Patent filings in Delaware's federal district court fell 41% over two years after Chief Judge Colm Connolly ordered disclosure of litigation funders in April 2022 — yet the Delaware Court of Chancery, the nation's most important forum for corporate disputes, still has no equivalent rule. The contrast sits at the center of the latest phase of the corporate exodus from Delaware, which now includes at least 30 companies over the past two years.

Virtu Financial announced its relocation from Delaware to Texas on Nov. 4. Virtu faces pending litigation before Vice Chancellor Travis Laster, who denied the company's motion to dismiss. Laster's widely criticized decision in the Cloudflare case, issued Nov. 5, has intensified boardroom concern that the Chancery Court — once prized for predictability — can no longer be forecast with confidence, according to research on reincorporation trends published by Harvard's corporate governance forum. The Delaware legislature attempted a correction through SB21, but critics argue certain Chancery judges continue to defy the legislature's will, while the Delaware Supreme Court has remanded cases back to the same judges.

Who is paying for the lawsuit?

A second blind spot receives far less attention. A Delaware company can be hauled into the Court of Chancery today with no way of knowing who funds the lawsuit against it, whether that backer controls settlement, or whether it is a competitor or a foreign state.

The global litigation finance market was estimated at $20.6 billion in 2025, with forecasts that it will more than double within a decade, according to Future Market Insights. U.S. commercial funders alone managed roughly $16 billion in assets at the end of 2024, Bloomberg Law reported. The market barely existed two decades ago.

No federal statute or rule requires disclosure of even the existence of a litigation funder, according to the Government Accountability Office — let alone whether the funder holds sway over litigation strategy or settlement decisions.

What are the national security risks?

A December 2024 GAO report found stakeholders pointing to funders from China, Saudi Arabia and France, while conceding that the full extent of such funding remains unknowable. Burford Capital has announced a "strategic capital relationship" with a sovereign wealth fund. Fortress Investment Group is now majority-owned by a consortium led by Mubadala, Abu Dhabi's sovereign investor.

The danger is concrete. A Shenzhen-based firm led by the general counsel of Chinese electronics giant TCL was revealed to be financing patent suits against Samsung in U.S. courts. Samsung later alleged the funder had misused its confidential information to compete unfairly. Connolly's disclosure order surfaced the TCL-linked funder.

Discovery magnifies the exposure. Discovery is estimated to account for 50% to 90% of the cost of litigating a case, according to the Institute for Legal Reform. A funded plaintiff can run up a defendant's bill as an end in itself or request document dumps of strategically sensitive files of limited relevance to the case — a mechanism, critics argue, for extracting sensitive information under the protective cover of judicial process for hostile foreign powers.

How big is funded patent litigation?

Patent cases absorbed 32% of new litigation-funding commitments in 2024, up from 19% a year earlier and the largest single category. Roughly 30% of patent suits are now estimated to be funded. Most large technology companies interviewed by the GAO said more than half the patent suits filed against them involve confirmed or suspected third-party funding.

Non-practicing entities — companies that make no products but acquire patents to monetize them in court — filed 55% of all district-court patent cases in 2025 and 90% of those in the high-tech sector, according to Unified Patents.

Because the U.S. Supreme Court held in TC Heartland that a corporation "resides" for patent-venue purposes only in its state of incorporation, Delaware's federal district court serves as a default venue for patent suits against Delaware corporations. Connolly's order required parties to disclose any litigation funder and whether it controls litigation or settlement decisions. Patent filings in the district fell 41% over the following two years against a 15% national decline, and funded patent cases in his courtroom virtually disappeared.

Why is Chancery the gap?

Delaware's Superior Court amended its rules on Sept. 30, 2026 to permit discovery into a funder's existence, identity and control rights, while shielding the funding agreement absent good cause. The Court of Chancery has adopted no corresponding rule and proceeds case by case.

In Burkhart v. Genworth, a putative class action decided in 2024, Vice Chancellor Nathan Cook ordered plaintiffs to produce their funding agreement in full, warning that such cases are "especially ripe for a third-party funder to exercise improper control over the litigation." One order from one of the court's seven judges, won only after a motion to compel, falls short of a universal requirement.

The rest of the country is not waiting

The chairman of the House Oversight Committee urged the Judicial Conference in 2024 to consider mandatory disclosure, citing foreign money in U.S. lawsuits. A bipartisan Senate bill introduced in 2023 by Kennedy and Manchin would require foreign funders to disclose their role and bar sovereign wealth funds from financing U.S. litigation. Four senators introduced the Litigation Funding Transparency Act this February, requiring disclosure in federal class actions and multidistrict litigation.

The International Trade Commission proposed in April to require funder disclosure in Section 337 proceedings, which determine whether foreign goods can be blocked from the U.S. market. Ohio enacted a law in July requiring funders to register, disclose agreements and abstain from influencing litigation, while prohibiting foreign funders outright. North Carolina on June 22 became the first state to prohibit third-party litigation investment altogether. More than 20 states have now enacted laws regulating the practice, and New Jersey's Assembly passed a disclosure bill in June.

Boards leaving Delaware cite the Chancery Court's unpredictability and the cost of stockholder litigation — and undisclosed litigation funding feeds both, Harvard's research notes. The proposed fix is a Chancery rule modeled on Connolly's order, requiring parties at the outset to disclose whether a funder exists, who it is, and whether it controls strategy or settlement. Justice Louis Brandeis observed that sunlight is said to be the best of disinfectants.