It is the visible edge of a structural shift in how companies create value and how easily that value now walks out the door. Trade secrets used to be the quiet cousin of the intellectual property family — patents got the valuation multiples, trademarks got the brand meetings. That era is over. For a lot of growth-stage companies, the trade secret portfolio can be worth more than the patents, copyrights, and trademarks combined. It rarely shows up on the balance sheet, and it is almost never insured against the risk it actually faces — which is not that someone will design around it, but that someone will take it. So it is worth understanding why the numbers are climbing, because each driver points to a specific exposure that a business owner can do something about. Employees move more, and faster The single largest source of trade secret disputes is not corporate espionage. It is ordinary talent mobility. Roughly 60% of misappropriation cases involve a departing employee, typically heading to a direct competitor. Tenure has shortened, remote work has normalized discreet cross-company job searches, and the volume of departures that touch sensitive information has grown accordingly. The prototypical case a decade ago was a sales rep leaving with a customer list. Today it is a design lead, a data scientist, or a process engineer carrying the company's hardest-won know-how — sometimes in a file, more often in their head. The cost of taking information has collapsed A USB drive, a personal cloud folder, an auto-forwarded email rule, a screenshot script — what once required filing cabinets and a truck now takes a few minutes. The technical friction that used to deter casual misappropriation is largely gone. That has two consequences. It makes the taking easier, and it makes the forensic trail richer: badge records, git commit histories, egress logs, and download timestamps now tell a story that is often more persuasive to a judge than any witness. The evidence exists. The question is whether the claim holder preserves it before it rolls off a ninety-day retention setting. AI has raised the stakes Machine-learning models are trained on data, code, and process knowledge that is frequently proprietary. Competitors racing to ship an equivalent product have a powerful incentive to shortcut the long, expensive path of independent development — and in software, life sciences, financial services, and advanced manufacturing, a six-to-twelve-month head start can be worth hundreds of millions of dollars. When the crown jewels are unpatented know-how, misappropriation is not a nuisance. It is an existential competitive event. Apple's 2026 trade secret suit against OpenAI — built around aggressive hiring from Apple's hardware teams — is only the most visible example of a pattern now playing out across the economy. A single, credible venue Finally, the law itself has changed the calculus. Since 2016, the federal Defend Trade Secrets Act has given claim holders a nationwide cause of action, federal discovery tools, and remedies strong enough to matter — including an extraordinary ex parte seizure procedure. 2 Enforcement is more predictable than it was under a patchwork of state statutes, and predictability attracts plaintiffs. It also attracts capital, which is where a firm like ours enters the picture. What it means for you From the underwriter's chair, the trend line is unambiguous: more valuable secrets, more mobile employees, cheaper theft, and a legal framework that rewards claim holders who move deliberately. The companies that fare worst are the ones that treated their secrecy program as a compliance checkbox and discover, only in a complaint, that it was the strategy all along. The companies that fare best have thought about identification, preservation, and enforcement economics before they ever need them. If your business runs on information other people would love to have, the record filing numbers are not abstract. They are a forecast. Go deeper with the Playbook. This post covers one piece of a much larger picture. For the full framework — what the law requires, what a strong pre-filing case looks like, how damages experts value these matters, how counsel fee structures change your economics, and how litigation finance fits in — read Certum Group's Trade Secret Litigation Playbook , our field guide for business owners and the counsel who advise them: certumgroup.com/the-trade-secret-playbook . And if you are evaluating a live dispute — or simply want to pressure-test what a matter is worth and how it might be funded — get in touch. A confidential conversation with Certum is free and carries no obligation, whether or not you ultimately seek funding. Reach us at certumgroup.com/contact-us . Sources 1. Lex Machina, Trade Secret Litigation Report (2026), reporting an all-time high in federal trade secret case filings in 2025; see also Lex Machina, Trade Secret Litigation Report (2024) (1,203 federal filings in 2023). 2. Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 18 U.S.C. Section 1836 et seq.
