Why the PTAB shift changes the maths on funding patent cases
At Erso Capital, we look at patent disputes through the lens of recoverable value. The question is not only whether the patent owner has a strong claim. It is how long the route to that value is, how many procedural detours sit along the way, and how much capital has to remain at risk before the case reaches a commercial outcome.
That route has changed in the United States.
The shift is most visible at the Patent Trial and Appeal Board. For years, an inter partes review was a familiar part of the defence playbook. A defendant sued for infringement could challenge validity at the PTAB, seek a stay in the district court, and use that parallel process to increase cost, delay and uncertainty for the patent owner. For a funder, that mattered. A strong infringement case could still become a difficult investment if the claim was likely to be pulled into a lengthy PTAB fight before the district court ever reached the merits.
That assumption now needs to be revisited.
Institution decisions for IPR and PGR proceedings now sit with the USPTO Director, rather than being left in the ordinary course to PTAB panels. At the same time, the Office has become more willing to deny institution on discretionary grounds. Recent designations have given that approach more shape, including the treatment of post-grant review, timing, parallel proceedings, copycat petitions, time-barred parties and the patent owner’s settled expectations where a patent has been in force for a number of years.
The practical result is that defendants can no longer assume that an IPR will be instituted simply because a petition has been filed. Petition volumes have fallen, discretionary denials have increased, and challengers are increasingly looking at alternatives such as ex parte re-examination.
For patent owners, that changes the economics of enforcement. For funders, it changes the model.
If a validity challenge is less likely to be instituted, the expected cost of fighting a parallel proceeding may fall. If a district court stay becomes less likely, the timeline to trial may compress. If the defendant loses a familiar delay mechanism, the claimant’s leverage may improve. None of those changes makes a weak case strong, but they can make a strong case more financeable.
There is an important qualification. A lower likelihood of PTAB institution is not automatically good news for a funder. An IPR can be expensive and disruptive, but it can also perform a useful screening function. If the patent owner’s validity analysis is wrong, it is generally better to discover that before the full district court budget has been spent. The absence of a PTAB process does not remove validity risk; it simply changes when and where that risk is likely to be tested.
That is why the shift is only genuinely funder-friendly where the front-end analysis is strong. If experienced patent counsel has pressure-tested validity, the infringement read is clean, and the damages case is commercially meaningful, then less procedural friction and a faster route to trial are generally welcome. But if the case is carrying unresolved validity issues, fewer IPRs may simply defer the problem rather than solve it.
That is the point. Litigation funding is not just about the merits of the claim. It is about the route from filing to recovery, and about when the main risks are likely to crystallise. A case that once looked marginal because it was likely to be diverted through the PTAB may now look different if the district court action is more likely to remain the main event, but only where the underlying validity analysis is strong enough to justify that confidence.
Venue compounds the effect. The Eastern District of Texas remains one of the most important patent forums in the country, and Texas venues continue to attract a substantial share of patent filings. For a funder, that is not just a filing statistic. It affects timing, settlement pressure, trial risk and capital duration. A forum where a case can move on a schedule the parties have to take seriously is a forum where funding can be priced with more confidence.
But this should not be mistaken for easy money.
The same period has also seen the Federal Circuit scrutinise patent damages more closely. EcoFactor v Google is the obvious example. There, the court vacated a damages award and ordered a new trial because the damages expert’s royalty analysis was not adequately supported by the licences on which it relied. The message for claimants is uncomfortable but important: a faster path to trial is not the same thing as a safe path to a collectable judgment.
That is the balance we are focused on at Erso. The front end of many patent cases may have improved for patent owners. The back end has become more demanding. A claimant may face fewer procedural obstacles before trial, but any damages award still needs to survive appellate scrutiny.
That makes the underwriting question sharper.
Is the patent likely to withstand a validity attack, whether in district court, at the PTAB or through reexamination? Is the infringement case clean? Are the accused products commercially meaningful? Are damages built on comparables that actually support the royalty being advanced? Has apportionment been handled properly? Is the expert evidence robust enough to survive Rule 702 and Federal Circuit review?
Where the answers are yes, the current environment is more favourable to well-prepared patentees than it was a few years ago. The PTAB is no longer the same automatic pressure valve for defendants. District court timelines matter more. Damages discipline matters more. And the difference between a case that is merely arguable and one that is genuinely financeable has become easier to see.
That is a good market for a disciplined funder. It rewards strong patents, careful case selection and realistic damages work. It punishes cases built mainly on delay, overreach or optimistic assumptions about settlement pressure.
For patent owners and law firms building enforcement campaigns, the funding conversation should therefore happen earlier. The question is not simply whether capital is available. It is whether the case has been structured in a way that turns procedural momentum into recoverable value.
If you are developing a patent campaign and want a funder’s perspective on where the real risk sits, Erso Capital would be happy to have that conversation.
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