The Litigation Funding Transparency Act of 2026: A Critical Analysis of Its Impact on Patent Enforcement and Plaintiff Access to Justice

I. Introduction

On February 11, 2026, Senate Judiciary Committee Chairman Chuck Grassley (R-IA), joined by Senators Thom Tillis (R-NC), John Kennedy (R-LA), and John Cornyn (R-TX), introduced S. ___, the Litigation Funding Transparency Act of 2026 (the “Act” or “LFTA”). The Act proposes to amend Title 28 of the United States Code to impose comprehensive disclosure requirements on third-party litigation funding (“TPLF”) in certain categories of federal civil actions. While the stated purpose of the legislation is to increase “transparency and oversight,” a careful examination of its provisions reveals a framework that would substantially alter the litigation landscape for patent holders, individual plaintiffs, and small entities who rely on external funding to prosecute claims against well-capitalized defendants.

Third-party litigation funding has become a critical mechanism for leveling the playing field in complex civil litigation. In patent enforcement, where individual inventors and small companies routinely face multinational corporations with virtually unlimited litigation budgets, external funding often represents the only viable path to enforcing valid intellectual property rights. The LFTA threatens to disrupt this dynamic by imposing asymmetric disclosure obligations, chilling legitimate funding relationships, and providing defendants with powerful new tools to delay, complicate, and ultimately defeat meritorious claims.

The Act has been endorsed by the U.S. Chamber of Commerce, the American Property Casualty Insurance Association (“APCIA”), the National Insurance Crime Bureau (“NICB”), and the High Tech Inventors Alliance (“HTIA”). The composition of this endorsement coalition is itself instructive. The High Tech Inventors Alliance, despite its name, primarily represents large technology companies—including Apple, Google, Intel, Cisco, Dell, and similar entities—that are among the most frequently sued defendants in patent litigation. Their endorsement of legislation designed to restrict plaintiff access to litigation funding reflects a strategic calculation by entities that benefit directly from weakening the enforcement capabilities of patent owners.

This article provides a detailed summary of the LFTA’s provisions, examines the specific types of cases affected, analyzes its direct and indirect implications for patent litigation, and identifies the significant negative consequences that would flow from its enactment.

II. Summary of the Act

The LFTA proposes to amend Chapter 115 of Title 28 of the United States Code by adding a new Section 1747, entitled “Third-party litigation funding disclosure.” The Act creates a comprehensive disclosure regime applicable to “covered civil actions” in which any party or counsel of record has received or agreed to receive third-party litigation funding.

A. Scope of “Covered Civil Actions”

The Act defines “covered civil action” to encompass three categories of federal litigation: (1) any civil action transferred to or filed in coordinated or consolidated pretrial proceedings established by the Judicial Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 1407; (2) any “class action” as defined in 28 U.S.C. § 1711; and (3) any civil action filed in a coordinated or consolidated proceeding before a United States district court that includes not fewer than 100 civil actions. The Act carves out actions brought or funded by nonprofit legal organizations providing pro bono representation, provided the donations used to fund the action were not provided by a foreign state, foreign person, sovereign wealth fund, or a commercial enterprise controlled by or owned by such foreign entities.

B. Definition of “Third-Party Funder”

The Act defines “third-party funder” as any “commercial enterprise, foreign state, foreign person, or sovereign wealth fund” other than counsel of record that either: (A) provides or agrees to provide direct or indirect monetary support to a party, counsel, or law firm for purposes of funding the initiation or litigation of a covered civil action in which the funder is not a named party; or (B) as a nonparty, has a right to receive in return anything greater in value than what is given or granted that is related to the proceeds from a covered civil action—whether by settlement, judgment, attorney’s fees, or otherwise.

The definition of “commercial enterprise” includes any entity formed for the ongoing conduct of lawful business, but excludes entities whose right or expectation of payment is limited to: (i) repayment of a loan principal; (ii) repayment of a loan principal plus interest not exceeding the greater of 10 percent or a rate three times the annual average 30-year constant maturity Treasury yield; or (iii) reimbursement of fees or grants paid or given to counsel of record. This exclusion exempts traditional lending institutions whose involvement is limited to conventional loan arrangements, but captures virtually all litigation funders whose returns are contingent upon or proportional to litigation outcomes.

