In an era where intellectual property (IP) is the primary engine of corporate value, the cost of defending that value has reached historic heights. As we navigate 2026, enterprise-level patent and trade secret litigation often costs upwards of $5 million to $10 million per case, creating a paradox: even the world’s largest corporations find their balance sheets strained by the very assets they are meant to protect.
Enter Litigation Funding—once a niche tool for cash-strapped plaintiffs, now a sophisticated strategic financial instrument used by Fortune 500 companies to offload risk, preserve working capital, and monetize legal claims without impacting EBITDA.
1. The Strategic Shift: Why Enterprises Use External Capital
For a modern corporation, litigation is often viewed as a “dead asset”—a contingent liability that consumes cash but offers no guaranteed return. Litigation funding transforms this dynamic.
- Risk Mitigation: Most funding is non-recourse. If the case is lost, the corporation owes the funder nothing. This shifts the downside risk entirely to the third-party investor.+1
- Budget Predictability: Legal departments are increasingly treated as cost centers. Funding allows General Counsel to pursue meritorious claims without exceeding their annual litigation budgets.
- Balance Sheet Optimization: By using external capital, companies can keep their own cash focused on R&D and operations, effectively “financing” their legal disputes at a zero-cost basis until a settlement or judgment is reached.
2. Funding Structures for IP Portfolios
Unlike small-scale “single-case” funding, enterprise corporations often utilize more complex arrangements tailored to high-volume IP environments.
Portfolio Funding
Instead of funding one patent infringement suit, a corporation bundles 10–15 cases into a single “portfolio.”
- Cross-Collateralization: The funder’s return is tied to the success of the entire bundle. If one case fails but three others win, the funder still recovers their investment.
- Lower Costs: Because the risk is diversified across multiple disputes, the “cost of capital” (the percentage the funder takes) is typically lower than in single-case arrangements.
Monetization of Judgments and Awards
In 2026, a growing trend involves “monetizing” a judgment while it is still under appeal. A funder provides the corporation with an immediate cash advance against a winning trial court judgment, allowing the company to realize the value of the win years before the appellate process concludes.
3. The 2026 Landscape: AI and Trade Secrets
The nature of what is being funded is shifting. While patent litigation remains the “bread and butter” of IP funding, two areas are seeing explosive growth:
- AI Infringement Claims: With AI models now integrated into every enterprise layer, disputes over training data and “output similarity” are surging. Funders are increasingly backing corporations in “test cases” that define the boundaries of fair use in the AI era.
- Trade Secret Theft: As employee mobility increases, the theft of proprietary algorithms and data sets has spiked. These cases are often “fact-heavy” and expensive to litigate; third-party capital allows companies to pursue former employees or competitors with the full weight of top-tier legal counsel.
4. Key Considerations: The “Waterfall” and Control
Securing capital is not without its complexities. Enterprise leaders must navigate two critical areas during negotiations:
The Distribution Waterfall
This is the contractual priority of how money is paid out after a win. A typical 2026 “waterfall” looks like this:
- Funder’s Principal: The funder recovers the exact amount they spent on legal fees and costs.
- Funder’s Return: Usually a multiple (e.g., 2x-3x) of the investment or a percentage (e.g., 20%) of the total recovery.
- The Corporation: The remaining “lion’s share” goes to the company.
Autonomy and Privilege
A common concern is whether a funder can dictate legal strategy. Modern funding agreements strictly preserve the corporation’s right to settle or manage the case. Furthermore, in many jurisdictions (including the UK and several US states), 2026 regulations have clarified that sharing information with a funder does not waive attorney-client privilege, provided a robust Non-Disclosure Agreement (NDA) is in place.
Summary of Enterprise Litigation Funding in 2026
| Feature | Traditional Self-Funding | Third-Party Litigation Funding |
| Financial Impact | Reduces operating cash/EBITDA | Neutral; non-recourse |
| Risk Profile | 100% Corporate risk | 100% Funder risk (downside) |
| Strategy | Budget-constrained | Merit-driven |
| Strategic Focus | Conservative | High-stakes/Aggressive |