Litigation funders keep hidden as Delaware Chancery resists disclosure rule

Delaware's federal courts have moved to make third-party litigation funders visible in the cases they finance, but the state's Court of Chancery, the court most central to corporate disputes, has not followed. That gap leaves the identity and influence of financial backers of lawsuits largely hidden at the moment the industry is expanding fast.

The global litigation finance market reached about $20.6 billion in 2025 and is forecast to more than double within a decade. U.S. commercial funders managed roughly $16 billion at the end of 2024. Funders typically supply money for lawsuits in exchange for a share of any recovery, and discovery alone can account for an estimated 50 to 90 percent of litigation costs, which makes outside capital attractive to plaintiffs and their lawyers.

Patent litigation is where the money is most concentrated. Patent cases accounted for 32 percent of new funding commitments in 2024, and roughly 30 percent of patent suits are estimated to be funded. Non-practicing entities, firms that hold patents without producing goods, filed 55 percent of district patent cases in 2025. Because of the Supreme Court's TC Heartland decision, the Delaware federal court is the default venue for patent suits against Delaware corporations.

That is why the federal court's approach matters. In 2022, Judge Connolly issued a disclosure order requiring parties to reveal funding arrangements. Patent filings fell 41 percent over the following two years, a drop that supporters of disclosure cite as evidence that transparency deters weak or speculative claims. Delaware's Superior Court amended its rules on September 30, 2026, to permit discovery of a funder's identity. The Court of Chancery has no equivalent rule and handles the question case by case. In Burkhart v. Genworth in 2024, Vice Chancellor Cook ordered a funding agreement produced, but that outcome depends on the individual judge rather than a settled standard.

The Chancery Court's position is complicated by its recent turbulence. Over the past two years, at least 30 companies have left Delaware, and on November 4 Virtu Financial announced it would move from Delaware to Texas. Vice Chancellor Laster's ruling in the Cloudflare case drew criticism as overreach, and the legislature passed SB21 to address what lawmakers saw as unpredictability in the court. Critics have alleged that some judges continue to defy the statute, and the Delaware Supreme Court has sent cases back to the same judges, which has blunted the effect of reversals. Those disputes have made the court's own consistency a live question for businesses weighing where to incorporate.

Disclosure is not a purely domestic issue. No federal statute or rule requires that the existence or control of litigation funders be disclosed. A December 2024 Government Accountability Office report linked funders to China, Saudi Arabia and France and concluded that the full extent of foreign involvement cannot be known. Some firms are tied to sovereign wealth funds, including Abu Dhabi's Mubadala. A Shenzhen firm connected to TCL reportedly financed patent suits against Samsung, and misuse has been alleged in that matter.

Lawmakers have pressed the issue at the federal level. The chair of the House Oversight Committee urged disclosure, and Senate bills were introduced in 2023 and again in February 2026. The International Trade Commission proposed a disclosure rule in April for Section 337 proceedings, which cover unfair import practices. At the state level, more than 20 states have enacted funding laws. Ohio passed a law in July requiring funder registration and disclosure and barring foreign funders. North Carolina became the first state to ban third-party litigation investment on June 22, and the New Jersey Assembly passed a disclosure bill in June.

The argument now being made is that the Court of Chancery should adopt a clear rule modeled on Judge Connolly's order, rather than leaving disclosure to the discretion of individual judges. Such a rule would give litigants and the public a consistent answer to who is financing a case, at a time when both the money and the foreign interests behind it are growing.

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Derek Weston

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Derek Weston covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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