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A Court of Appeal judgment handed down this month should be required reading for anyone who licenses their trade mark to a third party. It is a reminder that getting the commercial deal right is not enough. The paperwork has to follow.

What happened

Lifestyle Equities owns the Beverly Hills Polo Club trade mark and licenses it to businesses that sell goods under the brand. Frasers Group, formerly Sports Direct, was found to have infringed those trade marks by selling goods under a rival brand. The infringement was proved. Frasers lost the underlying case.

The problem arose at the damages stage. Lifestyle Equities tried to claim not just its own losses but the losses suffered by its licensees, the businesses actually trading under the brand. The Court of Appeal ruled that it could not. The licences had not been registered at the UK Intellectual Property Office before the dispute began, and the court held it was too late to register them retrospectively once proceedings had started.

A significant portion of the damages were lost. Not because the infringement was not real. But because the licensing paperwork was not in order.

Why this matters for smaller businesses

Large brand owners with sophisticated legal teams can get this wrong. Smaller businesses with licensing arrangements that have grown organically over time, often without formal legal input at every stage, are considerably more exposed.

The scenario is more common than people think. A business registers a trade mark. It allows a distributor, a franchisee or a retail partner to sell goods under that brand. The arrangement works well and grows over time. The licence agreement may exist in some form but it has never been formally registered at the IPO. Nobody thinks about it until something goes wrong.

When something does go wrong and infringement occurs, the business discovers that it cannot recover the full value of the losses suffered across its licensing network. The rights it thought it had are worth considerably less than expected.

What the law requires

Under section 25 of the Trade Marks Act 1994, a licence of a registered trade mark must be registered at the UK Intellectual Property Office to be effective against third parties. An unregistered licence is valid between the two parties who signed it. But it cannot be relied upon in infringement proceedings to recover the licensee’s losses, and it does not bind a third party who acquires the trade mark or an interest in it.

Registration is straightforward and inexpensive. The IPO charges a modest fee and the process can be completed online. There is no good reason not to do it.

What to do now

If your business licenses its trade marks to any third party, whether formally or informally, take three steps.

First, review every licensing arrangement currently in place. This includes formal licence agreements but also any informal arrangements where a third party uses your brand under an understanding rather than a written contract.

Second, check whether each licence has been registered at the UK Intellectual Property Office. If it has not, register it. The IPO’s online portal makes this straightforward. Your trade mark attorney can assist if needed.

Third, if any of your licensing arrangements are informal or undocumented, get them properly recorded in a written agreement before registering. An unwritten arrangement cannot be registered and offers very limited protection.

The broader lesson

Registering a trade mark is the beginning of protecting it, not the end. The commercial arrangements built around it need to be documented and registered with the same care as the underlying right. If they are not, the value of the trade mark in the event of infringement may be significantly less than you expect.

IP insurance covers the legal costs of enforcing trade mark rights against infringers. But as this case demonstrates, no insurance policy can recover losses that are unavailable as a matter of law. The time to get the paperwork right is before a dispute arises.

 

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

 

The Unified Patent Court has now been operating for over two years. What started with considerable uncertainty has settled into something more significant than many predicted and UK businesses with European patents need to understand what it means for them.

What is the UPC and where does the UK stand?

The Unified Patent Court is a specialist patent court covering the EU member states that have ratified the UPC Agreement. It opened on 1 June 2023 and allows patent holders to bring a single infringement action covering all participating states simultaneously, rather than pursuing separate national proceedings in each country.

The UK is not a member. Brexit removed the UK from the system before it launched, and there is no current prospect of rejoining. UK-registered patents and UK patent disputes remain subject to the UK courts as before.

However and this is the point that many UK businesses miss the UPC’s jurisdiction does not stop at the UK border in every respect.

The long-arm jurisdiction question

The most significant development of 2025 was the UPC’s confirmation that it can decide on patent infringement in the UK, even though the UK is not a member, provided the defendant is domiciled in a contracting member state.

