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Intellectual property trends and possible risk solutions

Intellectual property (IP) is likely to be one of a business’s most valuable assets.
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By Sarah Coutts , 

Intellectual Property Product Leader

25/09/2024 · 4 minute read

Understanding IP litigation risk

Whether a company is leveraging innovative technologies to expand their operations, or managing complex global supply chains, intellectual property (IP) is likely to be one of a business’s most valuable assets.

The World Intellectual Property Office reported a record breaking 3.46 million patent applications filed in 2022, and this figure is expected to have increased in 2023. Compounding this increase, the IP space becomes increasingly litigious at times of economic downturn and uncertainty.

On Marsh’s recent webinar, ‘Understanding intellectual property ligation risk’, IP litigation trends were explored alongside possible risk solutions. This article focuses on the key litigation trends emerging in the IP space.

The panel comprised Chris Williams, Partner in the IP team at global law firm Clyde & Co; lead IP underwriter at Tokio Marine Kiln, Ellie Webb; and Arch Insurance International’s Head of Intangible Assets, Ian Lewis. The session was chaired by Marsh UK’s professional indemnity and IP product leader, Sarah Coutts.

The IP litigation landscape

  • Trade secret: Clyde’s Chris Williams noted an increase in disputes for trade secrets: “We do see an increase in a variety of scenarios: from business partners who have separated where the outgoing party attempts to use said secrets to start a new company or, alternatively, where employees move companies and the ex-employer queries whether a trade secret has been misappropriated, particularly where it is potentially being used for the benefit of a competitor.” This uptick in disputes has arguably been enabled by recent codification and regulation around trade secrets, particularly in the EU Trade Secrets Directive, which was implemented in the UK and survived Brexit. These developments mean that, if you have a secret of commercial value, you may now get trade secret protection within a codified regime.
  • Arbitration: Chris Williams also noted that there has been greater use of arbitration to resolve IP disputes. With an increase in specialist arbitrators in the market over the last several years, arbitration provides an attractive alternative to resolving disputes through the territorially limited courts. The proceedings in arbitration are confidential, so this route is also seen as safer, particularly in cases involving commercially sensitive information.
  • Generative AI: All parties agreed that the use of Generative AI does present an extra level of IP risk, both from an input and output perspective. The data put into training models may be proprietary information which is used without permission. The output data, such as the content that is being generated, may not meet the threshold for authorship or invention if it is entirely generated by AI, without creative human input, and so there may be issues with protectability.
    Ellie Webb commented: “AI has a lot of companies thinking more about their IP risk and it obviously carries a huge innovation momentum. We are expecting a real rise in IP filings, not just from the copyright angle, but also as a result of the surge in innovation that is associated with this huge boom in AI.” 
  • Litigation funding: Smaller funders have been attracted to IP by potentially large awards; and larger more sophisticated funders undertaking better due diligence feel more comfortable in supporting the litigation. Ellie Webb said that, overall, this can result in a greater willingness for parties to litigate and get to the point of damages rather than settle earlier, with damage awards becoming more frequent and potentially more severe. Ian Lewis added that this is also leading to higher settlement sums as the dynamic in the negotiations has shifted with the funder often requiring a certain level of return.
    While the US was the home for this funding, the launch of the Unified Patent Court (UPC) in June 2023 has opened another market. As the UPC can potentially stop a defendant selling a product across multiple EU countries rather than one single jurisdiction, this significantly increases the injunction risk. That applies a lot of pressure on defendants, which litigation funders see as an opportunity.
  • An increase in activity from “patent trolls”: Patent trolls generate revenue through litigating patents rather than through their own products or services. Ian Lewis commented that he has seen the resurgence of a tactic by patent trolls where they will go after multiple of an insured’s customers at the same time – turning a potentially smaller incident into a much bigger one.

Build resilience against IP litigation risk

IP is a hotbed of potential litigation, and there are currently no signs of this abating. While the aspects discussed in this webinar continue to drive growth in IP risk, all companies today should be looking at their IP risk and considering IP risk transfer solutions. An IP dispute can be very expensive and for some companies, crippling. Quantifying potential IP risk and exploring IP risk transfer through insurance is recommended for all companies. 

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