The Past: A Case Study
It was a classic innovation story. A small company, essentially working out of a garage in New Jersey, independently developed a technology in the early 2000s that was ahead of its time. One that is now a part of our daily lives.
Like a lot of great inventions, the idea itself was simple. But it wasn’t so much a case of building a better mouse trap as it was of building one that no one thought they needed — until they did, urgently. The inventor wanted to be able to connect his MP3 player to a car’s stereo system, and to be able to control it through the car’s radio. That technology did not exist. So, he built a device that provided a connection that no car in the world possessed, mass-produced it, and sold his invention online.
He secured two patents: one that covered connecting with a USB cord, and another that covered doing so wirelessly via Bluetooth. He was certain that car manufacturers would be interested in licensing this highly practical solution, but that optimism proved to be ill-founded.
Innovation Rejected
“He wasn’t looking to sue anybody,” recounts Fred Fabricant, founder of the patent litigation boutique Fabricant LLP in New York. “He proudly went to visit several major auto manufacturers to demonstrate his invention and to offer a license to his technology.”
The conversation was a nonstarter.
“One automaker said, ‘We don’t want to do that. People pay $2,000 for a six-CD changer in the trunk. Why do we want to sell this little device or incorporate this technology in our cars, and lose that sale? Nobody’s ever going to buy the CD player again,’” Fabricant says. “The inventor went to another automaker — same kind of story. Nobody wanted anything to do with him.”
Carmaker after carmaker turned down the licensing opportunity. But on June 29, 2007, the game changed. Apple unveiled the first iPhone. Almost immediately, drivers wanted to connect this shiniest of new gadgets to their cars. There was a new and strong market demand for the spurned technology, but that didn’t mean auto manufacturers chose to respect the two critical patents that covered it.
“They all used his technology,” Fabricant says. “And they did it in a way that was almost identical to the way he had patented it. By 2010, it was in most cars. That critically hurt his business, because who’s going to buy a device from him for $125 on the internet when the car comes with it built in?”
“Having the financial wherewithal to see it through is important, and defendants know that. Otherwise, they’ll just destroy you.”
Managing Partner
Fabricant LLP
Finding the Means
The inventor dreamed of fully enforcing his patents, but of course did not have the money to take on the auto industry alone. So, he retained legal counsel, then approached a litigation funder.
The funder was interested, but with a caveat. They liked what they saw as a readily understandable narrative — the kind of a story that would resonate with a jury. They were not, however, fond of his lawyers at the time, who they believed lacked the experience and level of trust needed to see such a complex case through to the end. The funder provided a short list of other lawyers they liked working with and advised the inventor to meet them. If he was willing to work with one of them, they would consider funding the matter.
“Mine was one of the names on that list,” Fabricant says. “He hired me and then they funded us.”
Over the course of seven years, from 2016 to 2023, Fabricant brought more than 30 litigations against auto manufacturers and suppliers of radio “head units” — the main controller of a car audio system. All of these cases were resolved without going to trial. At the end of the day, the inventor collected monies in the high eight figures. That’s not to say that it was an easy process.
“We had to take them all deep,” Fabricant says. “These cases weren’t resolved after a few weeks or even months, even in the second or third round of cases. Nobody just caved. But as they looked at it, and as the corporate representatives got involved, they could all see that these were not cases they wanted to take to trial by jury. Too many potential jurors have seen the movie about the guy who invented variable speed windshield washers and got ripped off by the whole automotive industry. Still, it was a seven-year battle.”
Fabricant and the client worked with the same funder throughout the barrage of cases. They did not pursue the litigations all at once — managing 30-plus cases concurrently would strain any team, and present greater risk to the funder. So, the cases were bundled into several tranches, incrementally increasing the number of defendants as settlements mounted.
This rolling process was favorable both to the law firm and the funder, enabling more precise risk assessment and the ability to build on cumulative results. Each round of cases also successfully faced IPR challenges on both patents. Over seven years more than 25 IPRs were filed and ultimately defeated. That’s noteworthy in itself, as each IPR challenge can typically cost a quarter-million dollars or more at the PTAB, a nut that would be all but impossible for a small, independent business to finance.
Leveling the Field
At the time the technology at the heart of these cases was first being developed — in the early 2000s — litigation finance did not exist, at least not in any form that would be recognizable today. And it evolved substantially over the course of the seven-year litigation cycle. Fabricant’s experience in an almost 30-year career in patent litigation has provided a unique vantage on the progression of the space. He’s not at all ambiguous in articulating his feelings.
“I loved litigation funding then, and I love it even more now,” he says. “My first funded case was around 2008, when there were very few firms that were at all interested in doing that. There were few litigation funders as we know them today. In the beginning, it was a very unusual business, and there were not that many people in it. Even the people who were in it did not have huge amounts of capital.”
His enthusiasm for litigation finance is rooted in the concept of fair access to justice. He relishes representing patent owners who could never afford to go toe-to-toe with large companies or whole industries on their own. Even most midsize businesses, let alone an independent inventor or startup, can’t afford millions of dollars and the time required to enforce a valid and infringed patent against a massive corporation.
“It levels the playing field,” Fabricant says. “Having the financial wherewithal to see it through is important, and defendants know that. Otherwise, they’ll just destroy you. They’ll wait you out, they’ll never pay, they’ll pound you into the ground.
“I take great personal satisfaction in helping an inventor or a company realize the value of what they created,” he continues. “Some of the cases that I’ve worked on are amazing when you consider how some no-name inventor, who wasn’t rich, came up with the technology that found its way into things that people use every day. The only way to get rewarded for that is to have that technology recognized.” 
Part 2 of this series will focus on the current state of play in litigation finance.