C. Mandatory Disclosure Requirements

The heart of the LFTA lies in its disclosure obligations under proposed Section 1747(b). Any party or counsel of record must: (1) disclose in writing to the court and all other named parties the identity of any third-party funder; (2) disclose whether any third-party funder is a foreign state, foreign person, sovereign wealth fund, or a commercial enterprise directly or indirectly controlled by or owned by a foreign entity; (3) produce for inspection and copying to the court and all other named parties any funding agreement, unless otherwise ordered by the court; and (4) transmit copies of foreign-entity-related disclosures and funding agreements to the Administrative Office of the United States Courts.

These disclosures must be made no later than 10 days after the execution of any funding agreement or the time of service of the action, whichever is later. Parties bear a continuing duty to supplement or correct disclosures that become incomplete or incorrect in any material respect.

D. Enforcement Mechanism

The Act provides that the disclosure obligations are “deemed to be disclosures required by rule 26(a) of the Federal Rules of Civil Procedure” and are subject to the sanction provisions of Rule 37. This is a significant enforcement mechanism. Rule 37 sanctions can include prohibiting the introduction of evidence, striking pleadings, rendering default judgment, treating matters as established, dismissal of actions, and the imposition of attorney’s fees and costs. By grafting the LFTA’s requirements onto the existing discovery framework, the Act creates a potent enforcement regime with serious consequences for noncompliance.

E. Litigation Integrity Provisions

Section 1747(g) prohibits any third-party funder in a covered civil action from exerting or being afforded the right to exert “influence, control, or discretion regarding the litigation strategy, decision-making, or settlement negotiations of a party.” Courts are empowered to hold any person who violates this provision in contempt, exercising the powers of a district judge in any district. While ostensibly aimed at protecting litigant autonomy, this provision introduces significant ambiguity regarding the permissible scope of funder involvement and creates a new avenue for defendants to challenge and disrupt funded litigation.

F. Restrictions on Funder Access to Discovery Materials

Section 1747(h) prohibits any third-party funder, or any agent, counsel, or representative thereof, from obtaining, inspecting, copying, or otherwise viewing any discovery materials produced subject to a protective order under Rule 26(c)(1)(G), unless specifically authorized by the court. Violations are subject to contempt proceedings. This provision restricts funders’ ability to evaluate case developments and the strength of claims they have funded, potentially impairing their ability to make informed decisions about continued funding.

G. Public Reporting Requirements

The Act mandates that the Administrative Office of the United States Courts submit to Congress, the Attorney General, and the Principal Deputy Assistant Attorney General for National Security, and post on the United States Courts website, a report every 120 days (beginning 180 days after enactment) listing: each foreign entity identified as a funder, the caption and docket number of the action, the court in which it is pending, the amount of monetary support provided, and the total amount each foreign entity has provided in support of covered civil actions during the preceding 120 days. This public reporting requirement raises significant concerns regarding the disclosure of commercially sensitive information and litigation strategy.

H. Applicability

The Act applies to any case pending on or commenced after the date of enactment. This retroactive applicability would impose new disclosure obligations on existing funding arrangements entered into without any expectation of such requirements, potentially disrupting ongoing litigation and settled commercial expectations.

III. Types of Cases Affected by the Act

The LFTA’s definition of “covered civil action” determines the universe of cases subject to its disclosure and oversight requirements. Each of the three categories captures a distinct and significant body of federal litigation.

A. Multidistrict Litigation (MDL) Proceedings

The first and broadest category encompasses any civil action transferred to or filed in coordinated or consolidated pretrial proceedings under 28 U.S.C. § 1407. MDL proceedings represent some of the largest, most complex, and most consequential litigation in the federal system. The Judicial Panel on Multidistrict Litigation consolidates cases involving common questions of fact for coordinated pretrial proceedings before a single transferee judge, and the scope of cases affected is vast.

