Demystifying IP Insurance, ATE (After the Event) Insurance and IP Litigation Funding
Nearly every business possesses some form of intellectual property (IP), even if they’re unaware of it, or aware of the need to protect it. It’s the innovative idea that solves a problem, drives industries forward, and fosters innovation. It’s the distinctive design that catches the eye, the brand people instantly recognize, or the literature you’ve written. IP can be found everywhere in any business that seeks to distinguish itself from its closest competitor.
Your intellectual property is a vital business asset—it’s what sets your business apart. IP provides a competitive edge and should never be overlooked or left unprotected. Safeguarding your intellectual property ensures that the unique elements of your business remain yours and continue to add value.
So, first, what is Intellectual Property?
Intellectual property includes a range of rights that individuals or businesses can own, and these rights have tangible legal value. They can be bought, sold, or licensed to others. The primary categories of IP are Patents, Trademarks, Registered designs (‘Designs’) and Copyright. Other types of IP rights include database rights, confidential information (such as trade secrets), and goodwill.
While some IP rights require registration, others are automatically protected by law. However, do not assume that unregistered intellectual property lacks value. For instance, your brand identity can hold significant worth – even if you haven’t registered a trademark.
Why Protect Your IP?
Most people, when thinking about protecting their IP, think first about applying for a patent, or register for trade marks, or design. However, others often comment that enforcing IP is costly and so why should they bother protecting it in the first place? IP Litigation unfortunately is costly but is often needed to protect a business and therefore, its valuable IP assets.
So in this article, we are going to talk about ways you can protect your business in case a dispute over IP comes your way using IP insurance, as well as related products, including After the Event (ATE) IP Insurance, as well as IP Litigation Funding.
IP Insurance
IP Insurance products have been around for some time, but their popularity is growing and many insurance companies (and thus brokers) in the UK offer IP Insurance packages.
IP insurance is mainly designed to protect businesses and individuals against the financial risks related to intellectual property (IP) disputes, such as patent or copyright infringement claims. It helps cover legal costs, damages, and sometimes even lost income due to IP-related lawsuits.
The typical costs of IP insurance can range from as little as £4k/annum for a small business or start-up, up to hundreds of thousands for large corporates. However, there are some key factors that can affect the cost of your insurance premium and some of these factors follow:
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The Type of IP (patents are more expensive to insure than trademarks/copyrights)
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Your Industry (tech, pharma, and manufacturing for example all face higher risks)
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Your Litigation history (previous legal issues can increase premiums)
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Your Revenue & size of company (larger businesses pay more)
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Jurisdictions chosen (some regions, such as the US, have a higher risk of IP litigation, or where litigation tends to be more costly for example)
At the end of the day, an IP insurance package is similar to any other, it is priced based on an assessment of the risk that an insurance claim will be triggered, and the potential size of that claim.
IP ATE IP Insurance
After the Event (ATE) IP insurance protects litigants against the legal cost risks associated with a known piece of IP litigation – should that IP litigation be unsuccessful. ATE IP insurance can be arranged for levels of cover ranging from £50,000 up to £20million or more and can include the following risks in the cover:
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The Opponent’s costs risk
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The Litigant’s own disbursements
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The Litigant’s own solicitor’s fees*
* Less common, but a number of insurers will offer cover for at least 50% of a solicitor’s normal hourly rate.
A claim can be made regarding the policy at the conclusion of the litigation if the insured does not win their case.
Litigation Funding
Litigation funding is based on the concept where a third party, usually a commercial litigation funder, financing some or part of a party’s litigation in exchange for an agreed return should the case succeed. Litigation financing is generally non-recourse, so if the litigation is unsuccessful the client does not have to repay the funding advanced.
The litigation finance market is becoming increasingly diverse with numerous entities seeking to invest in this non-correlated asset class, all with highly variable investment approaches.
Litigation funding pricing is benefiting from this diversity and is fast becoming more competitive. Funders are no longer solely concentrating on multi-million-pound cases and as they seek portfolio diversity many funders are actively seeking more modest claims. These two factors combined means that litigation funding is now a valid option for many cases.
Funding has also become more innovative with some funders seeking to invest in law firms directly, on a non-recourse basis, by either lending against work in progress, providing cash flow for a contingent fee (where allowable), or investing in a portfolio of cases.
A Summary of Benefits of Each Type of IP Insurance Follows:
| IP Insurance | ATE Insurance | Litigation Funding |
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Provides Financial Protection Against Legal Costs
Reduces Business Risk
Shields businesses from unexpected financial losses due to IP disputes
Provides stability, especially for startups and SMEs with limited legal budgets
Attracts Investors & Business Partners – as demonstrates that a company has a proactive risk management process.
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Litigant can ringfence risk and remove cost of litigation from balance sheet
Assists to increase access to litigation by removing barrier of cost Tactical benefit of having an independent third party supporting the litigation as: Insurers will only support cases with Knowing the consequences of losing have less impact on clients could incentivise settlement
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Can manage cashflow and protect balance sheets
Funded party can no longer be defeated simply because they have a poor financial position Funded clients can pursue litigation with more confidence because of certainty around the financial risk. Similar tactical advantages to ATE Insurance regarding independent stakeholder involvement. |
In Summary:
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IP Insurance products are a good way of managing financial risk and giving peace of mind.
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Prices range depending on your business size and the level of risk you may be exposed to.
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You can take out insurance at any time and there is a vast array of staged payment options to suit you and your business.
Please note: here at Scintilla, we have worked with a range of IP Insurance providers in the past, however this article was written with a great deal of assistance and input by Jane Jones of PIB. So, the authors would like to particularly thank Jane and PIB for their help in writing this article.
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