This was confirmed in the Fujifilm v Kodak decision at the Dusseldorf Local Division in January 2025. In short, a European company that believes a UK business is infringing their Unitary Patent can bring a UPC action and obtain a ruling that covers UK activity. The UPC’s Court of Appeal has consistently taken an expansive view of the court’s jurisdiction, and further developments in this direction are expected through 2026.

For UK businesses operating in European markets or competing with European patent holders, this is a material change in the risk landscape.

How the UPC is being used in practice

The filing data from the EIP UPC Review 2025 tells a clear story. By the end of 2025 the court had received over 1,000 cases at first instance, including 536 infringement actions, 91 revocation actions and 141 applications for provisional measures. More than half of all infringement actions ever filed were filed in 2025 alone, with a marked acceleration in the second half of the year.

This is not a court finding its feet. It is a court gaining momentum. Infringement actions now represent nearly 70% of all filings, and provisional measures — urgent interim injunctions — are a significant and growing part of the workload.

The language of proceedings has also shifted. English has overtaken German as the most commonly used language, accounting for close to two thirds of new filings by the end of 2025. For UK businesses and their advisers, this removes one of the practical barriers to engaging with UPC proceedings.

What this means for UK patent holders

If your business holds European patents registered through the European Patent Office and validated in EU member states you now have two important options.

You can opt out of the UPC system for your existing patents, keeping disputes in the national courts you are familiar with. Or you can remain within the system and use the UPC as a powerful single-action enforcement tool across all participating states.

The opt-out decision is not permanent and can in some circumstances be reversed, but it needs to be made actively. Many UK patent holders have not given this sufficient thought.

If you hold Unitary Patents  the new single patent covering all participating UPC states  there is no opt-out available. These are subject to the UPC’s jurisdiction by design.

What this means for UK businesses without European patents

If your business does not hold European patents but operates in European markets, the UPC makes you more exposed to enforcement actions from European competitors, not less. A single action in a UPC Local Division can now produce an injunction covering 17 EU member states simultaneously. The cost and speed of pan-European enforcement have both improved significantly for well-resourced patent holders.

The acceleration in filings through 2025 suggests that more patent holders are becoming confident in using the system. UK businesses that compete with European IP-rich companies should be aware of this.

The insurance angle

Whether you are enforcing European patents through the UPC or defending a UPC action with potential UK effect, the financial exposure of cross-border patent litigation is significant. A UPC infringement action covering multiple jurisdictions is not a cheap proceeding to defend.

IP insurance covers the legal costs of defending patent infringement allegations and enforcing your own rights, including proceedings in the UPC. For UK businesses with European patent exposure, ensuring that cover is in place before a claim arrives rather than after  has never been more relevant.

Find out more about patent insurance Get a free indicative quote

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

For most SMEs facing infringement, the legal question is straightforward. The financial one is not.

They can see what is happening. They have taken legal advice and know they have a reasonable case. But the cost of pursuing it is difficult to justify against short-term revenue, particularly if the other side decides to defend. So nothing happens. The infringement continues. And over time the brand is diluted, market position is eroded and other potential infringers draw their own conclusions.

This is how that played out differently for one of our clients.

The business

A UK-based consumer products company with turnover of approximately £3 million. The business had developed a distinctive product supported by registered design rights and trade marks and was gaining traction through online and retail channels.

The trigger

The company identified a competitor selling a product with a clear overlap in both design and branding. Legal advice confirmed there was a reasonable basis for taking action. The concern was not just lost sales but longer-term dilution of the brand and, if left unchallenged, an open invitation to others.

The estimated cost of pursuing the matter was significant, particularly if defended. Without insurance the most likely outcome was inaction, or at best a letter before action with limited follow-through.

