What IPR have in common with WMD

Author Charles Levy
Licensed by US government
Source Wikipedia

Jane Lambert

I apologize in advance to those who will be offended by this post. I acknowledge that a photo of a mushroom cloud is pretty tasteless but it is sometimes necessary to shock in order to drive home a point. And my point is that an intellectual property right ("IPR") is a title to bring a law suit which, like weapons of mass destruction ("WMD"), has potency only if and to the extent that it is ever likely to be used.

The reason why doubt can arise as to whether an IPR will ever be used is that civil litigation is outrageously expensive.  In Ungar v Sugg (1899) 9 RPC 117 Lord Esher MR said:

"A man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent. His patent is swallowed up, and he is ruined."

Despite cost capping in what is now the Intellectual Property Enterprise Court (see Jane Lambert New Patents County Court Rules 31 Oct 2010 NIPC Law) and the launch of the small claims track (see Jane Lambert Patents County Court - the New Small Claims Track Rules 20 Sept 2012) that observation is still generally true.

In his report Enforcing Small Firms' Patent Rights CORDIS 2000 Professor William Kingston of Dublin University business school wrote at page 61:

"In present circumstances, therefore, when faced with a decision whether or not to infringe the patent of a small firm, the balance of advantage for any large firm middle manager is to recommend infringement and intimidation. The odds can be seen to be overwhelmingly against the small firm having the resources to defend itself through appropriate legal action, especially if this could go to appeal. Even if it had these resources, the rational course for it is not to use them in this way because of the risk attached. If the large-firm manager were to recommend taking a licence from the small firm instead of ignoring its patent, he could be considered as throwing away a valuable asset which the firm possesses in its power to intimidate. Throwing away assets and committing the firm to the additional cost of royalties on a licensed patent will not be seen as the best road to promotion."

So what can be done about it? Professor Kingston's proposed the establishment of patent defence unions and compulsory arbitration and that was actually considered by the Intellectual Property Advisory Committee in the early years of the present millennium but rejected as impractical.

The best solution (and it is not a perfect one) is IP insurance. Unless it has the resources to fund litigation up to the tune of a million pounds or so without batting an eyelid a business should consider before-the-event cover very seriously.  I have been writing about IP insurance for over 15 years. At first my arguments encountered enormous scepticism from other IP professionals (particularly patent and trade mark attorneys) but I am glad to say that the Chartered Institute of Patent Attorneys has recently published an excellent report entitled IP Insurance and other IP litigation funding arrangements which I discussed in IP Insurance: CIPA's Paper 1 May 2016 NIPC Inventors Club blog.

The best tip that I can give is to look for IP insurance at the time you apply for a patent or other IPR and that you write the cost of the premiums into your business plan as you would any other expense (see Jane Lambert Why every business plan should take account of intellectual property 3 April 2016).

If I were a business angel, private equity or any other investor (or indeed banker, crowd funder or public or private sector grant awarding authority) I wouldn't part with one penny of my own money let alone funds under my control despite the honeyed entreaties of the entrepreneur or other rights holder unless and until I was satisfied that IP insurance or some other satisfactory means of enforcing the IPR in question was in place (see An IP Primer for Business Angels and Private Equity Investors 29 Aug 2016).

So what if you don't get before-the-event cover?  I discussed the options in IP Insurance: CIPA's paper on 1 May 2016:

• "'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."

You should of course consider alternatives to litigation which I discussed in Dispute Avoidance Planning and Dispute Management 4 March 2016 and How to enforce your IP claim after court fees sky rocket 7 March 2016 and alternative methods of funding such as Legal Cost Finance which I discussed in Legal Cost Finance - Another Response to Sky Rocketing Court Fees 10 March 2016, but before-the-event IP insurance is probably your best bet.