Mass tort MDLs constitute the most prominent category. These proceedings involve thousands, and sometimes hundreds of thousands, of individual claims consolidated against one or more defendants. Pharmaceutical and medical device MDLs—such as those involving opioid manufacturers, PFAS contamination, talc-based products, hernia mesh implants, and defective hip and knee replacements—are frequently supported by third-party litigation funding. The scale of investment required to prosecute these cases against well-funded corporate defendants is immense, and litigation funders often provide critical capital for expert retention, scientific testing, discovery management, and trial preparation. Under the LFTA, every funding arrangement in every case consolidated within such an MDL would be subject to mandatory disclosure, including production of the complete funding agreement to all named parties.

Product liability MDLs extending beyond pharmaceuticals are similarly affected. Cases involving automotive defects, aviation disasters, consumer electronics failures, and industrial equipment malfunctions are frequently consolidated into MDL proceedings and are increasingly supported by third-party funding. The Act’s disclosure requirements would apply to each of these proceedings.

Environmental and toxic tort MDLs represent another significant category. Cases involving groundwater contamination, chemical exposure, pollution, and environmental disasters—including claims under CERCLA, state environmental statutes, and common law theories—are regularly consolidated for pretrial proceedings. These cases often require enormous upfront investment in scientific evidence and expert testimony, making third-party funding essential for plaintiffs who lack the resources to prosecute claims independently.

Securities fraud and financial MDLs also fall within the Act’s scope. Class actions alleging securities fraud under Section 10(b) of the Securities Exchange Act and Rule 10b-5, as well as consolidated ERISA actions and other financial litigation, are routinely assigned to MDL proceedings. Third-party funding is increasingly common in these cases, particularly where institutional investors serve as lead plaintiffs.

Data breach and privacy MDLs have proliferated in recent years, with actions arising from large-scale data breaches, violations of state consumer protection statutes, and claims under the California Consumer Privacy Act, the Illinois Biometric Information Privacy Act, and similar legislation. These proceedings are frequently consolidated under Section 1407 and would be fully subject to the LFTA’s requirements.

Antitrust MDLs—including price-fixing conspiracies, monopolization claims, and other antitrust actions consolidated for pretrial proceedings—represent another significant category. These cases often involve complex economic analysis, extensive discovery, and multi-year litigation timelines that make third-party funding particularly valuable.

B. Class Actions

The second category captures any “class action” as defined in 28 U.S.C. § 1711, which broadly encompasses actions filed under Rule 23 of the Federal Rules of Civil Procedure or similar state-law provisions removed to federal court under the Class Action Fairness Act (“CAFA”). Class actions are a foundational mechanism for aggregating claims that would be impracticable to litigate individually, and they span virtually every area of civil law.

Consumer class actions—alleging deceptive trade practices, false advertising, product mislabeling, unfair billing practices, and warranty breaches—represent one of the most common categories. These cases allow consumers who have suffered relatively small individual damages to aggregate their claims and hold corporations accountable for widespread misconduct. Third-party funding is frequently essential to prosecute these actions, as class counsel must advance significant costs over extended periods before any recovery.

Employment and wage-and-hour class actions, including claims for unpaid overtime, misclassification of employees, and systemic discrimination under Title VII and state employment laws, are also within the Act’s scope. ERISA class actions challenging improper management of retirement funds or denial of benefits are similarly covered.

Civil rights class actions—including systemic challenges to unconstitutional government policies, conditions of confinement in correctional facilities, environmental justice claims, and voting rights actions—would also be subject to the disclosure regime, except to the extent they are brought by qualifying nonprofit organizations under the Act’s narrow carve-out.

Securities fraud class actions, antitrust class actions alleging price-fixing or monopolistic behavior, and insurance bad faith class actions round out the major categories. In each of these areas, third-party litigation funding plays a significant and growing role, and the LFTA’s disclosure requirements would apply in full.