How insurance changed the position

The business had an IP insurance policy in place with enforcement cover. Legal advice confirming reasonable prospects of success was obtained as required, a budget was agreed with insurers and specialist solicitors were instructed to pursue the claim.

This allowed the business to act from a position of strength rather than sending a letter it could not back up. The other side knew from the outset that the claimant had the financial backing to see the matter through.

The outcome

The matter was resolved following formal engagement with the infringing party without the need for full proceedings.

The resolution protected the brand, reinforced market position and sent a clear signal to other potential infringers. None of that would have happened without the means to pursue it.

The broader point

IP only has value if it can be enforced. A registered right that cannot be backed up is worth considerably less than the registration suggests, and a well-funded infringer who calculates that the rights holder cannot afford to fight is making a rational commercial decision.

Insurance changes that calculation. Not just for the specific dispute, but for how the business is perceived by anyone who might consider copying it in future.

For many SMEs, the real risk is not losing a case. It is never bringing one.

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This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

Most businesses think of IP risk as something external. A competitor copies your product. Someone infringes your trade mark. A claim arrives out of nowhere.

In reality, some of the most significant IP risks are ones you have already agreed to. They are sitting in contracts you signed months or years ago, in clauses that felt like standard wording at the time.

What an IP indemnity actually means

Licensing agreements, collaboration deals, distribution arrangements and development contracts routinely contain IP warranties and indemnities. In plain terms, an IP indemnity is a promise. If a third party alleges that a product or service infringes their intellectual property, one party has agreed to cover the other’s losses. That can include legal costs, damages and settlement payments.

When the contract is being negotiated, the focus is usually on getting the deal done. The indemnity clause is treated as boilerplate. It rarely is.

Why the exposure is often larger than it appears

The problem with IP indemnities is that the exposure is frequently disproportionate to the size of the deal. A small business licensing its technology to a large distributor may find itself contractually responsible for indemnifying that distributor’s losses if an infringement claim arises. The larger the counterparty, the larger the potential exposure.

There is also a control problem that is less often considered. In some agreements, the party giving the indemnity loses control over the defence of the claim. Strategy, choice of legal advisers and settlement decisions can all pass to the counterparty. That loss of control increases both cost and risk, and it can mean a claim is settled on terms that damage your business even if the underlying allegation was weak.

When does the risk surface?

Usually at the worst possible moment. When a product is launched or scaled. When a new market is entered. When a third party asserts rights that nobody anticipated. By that point the contract has already been signed and the exposure is already there.

The question is not whether the contract should have been drafted differently. It is how the business manages the risk that is already in place.

What IP insurance covers in this context

IP insurance policies can respond to liabilities arising from contractual indemnities as well as direct infringement claims. The exact scope depends on the policy, but cover for indemnity exposure is an important and underappreciated element of what these policies can provide.

This is not a substitute for careful drafting. A well-negotiated agreement should limit the scope of any indemnity, cap the liability and preserve the indemnifying party’s control over the defence. But where risk cannot be negotiated away entirely, insurance provides a backstop.

For businesses that regularly enter licensing, distribution or collaboration agreements, the practical question is whether the indemnity exposure in existing and future contracts has been properly assessed and whether insurance is in place to respond to it.

As I often told clients when I was practising as an IP litigator, the time to think about how a contract will perform under pressure is before you sign it, not after the claim arrives.

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This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

Hiring a senior person from a direct competitor is often a sign that a business is gaining traction. It can also trigger a dispute that has nothing to do with whether anyone has done anything wrong.

This is how that played out for one of our clients.

The business

A UK-based software company with turnover of approximately £6 million, scaling quickly. The business had recently hired a senior employee from a direct competitor to support product development and commercial growth. The hire was seen internally as a significant step forward.

The trigger

Within a few months, the former employer issued a letter before action alleging that the employee had brought confidential information and trade secrets into the new business and that these had been used in developing a competing product. The claim included threats of injunctive relief, damages and orders relating to the use of specific technology.

