Funding Arrangements in Private Litigation Are Private Matters—Not to Be Scrutinized by the Federal Court or the Defendant

by Bennett Jones LLP

Bennett Jones LLP

Equip: IP Litigation Case of the Week

The cost of litigation can be a non-starter for an intellectual property owner with a strong infringement case. Litigation funding enterprises can help where the cost of litigation means the difference between proceeding and not proceeding.

Historically, the prohibitions on maintenance (meddling of a disinterested party to encourage a lawsuit) and champerty (maintenance and sharing in the award) prevented third parties from funding litigation.

In a recent decision, the Federal Court considered for the first time whether it had jurisdiction to enquire into the validity and applicability of a private litigation funding agreement. The Court concluded that the way private litigants fund litigation is not its concern nor is it the concern of the defendant.


Seedlings Life Science Ventures, LLC v Pfizer Canada Inc., 2017 FC 826

IP Type



Seedlings Life Science Ventures, LLC sued Pfizer Canada Inc. for patent infringement. To fund its litigation, Seedlings entered into a litigation funding agreement with Bentham IMF Capital Limited, a non-party and a professional litigation funding enterprise. Under the agreement, Bentham would fund Seedlings’ legal fees and disbursements in the action and each of Seedlings and Bentham would be entitled to financial returns from a successful outcome of the action whether by judgment or settlement. Seedlings would control the litigation but Bentham could terminate the agreement if it was no longer satisfied as to the merits or commercial viability of the action. Bentham would have access to all documents produced in the litigation. The agreement was conditional upon court approval and provided that if the Court did not approve its terms, Bentham could declare the agreement null and void.

Accordingly, Seedlings and Bentham sought court approval of the litigation funding agreement, requesting a declaration that the agreement did not render the action an abuse of process or demean the administration of justice, and that Pfizer had no right to object to Seedlings pursuing the litigation under the agreement. Pfizer opposed.

The Federal Court dismissed the motion because it lacked the jurisdiction to grant the relief.

Parties seek prior court approval of litigation funding arrangements primarily to protect the funding party from losing its investment if the funding agreement is subsequently found invalid and unenforceable as champertous. The Federal Court has examined litigation funding in the context of class action proceedings, the governing rules of which provide the Federal Court with oversight of agreements respecting solicitors’ fees and disbursements. Before Seedlings, the Federal Court had never considered the validity and enforceability of a litigation funding agreement in the context of private commercial litigation.

In Seedlings, the Federal Court considered whether it had jurisdiction to make determinations on the litigation funding agreement, as a Court of statutory as opposed to general jurisdiction. The answer was no: the litigation funding agreement was incidental to but distinct and independent from the underlying patent action and thus fell outside the jurisdiction of the Federal Court.

The Court considered whether Seedlings’ obligation to share documents and information obtained through discovery with Bentham gave rise to Federal Court jurisdiction to consider the agreement. The Court concluded it did not because there was no legal rule prohibiting Seedlings from sharing with Bentham discovery documents or information.

The Court also concluded that Pfizer had no right to enquire into the validity of the litigation funding agreement because it did not affect or determine the validity of the rights asserted by Seedlings in the action.

Following this decision, private litigants and litigation funding enterprises who request court approval of funding arrangements should bring the matter before a court of the appropriate province, rather than the Federal Court. Parties entering into these arrangements should find in this decision some comfort that the nature of the funding arrangement is beyond the reach of the defendant and cannot ground a claim that a meritorious action is an abuse of process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.