By Certum Group Team August 31, 2026
Certum’s William Marra was recently quoted in an article by MLex, a LexisNexis publication, on the widening debate over third-party litigation funding disclosure. “Litigation finance is the capital markets come to law,” Marra told the publication, emphasizing that funders are one of the few sources of capital available to an individual or small business facing a far larger opponent.  Responding to claims that litigation funding is a vehicle for foreign influence, Marra observed that “there’s just no evidence [of foreign influence] in the third-party funding space,” emphasizing that any real threat should be addressed through regulation covering foreign influence in litigation “in all of its forms.” The article also referenced Marra’s forthcoming New York University Law Review article on the third-party funding disclosure debate, which argues that any court-made disclosure rule should apply evenhandedly to all outside financing, and should not target only one form of third-party finance. “If you want to genuinely have a third-party litigation funding disclosure rule, then disclose all forms of third-party funding. Don’t just disclose the type of non-recourse litigation funding seeking money damages that is disproportionately used by poor individuals and small businesses.” The full article, Patent Litigation Drawn into Broader Third-Party Funding Disclosure Debate, is available here .
By Patrick Dempsey August 18, 2026
On July 10, 2026, the most valuable company in the world accused the most talked-about company in the world of theft. Apple sued OpenAI in the U.S. District Court for the Northern District of California, alleging that OpenAI built its hardware ambitions on a foundation of Apple’s misappropriated trade secrets.¹ Few disputes touch as much of Certum’s Trade Secret Litigation Playbook at once: reasonable measures to guard a secret, identifying with particularity what was taken, and the human-centered points — recruiting and employee departures — where secrets actually walk out the door. Nearly every core theme in Certum Group’s Trade Secret Guide is in this case. And the lesson beneath it is worth sitting with: for the companies with the most to protect, trade secret litigation is not a last resort. It’s a front-line instrument of competitive strategy. Background The dispute sits at the intersection of two of the most closely watched storylines in technology. In 2025, OpenAI acquired io, the hardware venture founded by former Apple design chief Jony Ive and a group of other Apple alumni, for a reported $6.5 billion, and set out to build its first consumer hardware device, widely expected to compete directly with the iPhone.² To staff that effort, OpenAI hired aggressively from Apple. According to the complaint, more than 400 former Apple employees now work at OpenAI.³ Two of those hires anchor Apple’s allegations. Tang Yew Tan spent roughly 24 years at Apple, where he served as a vice president of product design responsible for the iPhone and Apple Watch, before becoming OpenAI’s chief hardware officer. Chang Liu spent about eight years at Apple as a senior systems electrical engineer before departing for OpenAI in 2026.⁴ Apple’s theory is not that a single rogue employee walked out the door with a file. It is that the movement of talent was accompanied by a coordinated effort, one Apple describes as operating “at every level," to extract and exploit the confidential information those employees carried in their heads and on their devices.⁵ The Allegations The complaint reads less like a garden-variety departure dispute and more like a catalog of the exact conduct the Trade Secret Guide warns companies to watch for. Among Apple’s central allegations: Apple claims OpenAI’s hardware leadership directed recruiters to use Apple’s confidential project code names during the hiring process, and instructed job candidates to bring “actual parts” and “CAD/design artifacts” to their interviews.⁶ It alleges that OpenAI circulated internal Apple documents marked “Need to Know” that coached departing employees on how to evade Apple’s exit-security procedures, including the “dreaded walkout,” and to alert OpenAI before signing their exit agreements.⁷ The specifics attributed to individual employees are what give the complaint its texture. Apple alleges that Chang Liu exploited an authentication bug to reach internal network storage after his access should have been cut off, messaging a colleague, “LOL, I found out I can access the [network storage], so funny,” and noting within hours of his departure that he “still ha[d] another computer.”⁸ And Apple alleges that io “exploited and used Apple’s secret, proprietary industrial design techniques,” misleading one of Apple’s own manufacturing partners about whether it was authorized to use a confidential metal-finishing technique.⁹ The trade secrets Apple says are at risk span the full arc of its product-development process: technical specifications for unreleased technologies, engineering presentations and prototype data, component and vendor selection processes, and the proprietary manufacturing techniques that turn a design into a shippable product.¹⁰ Notably, Apple’s opening ask is not a damages windfall. It is protection. Apple seeks to bar OpenAI from using or disclosing the information at issue, to compel the return of its confidential materials, and to preserve the evidence.