C. Coordinated or Consolidated Proceedings Involving 100 or More Civil Actions

The third category—coordinated or consolidated proceedings before a district court involving 100 or more civil actions—captures large-scale litigation that has not been formally consolidated through the MDL process but has been grouped by a district court for coordinated management. This category is designed to reach mass action proceedings that achieve scale through individual filings in a single jurisdiction rather than through formal MDL transfer.

This provision is particularly relevant to mass tort litigation filed in plaintiff-friendly jurisdictions. Large-scale personal injury campaigns—involving pharmaceutical products, medical devices, toxic exposures, or defective consumer products—are sometimes prosecuted through coordinated individual filings in a single district rather than through the MDL mechanism. The 100-action threshold ensures that these proceedings are subject to the same disclosure requirements as formal MDL proceedings.

This category also captures certain large-scale patent enforcement campaigns in which a patent owner files actions against numerous defendants in the same district and the court consolidates them for pretrial management. While less common than mass tort coordinated proceedings, such campaigns do occur and would trigger the full LFTA disclosure regime if the 100-action threshold is met.

D. The Nonprofit Carve-Out

The Act exempts actions brought or funded by nonprofit legal organizations providing pro bono representation, but only if the donations used to fund the action were not provided by a foreign state, foreign person, sovereign wealth fund, or a commercial enterprise controlled by foreign entities. This carve-out is narrowly drawn and would not protect nonprofit organizations that receive any portion of their funding from foreign sources—a condition that excludes many legitimate public interest organizations with international donor bases.

IV. Direct and Indirect Impact on Patent Litigation

A threshold question for patent owners and their counsel is whether the LFTA would directly apply to patent infringement actions. The answer requires careful analysis and reveals both the Act’s immediate scope and its longer-term strategic implications for patent enforcement.

A. Most Patent Cases Fall Outside the Act’s Direct Scope

The vast majority of patent infringement cases would not be directly covered by the LFTA as currently drafted. The Act’s definition of “covered civil action” is limited to MDL proceedings under 28 U.S.C. § 1407, class actions under 28 U.S.C. § 1711, and coordinated or consolidated proceedings involving 100 or more civil actions. A typical patent enforcement action—one patent owner suing one or a handful of defendants in the Eastern District of Texas, the Western District of Texas, the District of Delaware, or another favorable venue—is a standalone civil action. It is not an MDL, it is not a class action, and it is not part of a 100-plus case consolidation. The LFTA’s disclosure requirements, litigation integrity provisions, and discovery restrictions would not apply.

This is a critical distinction for patent practitioners. Patent owners pursuing standard infringement actions, even those with substantial litigation funding arrangements, would not be required to disclose funder identities, produce funding agreements, or comply with the Act’s foreign reporting requirements under the current text of the legislation.

B. Patent Cases That Would Be Directly Affected

Notwithstanding the foregoing, certain categories of patent litigation fall squarely within the Act’s scope. Patent cases are periodically consolidated into MDL proceedings, particularly in the context of large-scale standard-essential patent (SEP) licensing disputes or where dozens of defendants are accused of infringing the same patent portfolio. When patent cases are transferred to or filed in coordinated pretrial proceedings under Section 1407, the full weight of the LFTA’s disclosure regime applies—including mandatory production of funding agreements, foreign funder reporting, and the prohibition on funder “influence” over litigation strategy.

Large-scale patent portfolio enforcement campaigns—where a patent owner files actions against numerous defendants in the same district and the court consolidates them for pretrial purposes—could also trigger the Act’s 100-action threshold. Patent owners pursuing broad licensing programs through litigation must carefully evaluate whether their enforcement strategy could result in a proceeding that crosses into “covered civil action” territory.

Class actions arising from patent-related disputes, though less common, also fall within the Act’s scope. Antitrust class actions alleging anticompetitive conduct in connection with standard-essential patents, FRAND licensing disputes, or patent settlement agreements (so-called “pay-for-delay” cases) would trigger the full disclosure regime.

