How will the abolition of premium recoverability affect IP disputes?

IP: many clients are accustomed to irrecoverable forums

Posted by Hannah Lee-Davey, business development executive at broker and Litigation Futures sponsor TheJudge

In many areas of law, recoverability of after-the-event (ATE) insurance premiums is a key element of the client’s purchasing decision, and obviously things are about to change on that front. However, our experience with intellectual property (IP) litigation is that recoverability is often seen as ‘neither here nor there’.

Often, IP litigation will be pursued or defended with a view to achieving a settlement; if a global settlement is reached, the premium is payable from the overall pot of monies recovered (along with other costs), rather than being separately recovered from the other side.

Most insurers will discount the premium due in the event of an early settlement – sometimes by as much as 80%. Therefore, clients embarking on IP litigation (and indeed many other forms of commercial litigation) seek to obtain insurance with a view to paying the premium from the pot – or from their own pocket – if the case settles.

Even when the relief sought is non-monetary (the obvious example being a client looking to defend an infringement claim and make a validity counter-claim), huge commercial benefits attach to succeeding in the litigation, albeit the client does not necessarily stand to make money from the case itself per se. In those situations, most clients are willing to pay a premium in the event of success, in return for a hedge on their potential downside.

Furthermore, many IP clients are accustomed to irrecoverable forums, as more and more are now litigating in the Patents County Court (PCC). We regularly secure insurance and funding for cases being held in the PCC, as clients wish to reduce their risk even further than that acheived by the £50,000 cap on recoverable adverse costs.

However, if the claim is sizeable, bringing ATE insurance and litigation funding into the mix can allow clients to utilise the High Court, where damages are unlimited, but which is considered more risky as there is no cap on the client’s potential adverse costs liability, by removing some or all of the associated financial risk.