For any business, taking out insurance to cover itself from theft, damage or negligence is common practice. However, with up to 80% of a company’s assets made up of IP, many are not adequately protecting themselves. Robert Games, Managing Director at Albright IP explains why businesses should re-evaluate their IP protection…
Most companies understand the importance of Intellectual Property (IP) and the need to patent and trademark the elements that make their business unique. However, many companies don’t then go on to develop an IP strategy that will protect them if IP enforcement or defence is needed in the future.
Mike Tyson famously said “everyone has a plan until they get hit” and likewise most businesses who have taken out patents and trademarks are content until they are infringed upon or inadvertently infringe upon someone else. Then the question arises, what next? Court? How much will it cost to protect our business? Can we afford it?
So how do you protect yourself? A specialist IP insurance is the answer
Just like you protect your home with buildings and contents insurance, the easiest way to protect your IP is to take out specialist insurance when you file your patents and trademarks. Patent and trade mark insurance, also known as IP insurance, will support you financially if you find yourself in an IP dispute. It will act as a deterrent to many hostile companies, because the other side will realise you have the financial backing to pursue an argument, and thus it typically encourages a speedier settlement.
For many SMEs the cost of defending or pursuing a claim against IP can be prohibitive and leave your business exposed. A typical IP insurance package suitable for companies up to £5m turnover, costs around £2000 a year. However, if it will save you tens or even hundreds of thousands down the road, it could be a small price to pay.
How much could a dispute cost?
IP claims for businesses under £5m turnover can often be undertaken in the UK Intellectual Property Enterprise Court (IPEC), a specialist Court which aims to keep costs low. Like any insurance policy you will have an excess to pay and this commonly ranges from between £5,000 and £10,000. This is still a serious expense of course, but with costs even in the IPEC often running to well over £100,000 for many IP claims, insurance is a powerful tool to make enforcement of rights affordable to SMEs.
Estimating how much it will cost you to fight an IP infringement in court is very difficult. However, it is not uncommon to see cases costing companies up to £125,000. One important point to note with IPEC is that the recovery of costs is capped to £50,000 pounds (losing party paying) and if there is inquiry into damages this is capped at £25,000. So even if you win the case, it is likely to still cost you a considerable expense, as the maximum you could receive back is £75,000 and in reality it often doesn’t even get to that.
The battle of the suitcases
If you need any evidence of how much an infringement can cost, then look no further than the recent case of the “Trunki”. In what was a long and costly saga, UK based Magmatic (the company behind children’s ride on suitcase Trunki) took Hong Kong-based PMS International (marketer of the Kiddee Case) to Court. Mr. Justice Arnold found that PMS had copied aspects of the Trunki, infringed Magmatic’s registered design, and even copied the safety notice from their rival. PMS appealed the finding on the registered design, which went all the way to the Supreme Court. The finding of infringement of the registered design ended up being overturned, although the High Court’s finding that copying had occurred, and the Magmatic’s win in unregistered design right and copyright, stands.
For Magmatic a company with a turnover of around £8 million the legal battle has cost the firm more than £500,000 and in 2014 they posted a loss before tax of £1.5 million.
It is also a good example of where a much larger business (PMS International has a turnover of around £45m) has impacted upon a smaller business by copying its designs. Paul Beverley, the managing director of PMS, had openly admitted that he came up with the idea for Kiddee Cases after seeing Trunki luggage.
IP Insurance can give smaller companies the confidence and means to enforce their IP. Disclosing your ability to finance a court case may make those looking to infringe your IP think twice.
What do you need to consider?
An important question to ask is whether the policy covers both pursuit and defence. Some policies only cover defence of an alleged IP infringement. This means that if someone accuses your company of an infringement you can claim on the insurance to fight it. However, without pursuit, you can’t actively protect your own IP and take someone to court who has infringed on your patent or trademark.
Fundamentally it’s about making sure that you can afford to protect your rights. A company’s IP could outweigh the value of its plant, premises or stock. In many cases it will be your business’s single most valuable asset which you use to secure finance for company growth and will likely need to be valued and protected if you are seeking funding. Put simply, protecting your IP assets is just good business.
Our advice would be to work closely with us to develop your IP strategy and insurance as you file your patents and trademarks. This way we can help to ensure that you have the right level of protection for you.
Contact us for more information.