Non-recourse financing

A funding structure in which the funder's return is contingent solely on the proceeds of a successful case — if the litigation fails, the plaintiff owes nothing. In IP litigation finance, non-recourse capital is particularly valuable because patent and trade secret cases carry binary outcome risk and multiyear timelines. Funders price this structure by applying risk-adjusted return multiples to their committed capital, typically targeting 3x–5x on successful patent cases. The non-recourse feature shifts litigation risk from the IP owner or counsel to the funder's portfolio, making it the foundational instrument of the asset class.

Because the entire commitment is at risk with no collateral backstop, funders concentrate diligence spend on the front end — independent freedom-to-operate and prior-art review before committing capital — rather than relying on covenants or security interests the way a conventional lender would. Return multiples in the 3x–5x range reflect this all-or-nothing loss profile: the funder must price every deployed dollar to cover the total write-off on the cases that fail, not just the marginal risk on any single position. This is also why non-recourse IP deals rarely include personal guarantees from inventors or assignees — adding recourse would defeat the accounting and reputational rationale claimants seek from third-party capital in the first place.