UK: Patent Litigation Insurance Summary: Risk Reward Ratio?

Last Updated: 24 April 2007
Article by Isabel Davies

Following the publication of the Gowers Review of Intellectual Property (The Gowers Review) the issue of a workable patent litigation insurance scheme has returned to the legal and political agenda. The desire to encourage more successful patent applications ensures that it will not shift until the situation is addressed.

In the aftermath of the publication of the report of the European Commission on, "The feasibility of possible insurance schemes against patent litigation risks" (The 2006 report) a number of patent insurance experts and analysts felt compelled to address the proposals. The 2006 report was the latest report since the first European Commission report was published in 2001 and followed by the more specific, "Patent litigation insurance" (The 2003 Report).

Along the way several nations, including the Welsh, "Intellectual property and legal expense insurance" (The Welsh report) in 2003 and the Danish, "Economic consequences of legal expense insurance for patents" (The Danish report) in 2001 have raised points for consideration, which many feel the Commission has failed to address fully. As the analysts form their next responses due shortly we take a look at the main proposals and assess the latest thoughts.

To view the article in full, please see below:

Full Article

Current Position

According to both the 2006 report and the Danish report, only a few European countries, including the United Kingdom, France, Germany and Sweden, have any experience with patent insurance. Nevertheless, both reports have found that none of the schemes offered in these countries can be said to have proven successful. The main reason for their failure seems to be, generally speaking, that the insurance companies offering them were unable to operate them at a profit or with a reasonable prospect of future profits.

"Bespoke" patent insurance is reported to be available in some European countries. But according to the 2006 report, the disadvantages of this type of insurance include high expenses for the required detailed pre-screening for risk assessment, which are usually borne by the person wishing to obtain insurance, high premiums to compensate for remaining uncertainties about the risk insured and limited coverage.

The proposal for a European patent litigation insurance scheme

Taking into account the opinions of insurance companies, brokers, patent attorneys, lawyers, and patentees, the first Commission report has come up with a proposal for the basic elements of a possible future European patent litigation insurance scheme, which it recommends for further intensive study:

  • Since the report concludes that no scheme will be able to attract the number of insured that would be necessary to make such a scheme viable with a low premium, it concludes that the scheme should be compulsory. Based on certain figures, the report estimates that requiring it would make it possible to offer coverage as outlined below for premiums ranging from 300 euros to 600 euros p.a., but assumes that such a scheme would almost certainly require public funding in the beginning. However, the report also proposes considering an "opt-out" scheme.
  • Patentees should be insured both as plaintiffs and as defendants in patent insurance litigation.
  • Coverage should be offered based on a two-stage model: In the first stage, without any risk assessment, the policy should cover a limited amount for a so-called "preliminary investigation" into the validity of a patent and whether the patent has been infringed. It is believed that such a "preliminary investigation" will often lead to settlement. Based on certain figures, the report proposes that an amount of up to 35,000 euros should be available to cover preliminary investigation costs. In the second stage, the policy should cover expenses incurred in each country in which litigation involving a national patent or a bundle of national rights that makes up a European patent takes place for an amount up to 1.5 million euros, as well as damages for infringement and costs of complying with injunctions, also in an amount up to 1.5 million euros. This coverage should be provided only to insured parties that have been advised "honestly" and "professionally" that they have a reasonable chance of not less than 50 per cent of winning their case.

Most of this was from the original 2003 report. The 2006 report adds:

  • Only a "widespread insurance scheme" would bring the beneficial effects to the patent system and such a scheme must avoid the costs of an initial technical risk assessment,
  • Compulsion is a necessary feature of the scheme without which no currently envisaged schemes are likely to be successful (however, the main conditions for a voluntary scheme were identified and considered). However it is careful to underline that the compulsory scheme should only be employed if benefits outweigh the disadvantages.
  • Patentees would be interested in insuring their patents if the premium and the conditions are reasonable,
  • Certain minimum co-insurance could be required, involving both the patentee and insurer sharing the risk.

The Intellectual Property Law Institute see the reality of a Europe wide patent insurance as a long way off.

Here are their comments:

  • The proposals only include recommendations for some basic elements of a future patent insurance scheme and for possible EU support, leaving many important questions unanswered and many details to be worked out.
  • The recommendation to make a European patent insurance scheme compulsory is certainly the most controversial aspect of the proposal in the 2006 report. From the insurers' point of view, a compulsory scheme is probably the best option. It avoids Patentees focusing on poor patents. However, insurers would not be able to weed out the bad or high risks.


At the moment a number of insurers, particularly in England and Germany, think the scheme is impractical. The main problem is that most insurers find it difficult to rationalise that assets of wildly different values and complexities can be covered by a single fixed premium. The argument is that if the scheme comes into force the worst insureds would be subsidised by the good ones. Additionally if the maximum payout for legal fees is predetermined there is a real danger that litigation could be prolonged to the extent that the fund provided for it is exhausted and the litigation fails due to lack of financial support.

The 2006 report fails to even mention the practical considerations of pan-European legislation. The variance in national insurance laws & the variation in taxation applying to policies must be considered. The additional cost to every application must be considered and is all the more relevant, as the cost of an application at the moment is already considered prohibitive for many. Would adding another fee to this make it more or less likely to encourage more applications?

The market itself is currently very small and there is a feeling that market forces rather than legislation should guide the IP insurance market. The rationale comes from The Welsh report which points to a lack of understanding about IP insurance. The report found that if businesses were more aware of risk then demand for IP insurance would go up naturally and the market would find its own level.

A possible solution may be to act upon the recommendations of the Gowers Review on copyright and set a ceiling for costs in IP litigation. This is a more practical solution as it would involve pre-determined costs but again it faces the problem of marrying very complex, technical patent litigation alongside more basic litigation under the same policy.

As it stands insurers would need to see how the system would work in practice before committing to anything. In the format proposed by the Commission there is concern that the scheme would be unworkable.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 23/04/2007.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions