In the first part of this two-part series, the relatively nascent asset class of Intellectual Property Private Credit (“IP Credit”) was introduced. That article explored the basic premise of the asset class, discussed some of the financiers in the space and reviewed some of the nuances inherent in the asset class. In this part, we take all of the knowledge gained in part one and apply it to a specific example by exploring a publicly traded company, which used IP Credit on a couple of different occasions with great success.

One of the areas in which I am intrigued, is the application of credit to intellectual property (“IP”) and using the value of patents (amongst other forms of intellectual property) as security for the loan, the so-called Intellectual Property Private Credit (“IP Credit”) asset class. While this is strictly speaking a credit asset class as you will see from this article, it sits adjacent to and sometimes crosses over with commercial litigation finance.

In the past, I have written about the importance of diversification, the applicability of portfolio theory (articles one, two & three), and the perils of fund concentration; but I also believe that investors in the asset class should understand the perils of relying on outliers to drive fund performance.

I recently moderated Litigation Finance Journal’s digital conference entitled Investor Insights into Litigation Funding, and the panelists delivered a clear message that the asset class needs to be more transparent.  Accordingly, I decided to pen this article to explore the more opaque aspects of the asset class and the reasons underlying that opacity, and what this means for investors, as well as provide some “watch-outs” for those looking to invest in the industry. 

There is no other way to express it; the US commercial litigation finance industry is under assault from a variety of different interest groups and the industry lacks a homogenous voice to counter the opposition and to communicate its strong benefits.