C. The Indirect Effects on Patent Litigation Are Substantial

Even for patent cases outside the Act’s direct scope, the practical consequences of the LFTA would be significant. Litigation funders do not compartmentalize their operations. The same funders who invest in patent enforcement actions also fund class actions, mass tort litigation, and other proceedings directly covered by the Act. If the LFTA chills funder participation in covered civil actions—by exposing proprietary deal terms, inviting collateral disputes over “litigation integrity,” and creating contempt exposure—that contraction will ripple across the entire funding market, including the market for patent litigation funding.

Funders who reduce their exposure to covered actions will have less capital deployed overall, less appetite for risk, and tighter underwriting standards across their full portfolios. The cost of capital for patent enforcement will rise as funders price in the regulatory and disclosure risks created by the LFTA—even in cases not directly subject to the Act. Patent owners who depend on third-party funding will face a smaller pool of willing funders, less favorable economic terms, and greater difficulty securing the financing necessary to prosecute complex, multi-year infringement actions against well-resourced defendants.

The LFTA will also likely cause funders to impose additional contractual protections and risk-allocation mechanisms in all funding agreements—not just those covering covered civil actions—to guard against the possibility that a standalone patent case could later be swept into an MDL or consolidated proceeding. This preemptive risk management will further increase costs and reduce the flexibility of funding arrangements available to patent owners.

D. The Act Establishes a Framework for Broader Future Regulation

Perhaps the most significant indirect consequence of the LFTA for patent litigation is the legislative precedent it establishes. The current bill represents the latest and most expansive iteration of legislation that Senator Grassley has introduced in various forms since at least 2021. Each successive version has been broader than the last. The 2021 bill focused primarily on identity disclosure in class actions and MDLs. The 2026 version adds the “litigation integrity” provisions prohibiting funder influence over litigation strategy, the restrictions on funder access to discovery materials, the foreign funder public reporting requirements, and the contempt enforcement mechanisms.

If the LFTA passes in its current form, it establishes the statutory infrastructure—the definitions, the disclosure framework, the enforcement mechanisms, and the reporting apparatus—that can be readily expanded to cover all federal civil actions through a simple amendment to the definition of “covered civil action.” Patent litigation practitioners should view the LFTA not merely as a bill that currently exempts most patent cases, but as the foundation for a regulatory regime that could encompass every funded patent enforcement action in the near future. The legislative trajectory is clear, and the direction is toward broader coverage.

V. Negative Consequences for Patent Owners and Plaintiffs

The practical consequences of the LFTA would fall disproportionately on patent owners, plaintiffs, and small entities. The following analysis identifies the most significant negative consequences that would result from the Act’s enactment.

A. Asymmetric Disclosure Creates a Strategic Windfall for Defendants

The Act’s most fundamental flaw is its asymmetry. The disclosure obligations apply only to plaintiffs and their counsel—the parties who typically receive litigation funding. Defendants, particularly large corporations, routinely receive economic support for their defense from insurers, indemnitors, parent companies, trade associations, and industry groups, yet none of these arrangements are subject to comparable disclosure requirements under the Act.

In patent litigation, this asymmetry is particularly consequential. A patent owner who has secured litigation funding to enforce valid patents against a large corporate infringer must disclose the identity of its funder, produce the complete funding agreement, and reveal the financial terms of the arrangement—including the funder’s expected return and the total funding commitment. The defendant, meanwhile, need not disclose whether its defense is subsidized by an industry consortium, a defensive patent aggregator, or an insurer with its own economic interest in the outcome. This one-sided transparency provides defendants with a significant strategic advantage: they can assess the plaintiff’s litigation budget, anticipate funding constraints, and calibrate their defense strategy—including the use of expensive, protracted discovery and motion practice—to exhaust the plaintiff’s resources.

