U.S. Rep. Issa bill that mandates disclosure of financing for civil lawsuits

U.S. Rep. Darrell Issa (R-CA) introduced a bill that mandates disclosure of third-party litigation financing agreements in civil lawsuits.

Currently, civil litigation is funded by undisclosed third parties, which may include hedge funds, commercial lenders, and sovereign wealth funds operating through shell companies. This practice is particularly challenging in Intellectual Property (IP) litigation due to the proclivity for large settlements and the rise of patent-assertion entities (PAEs).

Third-party litigation financing also produces national security concerns, as there have been recent cases of Chinese-backed funders fueling IP litigation against U.S. companies.

To address these concerns, the bill would require disclosure – at the onset of a civil action – of investors who have a right to receive payment based on the outcome of a case.

“This legislation is a breakthrough measure that will target serious abuses in our litigation system and achieve long-overdue transparency,” Issa, chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, said. “If a third-party investor is financing a lawsuit in federal court, it should be disclosed at the onset of the case. Awareness by all parties will help ensure fair and equal treatment by the justice system and deter bad actors from exploiting our courts.”

Several organizations have expressed their support for this bill, including the American Property Casualty Insurance Association, Unified Patents, Cisco Systems, Center for Climate Integrity, National Association of Mutual Insurance Companies, U.S. Made, National Association of Manufacturers, Institute for Legal Reform, and Lawyers for Civil Justice.

It is also supported by 14 state Attorneys General, former Director of National Intelligence John Ratcliffe, along with U.S. Sens. Marco Rubio (R-FL) and John Kennedy (R-LA).

Issa also recently convened a subcommittee hearing examining the impact of third-party funding on the legal system and IP litigation.

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