The business believed it had acted entirely appropriately. The new employee had been careful. Internal processes were in place. But none of that removed the need to respond.

The exposure

The immediate risks were threefold. An injunction could halt product development at a critical moment. The cost of defending the allegations was substantial. And the existence of a live dispute created reputational exposure with customers and investors at exactly the wrong time.

Without insurance, the likely response would have been to limit the new employee’s role, pause aspects of development and look for an early settlement to contain costs. Not because the claim was strong, but because fighting it was too expensive to contemplate.

How insurance changed the position

The business had an IP insurance policy in place covering defence of trade secrets and confidential information claims, including legal costs and access to specialist advisers.

The matter was notified promptly. Specialist solicitors were appointed, a clear evidential position was established documenting the internal processes and safeguards that had been followed, and the defence was progressed without financial constraint.

This allowed the business to respond firmly rather than reactively. The other side knew immediately that cost pressure would not force a quick settlement.

The outcome

The matter was resolved without the need for a full court process.

The business continued operating without significant disruption, protected its development roadmap and avoided making commercial concessions driven purely by the cost of defending itself.

The broader point

Trade secrets claims following a senior hire are rarely straightforward questions of right and wrong. They are frequently about perception, timing and the overlap between what someone knew at their old employer and what the new employer is doing. A well-resourced former employer can use the cost of litigation as leverage regardless of the underlying merits.

The ability to respond quickly and robustly, without being constrained by what the defence costs, changes that dynamic entirely.

If your business is hiring from competitors or scaling a technical team, understanding how trade secrets risk can arise and how insurance responds to it is worth doing before a claim arrives rather than after.

Find out more about IP insurance Get a free indicative quote

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

For most SMEs, the real challenge with an IP dispute is not the legal question. It is the financial one. Whether the claim is strong or weak, the cost of dealing with it properly can be prohibitive. This is how that played out for one of our clients.

The business

A UK-based technology company with turnover of approximately £4 million. The business had developed a proprietary product supported by a small but important patent portfolio and was growing strongly, with expansion into overseas markets underway. As part of that expansion it had entered into a number of licensing and distribution agreements, some of which contained IP indemnity clauses.

The trigger

Shortly after entering a new market, the company received a letter of claim from a competitor alleging patent infringement.

The claim was not obviously strong but it was credible enough to require a detailed legal response. At the same time, one of the company’s commercial partners pointed to an IP indemnity in their agreement and indicated they expected to be protected if the claim progressed.

Two problems had arrived simultaneously.

The exposure

Initial legal advice indicated that defending the claim through to trial could cost several hundred thousand pounds. Even a successful defence would still need to be funded.

The contractual indemnity added a second layer of financial exposure. The business was facing a significant liability to its commercial partner on top of its own legal costs, at exactly the point when management bandwidth and capital were committed to growth.

Without insurance, the options were unattractive. Settle early regardless of the merits, divert capital from growth to fund the defence, or attempt to negotiate from a position of financial weakness.

How insurance changed the position

The company had taken out an IP insurance policy before beginning its international expansion. The policy covered defence costs for infringement allegations and certain contractual liabilities including IP indemnities.

The matter was notified to insurers at an early stage. Specialist legal advisers were appointed, a defence strategy was developed and approved, and legal costs were met under the policy. The indemnity position was managed alongside the defence, avoiding a separate financial exposure to the commercial partner.

The business was able to respond robustly to the claim without immediate financial pressure and without diverting capital from its growth plans.

The outcome

The claim was resolved without proceeding to full trial.

The legal outcome matters less than the commercial one. With insurance in place the company defended on the merits, maintained its commercial relationships and kept its growth trajectory intact. Without it, the almost certain outcome would have been an early settlement on terms driven by financial necessity rather than legal merit.

The broader point

IP disputes are not just legal events. They are financial and strategic ones. For an SME at a critical stage of growth, the ability to respond properly can matter more than the underlying strength of the claim.

