Law firm challenge
A leading IP boutique has historically represented its clients on full contingency. But recent developments in the space have resulted in a heightened risk environment, making the firm reconsider its willingness to absorb pure contingency risk.
Concerned that the firm may soon have to choose between taking on too much risk or turning down good clients, a partner requests a proposal from a third-party litigation finance provider.
Burford legal finance solution
The litigation financier will provide $15 million in non-recourse portfolio financing—which is half of the expected $30 million needed to pursue a portfolio of three IP claims with different clients, each with a total budget of $10 million and expected proceeds in excess of $150 million across the cases.
With the IP boutique having secured a 40% interest in the proceeds of each case in exchange for full contingency arrangements, the litigation finance provider will receive 50% of the law firm’s contingent proceeds generated by the three cases.
Legal finance impact
The firm does the math and determines that financing enables the firm to mitigate 50% of its downside risk and generate $15 million in fees as the cases are litigated, all while giving up only 25% of its proceeds if the claim is successful ($15 million). Financing enables the boutique to fund legal fees and expenses for new IP matters, ensuring that the firm can balance its risk without sacrificing opportunities to continue growing its practice. The financing arrangement also supports new business: With less of its risk tied up in these cases, the firm can pursue new business with competitive terms and further diversify its book of cases.
This is a hypothetical example of one type of matter Burford routinely encounters and finances. It is meant to help demonstrate different use scenarios for our capital and the associated quantitative benefits.