The landscape of third-party litigation funding (TPLF) underwent a dramatic transformation in 2024, characterized by substantial market growth, increased regulatory scrutiny, and evolving trends in patent litigation. This year marked a turning point for the industry, with far-reaching implications for the global legal landscape.
Market Expansion and Financial Growth
The TPLF market experienced unprecedented expansion in 2024, with the global litigation funding investment market reaching a staggering USD 17.5 billion. Industry analysts project this figure to soar to USD 67.2 billion by 2037, representing a compound annual growth rate (CAGR) of 11.1% from 2025 to 2037. This remarkable growth trajectory underscores the increasing acceptance and utilization of third-party funding in legal disputes worldwide.
In the United States, the TPLF market demonstrated equally impressive growth. Starting from an estimated $4.5 billion in 2023, experts anticipate the market to more than double, reaching $9.7 billion by 2032. This projection translates to a CAGR of 8.9%, highlighting the robust expansion of litigation funding in the American legal system.
Patent Litigation: A Key Driver
Patent litigation continued to be a cornerstone of TPLF activity in 2024. It remained the largest category of cases supported by third-party financing, attracting 19% of new capital commitments.
The average deal size for patent litigation funding stood at $7.8 million in 2023, a slight decrease from $8.6 million in 2022. This minor adjustment did little to dampen the enthusiasm for patent-related funding, as evidenced by the increased activity in both Non-Practicing Entity (NPE) and non-NPE litigation.The first half of 2024 saw a significant uptick in patent litigation filings compared to the latter half of 2023. NPE filings surged by 14.06%, while non-NPE filings increased by 13.44%. Patent Assertion Entities (PAEs) also ramped up their activities, showing a 10.24% increase in the first half of 2024 compared to the same period in 2023. Perhaps most notably, operating companies demonstrated the largest increase in patent assertions, with a substantial 15.80% rise.
Regulatory Landscape and Legislative Developments
The rapid growth of TPLF did not go unnoticed by lawmakers and regulatory bodies. In 2024, there was a concerted effort to bring greater transparency and accountability to the industry. On October 7, 2024, Representatives Darrell Issa and Scott Fitzgerald introduced the Litigation Transparency Act, a problematic piece of legislation that would mandate the disclosure of third-party litigation funding agreements in civil lawsuits.
Following this, on October 10, 2024, the Judicial Conference's Advisory Committee on Civil Rules established a subcommittee to evaluate the potential implementation of new federal rules governing the disclosure of third-party financing. This move signaled a growing recognition of the need for standardized practices in TPLF across the federal court system.
At the state level, several jurisdictions took proactive steps to regulate TPLF. Montana, Indiana, Louisiana, and West Virginia passed legislation requiring transparency in funding agreements and holding funders accountable for financing frivolous lawsuits. These state-level initiatives reflected a broader trend towards increased oversight of TPLF practices. None of them mandated full disclosure of funding agreements, however.
International Developments and the Unified Patent Court
In 2024, the impact of TPLF extended beyond U.S. borders, with significant developments in the international arena. The Unified Patent Court (UPC) in Europe emerged as a major player in patent litigation, experiencing substantial growth throughout 2024. Case filings at the UPC skyrocketed by 85.23% from the first to the second half of the year, reaching 445 cases by June 2024. The UPC also made headlines with its first rulings on standard-essential patents (SEPs), revealing divergent approaches among local divisions on key issues such as licensing transparency in FRAND (Fair, Reasonable, and Non-Discriminatory) cases. These rulings are expected to have far-reaching implications for patent litigation strategies in Europe and beyond.
Challenges and Concerns
Despite its rapid growth, the TPLF industry faced increased scrutiny and challenges in 2024. Concerns were raised about the transparency of funding arrangements and the high fees charged by litigation funders. Some stakeholders expressed worries that third-party funding might prolong patent infringement lawsuits, generate excessive litigation, or enable foreign entities to undermine the U.S. economy. The U.S. Chamber of Commerce reported growing apprehension about an influx of foreign-sourced funding supporting U.S. patent litigation against key American companies and industries. This concern highlighted the complex interplay between TPLF, international business interests, and national economic security.
Conclusion
In conclusion, 2024 was a watershed year for third-party litigation funding. The industry's explosive growth, increased regulatory attention, and evolving trends in patent litigation have set the stage for potentially seismic changes in the legal funding landscape. As the market continues to expand and mature, it is clear that TPLF will play an increasingly significant role in shaping the future of global litigation strategies and outcomes.
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