If your business is expanding into new markets or entering agreements that include IP indemnities, it is worth understanding how those risks might play out in practice before a claim arrives rather than after.

Find out more about patent insurance Get a free indicative quote

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

When investors look at an IP-led business, they are not simply asking whether patents and trade marks exist. They are asking whether those rights are owned cleanly, whether they are defensible, and whether the business can afford to protect them if challenged.

That last question is increasingly common in due diligence, and it is one that many founders are not prepared for.

IP is only as valuable as the ability to enforce it

For early stage and growth businesses, IP often represents the majority of commercial value. The technology, the brand, the proprietary process, the customer data. These are the assets investors are backing.

But a patent that cannot be enforced is worth considerably less than its registration suggests. And a business that cannot fund a defence against an infringement allegation is carrying a risk that does not appear on any balance sheet.

Investors understand this. The question is whether founders do.

What investors actually look for

During IP due diligence, the questions that matter most tend to fall into four areas.

The first is ownership. Does the company actually own the IP it says it does? This is less straightforward than it sounds. IP created by founders before incorporation, work done by contractors without proper assignment agreements, or rights that were never formally transferred from a parent company can all create chain of title problems. These are among the most common issues that surface during investment due diligence and they can delay or derail transactions entirely.

The second is freedom to operate. Could the business be inadvertently infringing third party rights? A product that works and sells well can still carry a significant litigation risk if it operates in a crowded IP landscape. Investors want to know this has been properly assessed, not assumed away.

The third is existing exposure. Are there current or historic disputes, cease and desist letters, or opposition proceedings that have not been resolved? These need to be disclosed and understood. A dispute that was settled informally without proper legal advice can leave residual risk.

The fourth is enforcement strategy. If a competitor copies the product, what does the business do? This is where the conversation about funding arises. Investors who are putting significant capital into a business want to know that the IP underpinning their investment can be defended. A founder who has no credible answer to this question is raising a red flag.

The insurance question in due diligence

IP insurance is increasingly being raised in investment discussions, particularly for businesses in the life sciences, deep tech and consumer brand sectors where IP is central to value.

For some investors, the existence of an IP insurance policy is a positive signal. It demonstrates that the founders have thought seriously about IP risk, have taken steps to manage it, and will not be derailed by the financial shock of a dispute at a critical point in the company’s development.

For investors backing university spinouts or early stage technology companies, the comfort this provides is genuine. A business that can demonstrate it has both strong IP and the means to protect it is a materially better investment than one that has only the former.

What this means in practice

If your business is preparing for investment or has recently raised and is now scaling, there are two things worth thinking about.

The first is whether your IP ownership is clean. Founder agreements, employment contracts, contractor assignments and licensing arrangements all need to be reviewed before investors do it for you. Problems are much easier to fix before due diligence than during it.

The second is how you would fund a dispute if one arose. If the honest answer is that you would not be able to without significant disruption to the business, that is a risk that IP insurance is designed to address. The cost of a policy is modest relative to the investment being protected. And having it in place before a dispute arises rather than after is, as always, the point.

Find out more about IP insurance for technology businesses Find out more about IP insurance for university spinouts Get a free indicative quote

This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

The honest answer is yes. For most SMEs that own registered IP and rely on it commercially, IP insurance is worth it. Not because disputes are inevitable, but because the consequences of being unprepared for one are disproportionate to the cost of the cover.

That is the short answer. Here is the longer one.

What you are actually paying for

IP insurance covers the legal costs of enforcing your IP rights against infringers and defending allegations that you have infringed a third party’s rights. For an SME, policies typically start from around £1,200 per year for £125,000 of cover, rising to around £4,500 per year for £1 million of cover.

