Peter DeFazio: Litigation transparency is needed to protect federal investments in Oregon

Policy changes in Washington, D.C., can often feel far removed from our communities, but Oregon is about to experience tangible benefits from federal investments to boost domestic manufacturing. Now, we must protect these advancements from competitors who benefit when American manufacturers falter.

Over the past three years, the Biden administration and Congress have made historic infrastructure investments. The Bipartisan Infrastructure Deal is providing funding for roads, bridges, railways and more. In parallel, the CHIPS and Science Act is committing critical resources toward our innovation infrastructure, including expanding domestic manufacturing of microchips, which serve as the linchpins of nearly all modern technologies.

During a recent trip to Arizona, President Biden announced an agreement to allocate $8.5 billion in CHIPS Act funding to Intel Corp., supporting the construction and expansion of domestic semiconductor manufacturing facilities. The investment in Intel is among several strategic private-sector partnerships that will enable the United States to produce 20% of the world’s leading-edge chips by the end of the decade. In addition to the $8.5 billion in CHIPS funding and $11 billion in government loans, Intel has committed more than $100 billion to expand chipmaking capacity.

This investment not only strengthens supply chains and reduces security risks associated with reliance on overseas chip manufacturing, but also directly creates 30,000 jobs and indirectly supports tens of thousands more in Arizona, Ohio, New Mexico and at Intel’s Hillsboro, Oregon facilities.

The deal is a win for consumers, U.S. manufacturing, U.S. innovation and national security. Now, the federal judiciary has an unexpected, but crucial, role to play in protecting this deal and others like it.

Intel has been entangled in numerous cases of “patent trolling.” Unlike manufacturers, patent trolls profit via litigation rather than by producing goods. These patent infringement lawsuits are often advanced with investor support. This can occur directly, with third-party groups covering litigation costs, or indirectly, when a patent troll is owned by a hedge fund, sovereign wealth fund, or other investor. In either situation, the lawsuits are often the patent trolls’ entire business model, rather than a means to protect intellectual property.

Intel has faced repeated patent infringement lawsuits from the patent troll VLSI Technology. VLSI is a subsidiary of Fortress Investment Group, which was owned by Softbank before it sold a majority stake in Fortress to a sovereign investor in the United Arab Emirates. VLSI initiated a series of lawsuits against Intel and was initially awarded billions of dollars in damages. Some of the damages have been reversed , and some were related to patents that have since been declared invalid . Regardless of the final case outcomes, Intel has spent years defending itself across multiple venues against these legal attacks.

It is a tangled web, but put simply: a U.S. chip manufacturer investing in domestic production faces repeated patent infringement lawsuits from a shell company whose patents were later deemed invalid. This shell company is owned by a hedge fund whose majority owner is an overseas sovereign wealth fund investor.

This type of arrangement is, unfortunately, not an isolated incident. More than half of all U.S. patent lawsuits are brought by these patent troll shell companies, and at least 30% of patent cases receive third-party investment. The U.S. commercial litigation funding industry has over $15 billion in assets under management, with about 20% of new capital commitments directed toward patent lawsuits each year.

We can only see the tip of the iceberg, because we don’t know just how many cases in U.S. courts are funded by outside investors. Individual district courts determine litigation funding transparency rules, and only a few have instituted blanket transparency measures. This weak spot poses significant concerns about how foreign investors might influence U.S. lawsuits to the detriment of American interests.

A patchwork set of litigation investment disclosure rules is not sufficient to deal with the legal strategy’s growth. The Judicial Conference of the United States, which oversees federal court policy, must mandate litigation investment transparency for all cases. Only then will we know precisely who is behind high-stakes lawsuits with far-reaching implications.

American taxpayers are making major investments in innovative companies like Intel, which will bring new jobs and expanded industry to Oregon. We all deserve to know if access to the courts is being misused to compromise our investment in American manufacturing.

Absent compulsory disclosure requirements, our courts are vulnerable to tampering at the hands of lawsuit investors operating at home and overseas. The federal judiciary must pull back the curtain on litigation funders whose lawsuits slow our nation’s innovation and economic growth.

Peter A. DeFazio served in Congress as the U.S. representative for Oregon's 4th congressional district from 1987 to 2023.