Enforcement and funding: Strengthening your IP strategy to protect against infringement
Have you created a strategy to address how you will enforce and fund the protection of your intellectual property (IP) assets, if required?
IP rights are enforced through civil proceedings. This means there is no policing body that prevents infringement of IP rights and infringement disputes must be brought by the rights holder. However, litigation costs in the English courts can be very high – ranging from £100,000 to several million pounds according to the size and complexity of proceedings. Thankfully, legal enforcement proceedings are relatively rare and most often negotiation can lead to settlement before legal action is required.
If you believe your IP rights have been infringed, the most common litigation claims are for:
- an injunction (ordering the infringer to cease using your IP); and/or
- damages (remuneration of any profits the infringer gained from unlawfully using your IP).
Further examples of claims can include destruction (for example, ordering destruction of counterfeit goods), and inspection (ordering independent inspection of a production facility to ascertain whether production methods are infringing your IP).
If you have IP rights registered in multiple jurisdictions, a key question when strategizing your infringement dispute is where to take the action since litigation disputes are held on a national basis. You may wish to consider factors such as:
- Market share
- Predictability of outcome dependent on national case law
However, due to the high cost of litigation disputes it is often preferrable to negotiate a licensing agreement with the infringing party.
For European patents, opposition proceedings are an alternative way of protecting your IP if you believe a competitor has been granted a patent that is invalid in light of your own, or other, existing IP. Oppositions must be filed within nine months of grant of the offending European patent. There is no equivalent period for UK patents, however post-grant revocation proceedings can be initiated at any time after grant.
Taking legal action to enforce your IP rights can be very costly, so it is wise to consider how you would fund this if you had to act. Being unable to take legal action due to the excessive cost of litigation can often lead to reputational and financial harm.
This can be particularly poignant for businesses operating in highly contentious fields of IP, or if your business needs protection against potential liabilities arising under IP indemnities. For example, you may be required to hold licensees, manufacturers, and other parties, harmless against the cost of IP litigation.
One way to address this is investing in IP insurance, of which a variety of types exist, including:
- offensive insurance – the costs of enforcing your IP rights against potential infringers;
- defensive insurance – the costs of defending allegations that you have infringed a competitor’s rights;
- any exposures arising under warranties or indemnities given to customers, licensees, or third parties; and
- the costs of disputes arising under IP agreements such as licenses and distribution agreements.
Investing in IP insurance may also result in additional benefits such as providing a deterrent to potential infringers, adding value to your rights during licensing or assignment, and reassuring lenders and investors.
However, when taking out insurance cover you may wish to investigate the following considerations:
Who is in control of the litigation? (i.e. you or the insurance company)
In general, you, assisted by your legal representative, should remain in control of the litigation. However, be sure to check your policy details to ensure you would fulfil all the criteria to guarantee funding by the insurer.
Can you choose your legal representative?
In most cases, yes, but your chosen representative may be subject to the insurers’ approval to ensure they have the necessary skills and knowledge to fight the claim. Check your policy to confirm the exact terms of your agreement, including whether a particular solicitor must be used.
In patent disputes, do you have much say in terms of control of claim amendments?
During a dispute, it is common to consult with your legal representative to determine possible avenues for claim amendment that will be commercially relevant to your business. If there are features of particular importance, you should raise this with your legal representative.
Under what conditions can you rely on the IP insurance?
The exact conditions depend on your chosen policy, for example this may include whether you are insured against costs only for enforcing your IP rights, or also defending infringement allegations.
If you have a potential claim you may also need to obtain a legal opinion from a qualified person confirming a good chance of success. Some insurers may require a minimum confidence level, for example above 50-60% chance of success, to be relied upon to fund the pursuit of a claim.
In general, you will not be insured if you are aware of an ongoing infringement or if you know/believe an infringement is likely to occur upon taking out the insurance policy.
Please note that Mathys & Squire LLP is not an insurance broker and the information given above is intended to be for information only. Nothing contained in this article should be construed as legal advice. If you have any specific questions about any of the issues mentioned above, please get in touch with a member of our team.
Written by: Andrew White & Jessie Harrison