¹¹ In other words, Apple is using the courthouse to do what its NDAs and exit interviews were supposed to do: keep its edge inside the building. OpenAI’s Response OpenAI has pushed back hard, and its answer is a preview of the fault lines any trade secret plaintiff should expect to fight over. On August 6, 2026, OpenAI moved to dismiss, characterizing the alleged conduct as “benign, lawful conduct” that Apple has mischaracterized, and arguing that its hardware executives simply followed standard industry recruiting practices.¹² As to Chang Liu, OpenAI contends he was “trying to help Apple” by assisting former colleagues who asked him to locate work information, not stealing anything.¹³ More pointed, and more instructive, is OpenAI’s argument that Apple’s own conduct undermines its case. OpenAI asserts that Apple allowed employees to use personal iCloud accounts for work and failed to properly revoke access when they left — noting that an Apple manager remained logged into Chang Liu’s personal iCloud account after his departure in order to transfer files.¹⁴ From that, OpenAI argues that Apple’s offboarding lapses created “confusion and unwanted access issues that Apple now characterizes as theft.” OpenAI also contends that Apple has not identified its trade secrets with adequate specificity, pointing instead to “generic categories of the product-development process.”¹⁵ OpenAI must file its full response by August 17, 2026, with oral argument on the motion set for October 1, 2026.¹⁶ Whatever the merits, OpenAI’s playbook is worth studying precisely because it is so conventional. Reasonable secrecy measures and identification of the trade secret with particularity are two of the elements every misappropriation claim rises or falls on, and they are exactly where a well-resourced defendant will apply pressure first. What This Means It is easy to read a case like this as celebrity litigation between two of the most valuable enterprises on earth. The more useful reading is that trade secret law has become core infrastructure for how modern companies protect competitive advantage. Apple did not respond to a $6.5 billion competitive threat with a press release or a patent portfolio. It responded with a trade secret complaint, because in a business where the crown jewels are unpatented know-how — manufacturing techniques, vendor relationships, unreleased designs — the Defend Trade Secrets Act and its state-law counterparts are the sharpest tools available. The case also throws the Trade Secret Guide’s central lessons into relief. The value of a trade secret program is only as good as the “reasonable measures” behind it; OpenAI’s opening move is to argue that Apple’s own iCloud and offboarding practices were not reasonable at all. The ability to describe what was taken, with specificity, is not a formality. It is frequently the whole ballgame at the pleading stage. And the human element — recruiting, exit procedures, the “dreaded walkout” — is where secrets actually leak, long before anyone reaches a courtroom. Companies that treat these as compliance checkboxes learn the hard way, in a complaint, that they were the strategy all along. For those of us who evaluate disputes for a living, Apple v. OpenAI is also a reminder of why high-stakes trade secret matters are among the most compelling on the plaintiff’s side. The conduct is often concrete and documentable, the competitive stakes are enormous, and, as the Federal Circuit’s recent decision in Versata Software v. Ford underscored, the damages framework can reach the full value of what the misappropriation delivered to the wrongdoer, not merely a discounted license fee. That combination is exactly what makes these cases worth pursuing, and worth backing. Apple’s complaint will be tested, as it should be, and the allegations remain just that — allegations. But the strategic signal is already unmistakable. When the most valuable company in the world wants to defend its future, it reaches for trade secret law. Certum Group’s Trade Secret Guide is built to help plaintiffs and their counsel do the same, whatever their size, and this case is a live illustration of why that playbook matters now more than ever. Certum Group can help. If you are evaluating a trade secret dispute or want to talk through options for funding or de-risking one, get in touch . Footnotes ¹ Complaint, Apple Inc. v. OpenAI, Inc. , No. 5:26-cv-07078 (N.D. Cal. filed July 10, 2026); see Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ² The wildest allegations in Apple's trade secrets lawsuit against OpenAI , TechCrunch (July 13, 2026). ³ Id. ⁴ Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ⁵ Apple sues OpenAI alleging trade secret theft, says scheme was "at every level," CNBC (July 10, 2026). ⁶ The wildest allegations in Apple's trade secrets lawsuit against OpenAI , TechCrunch (July 13, 2026). ⁷ Id. ⁸ Id. ⁹ Id. ¹⁰ Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ¹¹ Id. ¹² OpenAI Asks Judge to Toss Apple's Trade Secrets Lawsuit , Claims Journal (Aug. 7, 2026). ¹³ Id. ¹⁴ OpenAI says Apple's own security practices undermine its trade secrets case , TechCrunch (Aug. 6, 2026). ¹⁵ Id. ¹⁶ OpenAI Asks Judge to Toss Apple's Trade Secrets Lawsuit , Claims Journal (Aug. 7, 2026).