Have you ever paused to consider who funds commercial lawsuits in the U.S. legal system? Likely not—but it’s time we all did. A recent report from the U.S. Chamber of Commerce exposes a critical issue: the lack of transparency in third-party litigation funding (TPLF) poses serious risks to the integrity of the justice system and, more alarmingly, to national security.

At its core, TPLF is simple: financiers provide resources to support lawsuits in exchange for a share of any damages awarded or settlements reached. While this practice began in Australia in the 1990s, it has become a lucrative and increasingly influential global industry. By 2023, $2.7 billion was funneled into TPLF activities in the U.S., adding to a staggering $15.2 billion in active investments nationwide.

When functioning as intended, TPLF can be beneficial. It allows plaintiffs and law firms without substantial financial resources to pursue legitimate claims. But the lack of mandatory disclosure around litigation funding creates troubling opacity. Without transparency, it becomes impossible to know who is bankrolling a case. What happens if a sovereign wealth fund or foreign actor with hostile intentions is covertly funding frivolous lawsuits to target key U.S. industries or bog down the legal system?

This concern is particularly pronounced in patent litigation, which is a major focus of TPLF activity. Roughly 30% of patent infringement lawsuits involve third-party funding. Such cases offer foreign adversaries a unique opportunity to harm U.S. technology companies, many of which are integral to national security efforts. Worse still, these lawsuits can provide adversaries with insights into proprietary and sensitive information.

Earlier this year, Joseph Magal, the former Director of the U.S. Patent and Trademark Office, highlighted these risks during a high-profile case involving VLSI Technology and Intel Corp. Intel, one of the most important semiconductor companies in the U.S., plays a critical role in national defense by producing technology essential to military operations. VLSI, a company that manufactures no products, has been accused of using patent litigation as a strategic tool. Its backer, Fortress Investment Group, is a hedge fund with significant foreign ownership, including Abu Dhabi-based interests.

In 2022, Judge Colm F. Connolly of the U.S. District Court in Delaware ordered VLSI to disclose the financial backers of its litigation against Intel. Instead of complying, VLSI dismissed its claims with prejudice, effectively abandoning years of work. This drastic step speaks volumes. It raises pressing questions about who stood to benefit from VLSI’s litigation strategy—and why they were so intent on avoiding scrutiny.

The secrecy surrounding funding sources in these cases leaves U.S. courts vulnerable to exploitation. Without mandated transparency, the system remains susceptible to manipulation by adversarial foreign entities. States like Montana, Indiana, Louisiana, and West Virginia have already recognized this threat and enacted laws to improve TPLF transparency. These measures represent an important first step, but more states—and the federal government—must follow suit.

Ultimately, the fairness and integrity of America’s courts are at stake. Safeguarding these principles is not merely a legal necessity but a national security imperative. Governments at all levels must act to enforce disclosure requirements for litigation funding. Transparency is not just an administrative formality—it is an essential safeguard against undue influence and an essential component of a functioning democracy.