Set against the cost of an IP dispute, those figures look very different. A contested trade mark case in the Intellectual Property Enterprise Court can cost £100,000 to £200,000 per side. A High Court patent case routinely exceeds £500,000. Even a relatively contained dispute, letters before action, counsel’s opinion, early stage negotiations, can run to tens of thousands of pounds before proceedings are issued.

For a business paying £1,200 a year, a single dispute that is funded by the insurer rather than absorbed by the business justifies years of premiums in one claim.

The question most businesses ask the wrong way

Most businesses frame the question as: “What are the chances of us having a dispute?”

The more useful question is: “If a dispute arises, can we afford to deal with it properly?”

For the majority of SMEs the answer to the second question is no, not without significant disruption to cash flow, management bandwidth and growth plans. IP insurance changes that answer without requiring the business to reserve capital it does not have.

When it is clearly worth it

IP insurance is most valuable where the business owns registered patents or trade marks that underpin its competitive advantage, where innovation is central to the business model, where the company is growing and becoming more visible to potential infringers or larger competitors, and where investors, lenders or licensees have an interest in knowing the IP is protected.

At any of these stages, the exposure is greatest and the cost of being unprepared is highest.

When it is less clear cut

If your business has no registered IP, limited exposure to competitors and sufficient reserves to fund a dispute from operating cash flow, the case for insurance is weaker. But that profile describes very few of the businesses that come to us. Most IP-rich SMEs are growing, cash constrained and entirely dependent on their IP for competitive advantage.

The point that is most often overlooked

IP insurance does not just pay for lawyers when a dispute arises. It changes the dynamic of the dispute itself.

Competitors and potential infringers think differently about copying IP that is insured. Letting the other side know early in a dispute that your legal costs are covered by an insurer changes the negotiating dynamic considerably. In my experience it encourages earlier settlement and prevents the kind of war of attrition that better-funded opponents sometimes use deliberately.

That deterrent effect and the settlement dynamic it creates are not reflected in any premium calculation but they are real and they have value.

The bottom line

IP insurance is not for every business. If you have no registered IP and no meaningful exposure to disputes it is probably not a priority.

But for any SME that has invested in building and protecting intellectual property, the question is not really whether insurance is worth it. It is whether you can afford to be without it when you need it most.

The answer to that question, in almost every case I have seen in 25 years, is no.

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This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

When businesses ask me about funding an IP dispute, the conversation usually covers two options IP insurance and litigation funding. They are often mentioned in the same breath, as though they are interchangeable. They are not. Understanding the difference matters, because choosing the wrong one, or not having either in place, can leave a business seriously exposed.

What is before-the-event IP insurance?

Before-the-event IP insurance is exactly what it sounds like — cover arranged before any dispute arises. You pay an annual premium and in return the insurer covers the legal costs of enforcing your IP rights against infringers and defending allegations that you have infringed a third party’s rights, subject to a merits assessment.

The key word is before. The policy needs to be in place before the dispute arises. Once a claim is on the table it is generally too late to obtain cover for that specific matter. This is the single most important thing businesses need to understand about IP insurance,  it is a planning tool, not a rescue tool.

For most SMEs with patents, trade marks or other registered rights, before-the-event insurance is the most practical and cost-effective way to ensure they can act when it matters.

What is litigation funding?

Litigation funding is a completely different arrangement. A third-party funder typically a specialist investment fund,  agrees to finance a legal claim in return for a share of any damages or settlement recovered. The funder is, in effect, investing in the outcome of the case.

Litigation funding is almost always arranged after a dispute has arisen, and it is almost exclusively focused on enforcement claims, situations where there are significant damages to recover. The funder needs to see a return on their investment, which means the potential award needs to be substantial enough to justify the risk.

The critical differences

The timing difference is the most obvious but not the most important. The more fundamental distinction is who the arrangement is designed to serve.

Before-the-event insurance is designed to serve the insured business. It covers both enforcement and defence, it does not take a share of any damages recovered, and it gives the business control over how the case is run subject to normal policy terms. The insurer’s interest is in resolving the dispute efficiently, not in maximising the financial outcome.

