IPO Guidance: Intellectual Property Insurance

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Jane Lambert

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:

• "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."

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.

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. 

Further Reading

Date	Author	Title
1 May 2016	Jane Lambert	IP Insurance: CIPA’s Paper
13 Aor 2013	Jane Lambert	Intellectual Property Litigation: The Funding Options
23 Ocr 2010	Jane Lambert	IP Insurance Five Years On
5 Feb 2005	Jane Lambert	IP Insurance: Two More Insurers Identified
3 Sep 2005	Jane Lambert	IP Insurance
3 Seo 2005	Jane Lambert	IP Insurance: Does it work?
2 Seo 2005	Jane Lambert	Q. Why aren't there more British Patents? A. Because Enforcement is too Expensive!
2 Seo 2005	Jane Lambert	Patents: Why are there no British Names in the Patent Office’s Top Ten?

IP Insurance: CIPA's Paper

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Jane Lambert

It will cost you several thousand pounds to get a patent for the UK and considerably more if you require patent protection elsewhere in the world especially outside Europe but unless you can enforce your monopoly in the civil courts you may as well spend the money on a new car or exotic holiday or even down the pub.

The cost of patent litigation has come down considerably in England and Wales (though not in Scotland and Northern Ireland) with the changes to CPR Part 63 in 2010 (see New Patents County Court Rules 31 Oct 2010 NIPC Law) but it is still not cheap. The costs that you may recover from the other side are capped at £50,000 for the trial on liability plus another £25,000 for an account or inquiry but you will probably have to pay at least as much out on your own solicitors and counsel and probably a great deal more. As for litigation in the Patent Court there are no limits though the judges will do their best to keep the parties focused on the issues and avoid unnecessary expense.

So what are your options if you are an inventor or small business owner?

• "Legal aid?" Sorry, chum, that was abolished for business disputes by paragraph 1 (h) of Schedule 2 to the Access to Justice Act 1999 although it may become available for litigation in the Unified Patent Court (see Legal Aid for the UPC 23 Jan 2016), 
• "How about no win, no fee?" No mate!  That may be a perfectly sensible way of funding personal injuries claims against insurance companies but intellectual property litigation isn't like that. For a start liability (whether your patent has been infringed) and the account or inquiry (how much money is due to you) are separate proceedings separated by many months and sometimes years. There's a great deal more uncertainty. Several lawyers have got their fingers burnt (see Success Fees and ATE Premiums in the Patents County Court: Henderson v All Around the World Recordings Ltd. 4 May 2013 NIPC Law).
• Litigation funding? Possibly but unlikely. Most funds shy away from IP litigation for the same reason lawyers steer clear of no win no fee retainers in this area of law.
• Legal indemnity insurance? You will find that most policies specifically exclude IP litigation.

No your best bet is IP insurance. Two of my most popular posts in this blog have been IP Insurance 3 Sept 2005 and IP Insurance Five Years On 23 Oct 2010.

More than five years have elapsed since my 2010 update but I have decided not to update it because the Chartered Institute of Patent Attorneys have just done that job for me.  They have published a 10 page report entitled IP Insurance and other IP litigation funding arrangements which can be downloaded from the CIPA's website. This report discusses before and after-the-event insurance and various alternative funding arrangements and then lists the brokers, insurers and other associations who offer IP cover. 

Anyone wishing to discuss this article, the CIPA report or IP insurance in general should call me during on 020 7404 5252 during office hours or send me a message through my contact form.