Deminor was contacted by a potential client to investigate the funding viability of a potential claim to recover damages from a competitor. A key software engineer at the client had left and joined a competitor, taking source code with him. The competitor was selling products incorporating the client’s code and the client wanted to recover damages. The company was unsure if they possessed the necessary working capital to pursue the claim without receiving external litigation funding assistance.
Process & Approach
Software cases are more difficult to assess than cases which involve registered rights as software cases are usually based on unregistered rights. In this case, our client had registered its copyright, which in the US means that statutory damages are available. However, for all software cases we work through the basics of the legal right as part of our due diligence. This does require a discussion with the client early on to check that they can evidence ownership of the copyright including who worked on its development, their employment status, and also which source code repository software they are using. We would also want to understand the background around how the defendant had the opportunity to copy the client’s software. In this case, a senior developer leaving and joining the competitor with a step change in the competitor’s software to resemble features of the client’s software was a strong indicator of infringement. Although we appreciate that pulling together this information will take a little time, it is information that the client should have to prepare its case for litigation. Checking these details as part of the litigation finance due diligence can be a useful double check that the necessary evidence is in place regarding development and ownership.
After assessing ownership and the opportunity to copy, we would then need to understand the infringement – if the object code of the infringing product is available, our client’s engineers can carry out a comparison of the two sets of code base. If a code comparison cannot be carried out, this is then a much more difficult due diligence exercise as infringement could not be assessed fully until after a litigation finance investment had been made and discovery completed. Our financial terms are put together based on our own proprietary risk models. If the case is assessed as higher risk but is an investment within our risk appetite, then the terms will reflect the risk that Deminor is taking on.
Summary
Deminor appreciates the time and cost that it takes to make a litigation finance application and to then support the funder’s due diligence through answering questions. Software cases are likely to be more document heavy in demonstrating a good case than cases involving other types of IP. Deminor is proud of its streamlined due diligence process and our client-centric approach in being mindful of the client’s time in structuring the due diligence process for that client’s case. However, many of the questions that we would ask in due diligence, will be questions that the client has had to ask itself in respect of its own internal approvals for the litigation.
Emily’s Comment
"Software infringement cases are notoriously difficult to get off the ground. Checking the key aspects of the case to answer questions posed by your funder can be used as an opportunity to review the case from the bottom up.”
