Issa Introduces Discussion Draft of Legislation Reforming Third-Party Financed Civil Litigation
Washington – Today, Congressman Darrell Issa (CA-48), Chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, introduced the Litigation Transparency Act of 2024 to mandate disclosure of third-party litigation financing agreements in civil lawsuits.
Currently, civil litigation is funded by undisclosed third parties – including 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).
“This legislation is a breakthrough measure that will target serious abuses in our litigation system and achieve long-overdue transparency,” said Rep. Issa. “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.”
Third-party litigation financing also produces national security concerns, as a series of recent cases have revealed Chinese-backed funders fueling IP litigation against U.S. companies. These concerns have also been echoed by 14 State Attorneys General, former Director of National Intelligence John Ratcliffe, Vice-Chairman of the Senate Intelligence Committee Senator Marco Rubio, and Ranking Member of the Subcommittee on Federal Courts, Senator John Kennedy.
To address these threats and abuses, 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.
The following organizations submitted statements of support for increased transparency in this area:
- American Property Casualty Insurance Association
- Unified Patents
- Center for Climate Integrity
- National Association of Mutual Insurance Companies
- U.S. Made
- National Association of Manufacturers
- Institute for Legal Reform
- Lawyers for Civil Justice
“Legal system abuse is a significant factor impacting insurance affordability and availability in states and across the country. By its very nature, third party litigation funding contributes to the growth in lawsuits and increases litigation costs, both of which increase the cost of insurance over time for every American family, individual, and business who purchases it. Chairman Issa’s draft legislation is a significant step forward to address the negative impacts of litigation funded by third party investors by requiring disclosure of third party litigation financing to the parties and the court in all federal civil actions. APCIA appreciates Chairman Issa’s leadership and will continue to educate and urge members of Congress to support this legislation.”
A one-pager can be found here and the bill text here.
Congressman Issa also recently convened a subcommittee hearing examining the impact of third-party funding on the legal system and IP litigation. Watch the hearing here.