The disclosure of funding agreement terms is particularly damaging. Funding agreements typically contain information about total funding commitments, milestone-based disbursement schedules, walk-away provisions, and return structures. Armed with this information, a defendant can tailor its litigation strategy to exploit known funding limitations—for example, by filing serial inter partes review petitions, engaging in scorched-earth discovery, or pursuing interlocutory appeals designed to delay proceedings beyond the funder’s investment horizon.

B. Chilling Effect on Legitimate Litigation Funding

The Act’s mandatory disclosure of funding agreements, including their complete financial terms, will have a significant chilling effect on the litigation funding market. Funders operate in a competitive marketplace where the terms of their investments—including pricing structures, return thresholds, and risk allocation mechanisms—constitute proprietary trade secrets and commercially sensitive information. Mandatory disclosure of these terms to opposing parties, courts, and in the case of foreign-connected entities, to the public at large, would fundamentally undermine the competitive dynamics of the funding market.

Many funders will simply decline to participate in covered civil actions rather than expose their proprietary investment terms. Others will demand higher returns to compensate for the increased risk and competitive exposure associated with mandatory disclosure. In either case, the availability and cost of litigation funding will be adversely affected, disproportionately harming the patent owners, individuals, and small entities who most depend on external funding to prosecute their claims.

For patent owners in particular, this chilling effect could be devastating. Patent enforcement requires substantial upfront investment in claim construction analysis, prior art searching, expert retention, and protracted litigation—often extending over multiple years and costing millions of dollars. Without access to litigation funding, many patent owners with meritorious claims will be unable to enforce their rights, effectively transferring wealth from inventors and innovators to infringers who benefit from the inability of smaller entities to pursue enforcement.

C. The “Litigation Integrity” Provision Introduces Unworkable Ambiguity

Section 1747(g)’s prohibition on funders exerting “influence, control, or discretion regarding the litigation strategy, decision-making, or settlement negotiations” introduces a vague and potentially unworkable standard that will generate collateral litigation and create uncertainty for all parties involved.

The line between permissible information-sharing and impermissible “influence” is inherently ambiguous. Funders necessarily evaluate case developments, discuss litigation milestones with counsel, and make decisions about continued funding based on the progress and merits of the case. These activities are essential to the funder’s role as an investor and are fully consistent with the plaintiff’s and counsel’s independent decision-making authority. Yet under the Act’s broadly worded prohibition, even routine communications between funders and counsel could be characterized by opposing parties as improper “influence” or “control.”

Defendants will inevitably weaponize this provision, filing motions to compel disclosure of communications between funders and counsel, seeking contempt findings, and manufacturing side disputes designed to distract from the merits of the case. The resulting satellite litigation will increase costs, delay proceedings, and impose asymmetric burdens on funded plaintiffs—precisely the parties least able to absorb such costs.

D. Restrictions on Funder Access to Discovery Materials Impair Investment Decisions

Section 1747(h)’s restriction on funder access to discovery materials produced under protective orders creates a practical problem for the funding relationship. Funders must evaluate case developments to make informed decisions about continued funding, additional investment, or settlement parameters. If funders cannot review key discovery materials—including the very evidence that demonstrates infringement, damages, or the strength of the plaintiff’s case—their ability to make rational investment decisions is severely impaired.

This restriction will predictably lead to one of two outcomes, neither of which serves the interests of justice. First, funders may reduce their funding commitments or demand more conservative terms to account for the information asymmetry, increasing costs for plaintiffs. Second, funders may withdraw from cases altogether when unable to assess case value and risk, leaving meritorious claims unfunded and unenforced.

E. Public Reporting of Foreign Funder Information Conflates National Security with Litigation Policy

The Act’s requirement that foreign funder information be reported to the Attorney General, the Principal Deputy Assistant Attorney General for National Security, and on the United States Courts website conflates legitimate national security concerns with broader litigation policy objectives. While there may be valid reasons to scrutinize litigation funded by hostile foreign governments, the Act’s reporting requirements sweep far more broadly, encompassing any foreign person or commercial enterprise with foreign ownership—including allied nations’ pension funds, European and Japanese litigation funders, and multinational investment firms with diverse global ownership structures.

