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The Intellectual Property Office ("IPO") has recently updated its guidance on IP insurance, It makes the point that such insurance may not be for every business but for some, it brings numerous benefits. According to the guidance, those benefits are as follows:
Cover against the costs of litigation and other expenses is available both before and after an infringement has occurred. Cover that is obtained before an infringement occurs is known as before-the-event ("BTE") insurance and cover after the infringement is known as after-the-event ("ATE") insurance. As might be expected BTE insurance is considerably cheaper than ATE. ATE policies were very popular before the Legal Aid, Sentencing and Punishment of Offenders Act 2012 came into force because a successful party could recover its premiums and its legal representatives' success fee from the losing party. That came to an end on 31 March 2013 (see Jane Lambert Intellectual Property Litigation - the Funding Options 10 April 2013 NIPC Law and Jane Lambert The Effect of the Legal Aid, Sentencing and Punishment of Offenders Bill on Intellectual Property Litigation 14 July 2011 NIPC Law). It is still possible to take out ATE insurance but the premiums must be paid by the insured. For that reason, such policies are much less common and the IPO guidance does not even bother to mention them.
- "It can protect cash-flow: IP insurance can ensure that your dispute and particularly litigation, does not tie up capital which you could use to grow the business
- it can provide a deterrent: LEI can give you the power to take action to enforce your rights where your financial position might not otherwise allow it. If a potential infringer knows that your insurance will cover making a claim, then it may be less likely to infringe or more likely they will stop when challenged. Some insurers are happy for you to confirm in marketing literature or on websites that your IP is insured, alerting competitors that insurance is in place
- it can improve your negotiating position: If this deterrent does not work then the knowledge that you can go to court (as a last resort) can encourage the alleged infringer to negotiate or mediate. Insurance can provide you with the means to take vital defensive action meaning there will be no need to settle on poor terms
- it might allow your IP to be used as collateral and can add value: Insurance can reassure lenders and investors that the value will not be lost because you cannot fight infringers/invalidity challenges. Potential licensees will also know that you can take legal action if necessary and will be indemnified if required."
The guidance lists the risks against which it is possible to insure. These include:
- opinion only: covers legal costs of obtaining an opinion on the likelihood of successfully enforcing or defending an IP claim;
- enforcement and defence: covers legal costs of taking action to stop others infringing IP rights and defending allegations of infringement. Can cover enforcement and defence either separately or together
- damages: covers any damages payable in an infringement action
- validity: covers legal costs of defending challenges to the validity of the insured's IP rights
- lost revenue: covers revenue lost as a result of losing IP rights
- indemnity: covers liabilities arising under guarantees given to third parties, and
- cyber: covers losses from a variety of cyber incidents, including IPR breaches.
Premiums and excesses are also considered in the guidance. By way of a rough indication, a typical premium for £100,000 (the cost of patent infringement proceedings in the Intellectual Property Enterprise Court) would be about £1,500. The guidance adds that many insurers will accept premiums by instalments.
A link to a list of brokers, insurers and other providers is in the guidance. Advice is given on identifying a broker, selecting the optimum cover, making a claim and resolving disputes with insurers through the Financial Ombudsman. The guidance discusses alternative methods of resolving IP disputes such as examiners' opinions on such matters as whether a patent is valid or whether it is infringed, and the IPO's mediation service.
Readers are referred to the IP insurance pages of the Chartered Institute of Patent Attorneys and the Chartered Institute of Trade Mark Attorneys. I have also written a number of articles on IP insurance since 2005 which are listed in the table below. Anyone wishing to discuss this article or IP insurance generally can call me on 020 7404 5252 or send me a message through my contact page.