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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.