This overbroad approach will deter legitimate foreign investment in U.S. litigation. Many of the world’s most sophisticated and reputable litigation funders are based in the United Kingdom, Australia, and continental Europe. Subjecting these entities to public reporting alongside hostile foreign actors stigmatizes legitimate funding activities and reduces the pool of capital available to patent owners and plaintiffs. The public reporting of funding amounts and funder identities in specific cases also creates a roadmap for defendants to identify and pressure funders directly, further chilling the funding market.

F. Retroactive Application Disrupts Existing Contractual Relationships

The Act’s application to cases “pending on or commenced after the date of enactment” raises serious concerns about the disruption of existing contractual relationships. Funding agreements currently in effect were negotiated and executed without any expectation that their terms would be disclosed to opposing parties, courts, or the public. Retroactive application of the disclosure requirements may render existing confidentiality provisions unenforceable, expose funders to competitive harm they did not anticipate, and potentially trigger termination provisions in funding agreements that were not drafted to accommodate such disclosures.

For patent owners currently engaged in funded litigation, the retroactive application could be catastrophic. A mid-litigation disclosure of funding terms could fundamentally alter the dynamics of settlement negotiations, embolden defendants to adopt more aggressive litigation postures, and potentially cause funders to terminate agreements rather than comply with disclosure requirements they did not anticipate.

G. The Act Fails to Address the Real Access-to-Justice Crisis

Perhaps the most significant negative consequence of the LFTA is what it fails to do: address the fundamental access-to-justice crisis that litigation funding exists to remedy. Patent litigation is extraordinarily expensive. The American Intellectual Property Law Association’s annual survey consistently reports median patent litigation costs ranging from approximately $1.5 million to $5 million or more through trial, depending on the amount in controversy. For individual inventors, universities, small businesses, and startups, these costs are prohibitive without external funding.

Third-party litigation funding addresses this market failure by providing patent owners with the resources to enforce their rights against well-capitalized infringers. Rather than facilitating access to justice, the LFTA erects new barriers by increasing the costs, risks, and burdens associated with funded litigation—barriers that fall almost exclusively on plaintiffs and patent owners. The Act effectively insulates large corporate defendants at the expense of the inventors and small entities whose innovations drive economic growth.

H. Increased Litigation Costs and Collateral Disputes

The Act’s disclosure requirements, enforcement mechanisms, and litigation integrity provisions will inevitably generate collateral disputes that increase the cost and duration of already expensive litigation. Defendants will file motions challenging the sufficiency of disclosures, seeking to compel production of additional funding-related documents, arguing that funder communications constitute impermissible “influence,” and requesting contempt proceedings under Sections 1747(g) and (h). Each of these disputes requires briefing, hearing time, and judicial resources—all of which increase costs and delay the resolution of the underlying dispute.

These collateral disputes disproportionately harm funded plaintiffs, who must bear the additional litigation costs while their funding is subject to scrutiny and their funders’ proprietary information is at risk. Defendants, by contrast, benefit from delay and increased costs, as these factors increase the likelihood that funding will be exhausted or that the plaintiff will accept a below-value settlement to avoid further expense.

I. The Act’s Endorsers Reveal Its True Beneficiaries

The identity of the Act’s supporters is itself instructive. The LFTA is endorsed by the U.S. Chamber of Commerce—the nation’s largest lobbying organization for corporate defendants—the American Property Casualty Insurance Association, the National Insurance Crime Bureau, and the High Tech Inventors Alliance. Each of these organizations represents entities that are overwhelmingly defendants in civil litigation, including patent infringement actions.

The High Tech Inventors Alliance’s endorsement is particularly revealing given its name. The organization primarily represents large technology companies—including Apple, Google, Intel, Cisco, Dell, and similar entities—that are among the most frequently sued defendants in patent litigation. These companies have every economic incentive to support legislation that restricts the ability of patent owners to secure the funding necessary to enforce their rights. Their endorsement should be understood for what it is: a strategic effort by frequent defendants to insulate themselves from patent enforcement by cutting off the financial lifeline that enables smaller patent owners to bring claims.

