Is IP litigation recession proof?

25 October 2012

It has been suggested that IP litigation is ‘recession proof’. Recent Ministry of Justice figures have shown that claims were up 19% in 2011. So what are the reasons for the rise?

Being aggressive and taking risks
As business gets tougher in times of recession companies are generally more aggressive when it comes to protecting the market share that they hold. Companies are also more likely to take risks when trying to build up their market share. The American case of Apple v Samsung is one such example where Apple issued proceedings against Samsung for 21 alleged breaches of Apple’s iPad patent where Samsung were trying to launch their tablet product onto the market.

Holding on to a market share
After fighting to obtain a market share, bigger companies are keen to hold on to that advantage, and as a consequence they are more willing to ‘stamp out’ smaller companies. This leads to an increase in ‘David and Goliath’ type cases such as the recent example where David Hunter and George Simpson applied to the Intellectual Property Office to register the name D&G Autocare as a trademark. They were swiftly presented with a notice of threatened opposition from the Italian fashion house Dolce & Gabbana. Upon asking for proof of Dolce’s presence in the car industry Dolce relented on the understanding that D&G Autocare would remain in Britain.

Taking what they’re owed
The International Chamber of Commerce has estimated that 7% of all world trade is in counterfeit goods. This adds up to a significant cost for those IP rights holders who are in times of recession, more willing to sue in order to recover monies lost to infringers. Brand owners are increasingly taking action against high street infringers and large scale counterfeiters, in the hope of recovering money and deterring similar infringers. These actions have also been helped by the introduction of two new EU developments, including the EU IP Enforcement Directive, which forces counterfeiters to ‘name and shame’ themselves, and the criminalisation of any deliberate infringements of IP rights across the EU, leading to maximum penalties of 4 years imprisonment/and or hundreds of thousands of Euros in fines for serious organised crime, such as piracy.

Over recent years, litigation funding in the UK has developed and this has had an impact on IP litigation. Whereas in the past, clients seeking funding were usually impecunious claimants who could not afford to litigate, it seems that increasingly, clients taking advantage of litigation funding options include those who can pay for some or all of their legal costs but are trying to manage their risk and cash flow. These parties may be sophisticated commercial entities or high net worth individuals.

In May 2012, IPCom won it’s appeal against Nokia in a Patent Case before the Court of Appeal. IPCom had taken out after-the-event (ATE) legal expenses insurance to cover its costs risk. According to James Blick of TheJudge, a broker for insurance litigation and funding, ‘IPCom was a classic example of a case that would never have been taken on in the past. It was high risk, technical and expensive.’

The new small claims track for the Patent County Court
The new small claims track for the Patent County Court was launched on 1 October 2012 following the publication of “Hargreaves Review of Intellectual Property and Growth” in May 2011. Although the figures will not be represented in the 19% rise quoted above, and the limit for compensation will be capped at £5000, this development deserves to be watched with interest.

The new track is a means of enabling rights-holders who were barred by expensive litigation to seek a cheaper, quicker resolution to IP disputes. There is a limit to the types of IP cases that will be considered, and it will not be appropriate for cases of patents, registered designs or plant varieties.

Although the financial cap will be limited, the Court has the power to grant final injunctions which will be appealing to smaller, independent right-holders whose main objective is protection over financial gains for infringement. It remains to be seen whether this development will lead to another Ministry of Justice increase for IP litigation for 2012.

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