Working with SMEs and start-ups on their intellectual property
(IP) strategy, I often find that clients can be concerned about the
prospect of large corporations stealing and exploiting their ideas.
With stories of significant patent disputes between tech giants
regularly in the headlines, many ask me why they should protect
their IP if they cannot afford to enforce it against a large
Earlier this month, the Scottish Government published its
Legislative Programme for 2016-17 which includes the Expenses and
Funding of Civil Litigation Bill. According to the Scottish
Government, "the Bill is an important part of the Scottish
Government's commitment to making the civil justice system more
accessible, affordable and equitable. It will introduce measures to
make the costs of civil action more predictable, to extend the
funding options for pursuers..." This is likely to be good
news for Scotland's businesses.
Litigation is almost always a last resort for businesses, not
just because of the costs, but also because of the uncertainty it
creates and the unwanted publicity it can attract. Careful planning
from the start can help prevent a court case further down the line.
Take the admittedly extreme example of a start-up company which has
made an invention relating to a technologically simple, generally
universal consumer product. The company may be concerned that one
or more corporations may quickly copy the invention and flood the
market in many countries with products incorporating the invention.
What advice would I give to a client like this?
In the first instance, discussions of a commercial nature with a
potential customer, supplier, partner or investor should be
conducted under the terms of a written Non-disclosure Agreement
(NDA). However, a NDA should not be seen as a substitute for filing
a patent application before holding any such discussions. A patent
is a monopoly right which is granted on a country-by-country basis.
It may be enforced after grant to prevent a third party –
such as a competitor – from performing one or more infringing
activities such as manufacturing, importing or selling an
infringing product in the country or countries concerned without
the patent owner's consent.
If a business with a pending patent application notices another
party infringing the patent rights they are applying for, or if
they think infringement is imminent, they should consider
accelerating the patent application process in order to secure the
grant of the patent(s) in the country or countries concerned as
soon as possible.
The deterrent effect on a large corporation of a robust clearly
infringed patent should not be under-estimated. General Counsel to
a large corporation understand the seriousness of the consequences
for their corporation if a robust clearly infringed patent is
asserted against them and may prefer to settle, rather than
escalate, a dispute. If no settlement is reached and Alternative
Dispute Resolution (ADR) also fails or is deemed inappropriate, it
may be necessary to bring an action for patent infringement in the
courts as a last resort.
If the Expenses and Funding of Civil Litigation Bill delivers
improved access to litigation in Scotland as intended, this may
help reassure SMEs and start-ups that they can take on large
corporations if they infringe their IP rights in Scotland. In
particular, the Bill will include provisions to 'introduce
sliding caps for success fee agreements in ... civil actions and
will allow damages-based agreements to be enforceable by
If SMEs and start-ups still consider the cost of litigation to
be prohibitive, before-the-Event (BtE) IP insurance may have a role
to play. If BtE insurance is not obtained, a "no win no
fee" agreement such as a Speculative Fee Arrangement (SFA) or
a Damages-Based Agreement (DBA) may make it easier for a start-up
company to bring infringement proceedings in Scotland, especially
if the patent is considered to be robust and clearly infringed.
Under an SFA, a claimant is only required to pay a
solicitor's legal fees if litigation is successful. If
litigation is successful, an additional success fee is charged as a
percentage of the legal fees. The claimant may also purchase
After-the-Event (AtE) IP insurance to address the risk of having to
pay the other side's costs in the event of an unfavourable
outcome. Under a DBA, a solicitor would not charge a fee should the
case be lost, but the solicitor would charge a proportion of any
damages recovered in the event of success. Third party funding for
litigation may also be considered, for example funding for
litigation from a direct competitor of the infringing
1.The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.
The UK government has not yet invoked Article 50 of the Treaty on European Union (this is likely to happen by the end of March), and the UK's actual exit from the European Union is at least two years away.
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