Litigation Funding Probe Continues To Make Waves – Patent

On remand from a decision allowing the US
District Court for the District of Delaware to continue its probe
into who was funding a patent owner’s infringement litigation,
the district court denied the patent owner’s motion to withdraw
the court’s memorandum explaining why records sought in its
prior order were relevant to addressing several concerns. The
district court also issued an order to show cause as to why the
patent owner should not be sanctioned for failing to produce the
records that the court sought. Nimitz Techs. LLC v. Bloomberg
L.P., Case No. 22-413-CFC, ECF Nos. 27-28 (D. Del. Dec. 14,
2022) (Connolly, J.)

Nimitz filed a mandamus petition seeking to reverse a
district court order that sought litigation funding records from
Nimitz. While the mandamus petition was pending, the
district court issued a memorandum explaining the relevancy of the
records it sought. On December 8, 2022, the US Court of Appeals for
the Federal Circuit issued its decision denying Nimitz’s
mandamus petition.

On the same day that the Federal Circuit’s decision issued,
Nimitz filed a motion in the district court asking the court to
withdraw its memorandum. Less than a week later, the court issued
an order summarily denying the motion but addressing two matters
raised in the motion because those matters had been raised in
related actions.

In its motion, Nimitz argued that the court’s disclosure
order did not cover limited liability companies because the order
referred to “limited liability corporations.” The court
rejected the argument, explaining that courts—including the
Supreme Court of the United States, the Delaware Supreme Court, the
Delaware Court of Chancery and the last four chief judges of the
district court itself—routinely refer to limited liability
companies as “limited liability corporations.”

Nimitz also sought the judge’s recusal, arguing that the
district court had already publicly adjudged Nimitz and its counsel
guilty of fraud and unethical conduct. The court rejected
Nimitz’s argument, noting that the judge previously stated that
the memorandum purposefully did not repeat his concerns “about
counsel’s professionalism and potential role in the abuse of
the Court because I have made no definitive conclusions about those
issues, and I did not want to unnecessarily embarrass
counsel.” The court, therefore, denied the motion.

The district court separately issued an order to show cause why
Nimitz should not be sanctioned for failing to produce the
litigation funding documents sought by the court. The court noted
that the Federal Circuit denied the mandamus petition on
December 8, and as of December 14, Nimitz had not produced any
documents or asked for an extension of time to produce documents.
Nimitz filed a response on December 21 arguing that the district
court proceeding remained stayed until the Federal Circuit issued a
mandate. Nimitz also argued that it is seeking further appellate
review of the district court’s order and cannot produce the
requested documents because it would moot the further appeal.

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