The One Big Beautiful Bill Act, a sweeping piece of must-pass legislation, is moving through the U.S. Senate under budget reconciliation. These omnibus bills often become vehicles for advancing pet projects and rewarding campaign donors. Lawmakers can quietly attach provisions that benefit allies as long as they’re not controversial enough to jeopardize the larger package allowing them to pass with minimal scrutiny.
Senator Thom Tillis (R-NC) attached an amendment to the One Big, Beautiful Bill Act that imposes a 40.8% tax (37% ordinary income rate plus a 3.8% surcharge) on profits from third-party litigation funding (TPLF) agreements.
The amendment is nearly identical to S.1821, the Tackling Predatory Litigation Funding Act introduced only weeks ago by Tillis. That bill has not undergone proper debate, and many of the stakeholders who could be significantly affected have not had adequate time to assess its implications and voice their concerns.
Although the amendment claims to target predatory funding practices, its real effect is to shield predatory infringers by making it harder to hold them accountable. Its premature inclusion in the One Big Beautiful Bill Act is misguided and harmful because it undermines access to justice thereby chilling American innovation.
Understanding Third-Party Litigation Funding
Third-party litigation funding involves investors providing financial backing to plaintiffs pursuing civil lawsuits in exchange for a share of any settlement or judgment. TPLF has grown significantly in recent years, enabling individuals, small businesses, and startups to pursue meritorious claims against well-resourced predatory corporations. For example, a small business alleging patent infringement by a Big Tech giant might lack the funds to sustain a lengthy legal battle. TPLF levels the playing field by covering legal costs to allow plaintiffs to seek justice.
The Tillis amendment seeks to deter TPLF by imposing a hefty tax on funders’ profits, arguing that some arrangements exploit plaintiffs with high-interest rates or unfair terms. While predatory practices exist in any financial sector, the amendment’s blunt approach penalizes the entire industry, ignoring its broader societal benefits.
The Tillis Amendment Undermines Access to Justice and American Innovation
The Tillis amendment will restrict access to justice for many ordinary Americans. Patent infringement litigation is prohibitively expensive, with costs for discovery, expert witnesses, and attorney fees running into millions of dollars. For individuals or small entities facing powerful defendants, TPLF is a lifeline. Without it, many valid patent infringement claims will never reach the courtroom.
By imposing a 40.8% tax on TPLF profits, the amendment discourages investment in meritorious cases, especially those with moderate or uncertain returns. Funders, already risk-averse, will shift focus to only the highest-value disputes that can return the cost plus the increased tax, leaving smaller claims behind. This will effectively shut the courthouse doors to many victims of predatory infringement. Small entities will be hit hardest, as they rely most on outside funding and often have smaller claims. The result will be a system that rewards predatory infringement by deep-pocketed corporations at the expense of startups and individual inventors.
The Senate should prioritize policies that enhance, not restrict, access to the courts for everyday Americas. Instead of making litigation more difficult and less obtainable, it should focus on reducing the cost and complexity of litigation. If it did that, TPLF could be made unnecessary for resource starved plaintiffs to access justice.
Beyond individual justice, TPLF plays a critical role in fostering innovation and economic growth, particularly for startups and small businesses. Patent infringement disputes are common in competitive industries. Startups often lack the capital to enforce their patent rights against larger competitors, who may infringe with impunity knowing smaller firms can’t afford litigation. TPLF empowers these innovators to protect their ideas, ensuring they can compete and thrive.
The Tillis amendment’s tax burden threatens this ecosystem. By reducing the financial incentive for funders to back patent cases, it discourages investment in smaller plaintiffs, leaving them vulnerable to predatory practices by larger firms. This not only harms individual businesses but also stifles innovation broadly, as entrepreneurs and their investors will hesitate to invest in new ideas without enforceable protections. A 2023 study by the U.S. Chamber of Commerce noted that robust IP enforcement, supported by accessible litigation, contributes significantly to GDP and job creation. Undermining TPLF risks these economic benefits.
The Tillis Amendment is Rife with Unintended Consequences and Corporate Favoritism
The Tillis amendment has never been properly debated in Congress. Backed by powerful lobbying interests, it is now being quietly pushed through by attaching it to must-pass legislation. This backdoor approach risks serious unintended consequences that benefit large corporations at the expense of ordinary Americans. By discouraging third-party litigation funding, the amendment tilts the playing field in favor of well-funded defendants, who can simply outlast smaller claimants in protracted legal battles. The result is a justice system where only the wealthy can afford to assert or defend their rights undermining the foundational principle of equal justice under law.
Removing the amendment would signal Congress’s commitment to supporting American innovation. As the Congress refines the bill for its July 4, 2025 target enactment, lawmakers should remove the Tillis amendment. By excising this provision, Congress can properly debate S.1821, the Tackling Predatory Litigation Funding Act to learn what its unintended consequences will be before making it the law of the land. This will help ensure that the One Big, Beautiful Bill Act is big and beautiful for all Americans, not just the powerful few.
Paul Morinville is Founder and Executive Director of SPARK Innovation. SPARK Innovation strives to create an policy environment where the conception, protection, and commercialization of technologies critical to our economic and national security prosper thereby enabling the United States to take back the global technological lead from China. Paul is an inventor and has been an executive at multiple technology startups including computer hardware, enterprise middleware, video compression software, artificial intelligence, and medical devices, and has licensed patents in the U.S. and China.
