Court OKs Litigation Financing in Delaware Intellectual Property Case

WILMINGTON, Delaware – In a closely watched case involving litigation financing, a Delaware judge refused to dismiss the matter, finding that third-party financing can be used to support a lawsuit.

The ruling came in an intellectual property lawsuit filed by Boston-based Charge Injection Technologies Inc. (CIT) against Delaware-based E.I. DuPont De Nemours & Co. The smaller CIT alleges DuPont improperly disclosed CIT’s proprietary technological information. DuPont sought to have the long-fought case tossed from court because CIT has relied on litigation financing from an affiliate of Burford Capital LLC to help fund the case.

Delaware Superior Court President Judge Jan R. Jurden found that the use of litigation financing did not disqualify the lawsuit and rejected DuPont’s claim that CIT had broken state laws against “champerty” and “maintenance,” which preclude a non-litigant assuming control of or interfering in a lawsuit based on financial interest is when someone financially supports or promotes another person’s lawsuit.

The court’s ruling has been featured in The Wall Street Journal, “Litigation Funder Doesn’t Violate Ethical Boundaries, Court Finds”; Forbes, “Dupont Loses Bid To Dismiss Lawsuit Financed by Outside Money”; Law360, “Del. Court OKs Litigation Finance In DuPont IP Case” (subscription required); and The Texas Lawbook in “Delaware Judge Approves Litigation Finance in Complex Business Dispute” (subscription required).

CIT is represented by partners Amir H. Alavi and Tim Shelby of Houston-based Ahmad Zavitsanos Anaipakos Alavi & Mensing P.C. or AZA.

“This is an important ruling for CIT, a small company that would be hard-pressed to match DuPont’s resources in litigating its claims without access to litigation funding,” says Mr. Alavi, lead attorney for CIT. “We are pleased Judge Jurden recognized that CIT’s arm’s-length litigation funding agreement does not violate the ancient doctrine of champerty and maintenance.”

Burford Capital says in a statement, “The Delaware court simply reaffirmed what was already clear – that litigation finance as practiced by Burford has nothing to do with the ‘ancient’ and ‘feudal’ practices of maintenance and champerty.

What this case illustrates more clearly is the need for litigation finance and the normal course of business obstructionism of companies like DuPont when they are litigation defendants.”

The case is Charge Injection Technologies Inc. v. E.I. du Pont de Nemours & Co., No. 07C-12-134, in the Superior Court of the State of Delaware.