Until the 31 March 2013 it was possible to enter a conditional fee agreement ("CFA") whereby the other side would pay any success fee. Similarly, it was possible to look to the other side to pay an after-the-event ("ATE") insurance premium. In his Final Report Sir Rupert Jackson recommended that success fees and ATE insurance premiums should cease to be recoverable from unsuccessful opponents in civil litigation as those costs were "the major contributor to disproportionate costs in civil litigation in England and Wales".. S.44 (4) and s.46 (1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which came into effect on 1 April 2013 carried those recommendations into effect. It is, of course, still possible to enter a CFA and take out ATE insurance but any success fee or insurance premium has to be paid by the successful party out of any damages that the successful party may receive.
Sir Rupert also recommended that that
"lawyers should be able to enter into contingency fee agreements with clients for contentious business, provided that:That recommendation is implemented by s.45 of the 2012 Act and The Damages-Based Agreements Regulations 2013 (SI 2013 No 609).
- the unsuccessful party in the proceedings, if ordered to pay the successful party’s costs, is only required to pay an amount for costs reflecting what would be a conventional amount, with any difference to be borne by the successful party; and
- the terms on which contingency fee agreements may be entered into are regulated, to safeguard the interests of clients."
As I said in my book, "Enforcing Intellectual Property Rights, A Concise Guide for Businesses, Innovative and Creative Individuals" there was never very much scope for CFAs in intellectual property litigation and I explained why in "No Win No Fee" NIPC website 14 July 2011. There was even less scope for CFAs in the Patents County Court with scale costs and capped totals. In my entire career at the IP Bar I have never entered a CFA though I have come close on a couple of occasions.
Although there may be scope for damaged based agreements for small IP claims now that the upper limit for damages for most claims has been raised from £5,000 to £10,000, the best funding option for most small businesses is before-the-event ("BTE") insurance as I noted in "IP Insurance Five Years On" Inventors Club 23 Oct 2010. Sir Rupert observed in his Final Report that the market for BTE insurance would be very different if his recommendations were accepted.
A company that has responded to the opportunities provided by this new market is COBRA Special Risks Ltd. ("COBRA"). One of COBRA's trading identities is COBRA Legal and IP. COBRA describes itself on its website as:
"London Market specialists providing intellectual property insurance solutions to a wide range of clients; from new start-up ventures with one great idea, to multinational corporations with extensive intellectual property portfolios.
With our expert team of IP specialists, COBRA Legal & IP can arrange insurance that will:
DEFEND your position if you are accused of infringing a third party's intellectual property;
PURSUE others who you believe are infringing your own intellectual property; and
PROTECT against damages awards which may arise from your intellectual property litigation.
With cover being available for all intellectual property rights including Patents, Registered Designs, Trademarks, Copyright and Domain Names, and anywhere in the world, COBRA Legal & IP will find the right solution for you."
What distinguishes COBRA from other BTE insurers is that its directors include a chartered patent attorney. Before joining COBRA, Ian Wishart had worked for the National Coal Board and Johnson Matthew as well as in private practice in Oxfordshire,
It appears from its proposal forms that COBRA can offer the same BTE and ATE cover as other IP insurers but it has one product that I have not seen before. Its IP Opinion policy is said to be "specifically designed for new start-up companies, and smaller SME companies." According to COBRA's website it would as follows:
"If the policyholder is faced with a potential infringement action, for example accused of copying a competitor's trade mark, design, or patent, then the insurer will pay for a full IP legal opinion. Consequently, the policyholder will be in a position to know whether they need to quickly negotiate a compromise, or whether they might have a defence and that their competitor is attempting to damage their business without any actual merit to their case.
If the policyholder considers that a competitor has infringed their insured IP rights, then the policy will again pay for a full IP legal opinion. The policyholder can then make an informed decision as to whether they can pursue the potential infringer, or whether this would be the wrong decision."
No doubt if the insured gets a favourable opinion he or she can seek ATE insurance or even, if the claim is big enough, from a third party investor such as Harbour Litigation Funding Ltd. which I mentioned in Litigation Funding for IP Claims, NIPC website, 18 Sept 2012. I understand that COBRA, which has connections with Harbour and other litigation funders can help to arrange such investment in a suitable case.
It is important to note that not all IP disputes have to be litigated. Generic top level domain name disputes, for instance, are more apt for settlement under ICANN's Uniform Domain Name Dispute Resolution Policy and many .uk country code domain name disputes by Nominet's Dispute Resolution Policy. Since Jospeph Dalby and I are both on the WIPO domain name dispute resolution panel we have considerable expertise in handling domain name disputes in 4-5 Gray's Inn Square. I will be chairing a seminar on Arbitration and domain name dispute resolution at the Old Distillery Building in Dublin at 18:00 on 15 April 2013 at which Joseph and Kate Colleary of Eversheds will be the speakers.
Should anyone want to learn more of this topic, he or she can call me on +44 (0)20 7404 5252 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.