True transparency legislation would impose symmetric disclosure obligations on all parties—requiring defendants to disclose their insurance arrangements, indemnification agreements, trade association support, and industry consortium participation alongside any plaintiff funding disclosures. The Act’s one-sided approach reveals that its purpose is not transparency for its own sake, but rather the strategic advantage that selective transparency confers upon defendants.

VI. Concerns Regarding Attorney-Client Privilege and Work Product

The Act’s requirement to produce funding agreements “for inspection and copying” to opposing parties raises significant concerns regarding the potential waiver of attorney-client privilege and work product protections. Funding agreements frequently contain or reference detailed case evaluations, litigation budgets, legal strategy assessments, and counsel’s analysis of the merits—all of which may be protected by the attorney-client privilege or the work product doctrine. Mandatory production of these documents to opposing parties could be construed as a waiver of these protections, opening the door to further discovery into privileged communications between counsel and client.

While the Act provides that funding agreements may be withheld if “otherwise ordered by the court,” this limited protective mechanism places the burden on the funded party to seek a court order—adding yet another layer of cost and collateral litigation to an already burdensome process. The Act should, at minimum, include express protections for privileged and work product materials contained within or referenced by funding agreements.

VII. Constitutional Considerations

The Act’s retroactive application to pending cases and its compelled disclosure of private contractual arrangements raise constitutional questions that merit careful consideration. The retroactive imposition of disclosure obligations on existing funding agreements may implicate the Due Process Clause of the Fifth Amendment, particularly where compliance would require the disclosure of information that was contractually protected at the time the agreement was executed. Additionally, the compelled disclosure of funding relationships and their terms may implicate First Amendment associational rights, as the Supreme Court has recognized that compelled disclosure of organizational affiliations and financial relationships can chill the exercise of protected associational freedoms.

VIII. Conclusion

The Litigation Funding Transparency Act of 2026 represents a significant threat to the ability of patent owners, individual plaintiffs, and small entities to access the federal courts and enforce their legal rights. While framed as a transparency measure, the Act imposes asymmetric burdens that benefit well-capitalized defendants at the expense of parties who depend on third-party funding to prosecute meritorious claims.

The Act’s reach is broad, encompassing MDL proceedings, class actions, and coordinated proceedings of 100 or more actions—capturing mass tort litigation, pharmaceutical and medical device cases, product liability actions, securities fraud, consumer class actions, environmental litigation, and patent-related proceedings that fall within these categories. While most standalone patent infringement cases fall outside the Act’s direct scope, the legislation’s indirect effects on the litigation funding market—including reduced funder participation, increased cost of capital, and tighter underwriting standards—will be felt across the entire patent enforcement ecosystem. The LFTA also establishes the statutory infrastructure for broader regulation that could, in future legislative sessions, be expanded to cover all federal civil actions.

The Act’s mandatory disclosure of complete funding agreements, its vague “litigation integrity” prohibition, its restrictions on funder access to discovery materials, its overbroad foreign funder reporting requirements, and its retroactive applicability collectively create a regime that will chill legitimate funding activity, increase litigation costs, generate collateral disputes, and ultimately deny justice to those who most need it. That the Act’s principal endorsers—the U.S. Chamber of Commerce and the High Tech Inventors Alliance among them—represent the very entities that benefit from weakened patent enforcement and reduced plaintiff access to justice tells the complete story of whose interests this legislation truly serves.

Patent owners and plaintiffs should actively engage in the legislative process to ensure that any transparency measures are balanced, proportionate, and do not serve as instruments for undermining access to justice. The patent system exists to promote innovation by granting inventors exclusive rights to their inventions. When those rights cannot be enforced due to the prohibitive cost of litigation, the system fails in its fundamental purpose. Legislation that further restricts the ability of patent owners to fund enforcement of their rights is not transparency—it is a subsidy for infringement.