Dentons Dentons offices in Vancouver, British Columbia, Canada. Photo: Mike Scarcella/ALM

The U.S. Justice Department on Wednesday asked a federal appeals court in Washington to void a $7.4 million legal-fee award secured by the global law firm Dentons, arguing that the government's litigation stance in the patent case was "substantially" justified and that the plaintiff should not be given any compensation at all.

A Dentons team won the fees in the U.S. Federal Claims Court for work on behalf of FastShip Inc., described in court papers by the government as "a Philadelphia-based start-up that attempted to raise money for a high-speed, transatlantic cargo ship service." The company, which had alleged U.S. combat ships infringed certain patent rights, declared bankruptcy in 2012.

The Justice Department is appealing the Federal Claims award, and the government's opening brief, filed Wednesday in the U.S. Court of Appeals for the Federal Circuit, asserted the lower court misapplied various federal provisions that allow successful plaintiffs to recoup fees and costs.

The government, however, said it does not intend to raise further questions about the litigation-funding arrangement in which Dentons received an initial payment of $600,000 from a Virginia-based entity called IPCo LLC.

In the lower court, the government had contested whether the litigation funding deal meant FastShip was not actually a "real party in interest" entitled to any fees. "The agreements were structured so that FastShip never paid any litigation expenses, other than the promised contingent fees to IPCo and Dentons from any award," the Justice Department said in Wednesday's court filing.

"While the government does not agree with the [lower court's] conclusions with respect to the real-party-in-interest issue and many of FastShip's specific requests for expenses, the government is only contesting the substantial justification issues for purposes of this appeal," Justice Department lawyer Scott Bolden, deputy director of the agency's commercial litigation branch, said in court papers.

FastShip's third-party funding arrangement, increasingly common in litigation across the country, had generated substantial discussion in the Federal Claims court. Judges ever more are facing questions about the propriety of outside financing arrangements and how much information about these deals should be revealed to parties and the courts.

Judge Charles Lettow of the U.S. Court of Federal Claims, presiding in FastShip's case, described litigation funding as a "controversial" and evolving part of the law. He noted the Federal Claims court has not adopted any rules addressing litigation financing agreements.

"Litigation financing agreements help bridge this divide by providing the attorney of record a source of guaranteed fees for their work, while granting the financer a share of the proceeds if the case is successful," Lettow wrote in his ruling in June. "Here, IPCo. acted as that bridge, covering the gap between claim and litigation, allowing FastShip to successfully pursue their infringement case. Preventing recovery based on such an agreement would be anathema to the underlying purpose of fee-shifting statutes."

The thrust of Lettow's ruling focused on whether the government's position in the litigation was "substantially justified." The Justice Department on Wednesday argued among other things that Lettow went too far in assessing pre-litigation conduct in his award of legal fees.

"The government's noninfringement position was supported by the intrinsic record and FastShip's own documents," Bolden wrote in DOJ's court filing.

 

Read more:

Allegations Against Burford Could Muddy Waters for Litigation Funding

Dentons Wins $7.4M in Fees, Costs Despite Litigation-Finance Agreement

Arbiters Push for More Disclosure as Litigation Funding Expands Into Their Venue

Litigation Funders Tap D.C. Firms for Lobbying Efforts Amid Finance Reform Dispute

As Capital Pours In, a Litigation Funding Icon Changes Its Strategy