Litigation funding is designed to generate a return for the funder. That is not a criticism it is simply what it is. Funders typically take between 20% and 40% of any recovery, and they will often have views on how the case should be conducted to maximise that return. Their interests and the client’s interests are broadly aligned but not identical.

Why litigation funding is not the answer for most SMEs

Litigation funders are highly selective. They fund cases with strong merits and, crucially,  substantial potential damages. In practice that usually means disputes where the recoverable damages are at least several million pounds. For the vast majority of SME patent and trade mark disputes the figures simply do not justify the investment from a funder’s perspective.

This is not a niche observation  it is the commercial reality of the litigation funding market. I have seen businesses assume that litigation funding is an option available to them, discover it is not, and find themselves with no viable route to enforce rights they have spent years building.

The case for before-the-event insurance

Before-the-event insurance is available to businesses of all sizes, for disputes of all values, covering both enforcement and defence. Premiums for SMEs typically start from around £1,200 per year depending on the level of cover. There is no share of damages, no funder influence over the conduct of the case, and no need to wait until a dispute has arisen to put cover in place.

It is also worth noting that the two options are not mutually exclusive. Some businesses use before-the-event insurance for defence cover and explore litigation funding for very high value enforcement claims. But for most SMEs the practical starting point is insurance and the most important step is getting it in place before a claim arises rather than after.

The question I was asked to present on at the CITMA Spring Conference in 2023 was precisely this why before-the-event insurance is almost always preferable to after-the-event insurance and litigation funding for businesses of this size. The answer comes down to accessibility, breadth of cover, cost and timing. On all four measures, before-the-event insurance wins for the overwhelming majority of SMEs.

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This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.

The honest answer is: for most SMEs, without financial backing, no.

That is a difficult thing to say when you have spent years developing a technology, paid tens of thousands in patent attorney fees to protect it, and watched a competitor launch a product that looks remarkably similar to yours. But it is the reality of the UK patent system as it currently operates, and understanding it is the first step to doing something about it.

What patent enforcement actually costs

A patent gives you an exclusive right. It does not give you a free fight.

Enforcing a patent in the UK means taking legal action — instructing specialist solicitors, obtaining expert technical evidence, and in most cases going through a process that can take two or more years before a judgment is reached.

The Intellectual Property Enterprise Court was created specifically to give SMEs a more accessible route to IP litigation, with a cap on recoverable costs of £60,000 per side. Even within those limits a realistic budget is £30,000 to £50,000. A contested High Court patent case — the route required for larger or more technically complex disputes — routinely costs £500,000 or more per side, with no cap on what you might be ordered to pay the other side if you lose.

For most SMEs, those figures represent months of revenue, not a contingency reserve.

The enforcement gap in practice

In 15 years as an IP litigator before founding Safeguard IP, I saw the enforcement gap play out repeatedly. A business with a genuine, valid patent that was clearly being infringed. A competitor — often better funded — copying the technology. And a founder who had done everything right: filed early, maintained the patent, taken legal advice. But who simply could not afford to enforce it.

The result was almost always the same. The infringement continued. Market share was eroded. The patent — in commercial terms — became worthless.

This is not a rare edge case. It is the common experience of innovating SMEs in the UK. The IPO itself has acknowledged that fear of enforcement costs is one of the primary reasons UK businesses patent less than their international peers.

Why this matters beyond the individual dispute

The consequences extend beyond any single company. When SMEs cannot enforce their patents, the incentive to innovate is weakened. Why spend years developing a proprietary technology and thousands protecting it if a larger, better-funded competitor can copy it with impunity?

This is the slow erosion of the UK’s competitive edge in technology and innovation — not through any single dramatic event, but through hundreds of disputes that never happen because the cost of fighting them is prohibitive.

What are the options?

There are broadly three approaches available to an SME facing infringement.

The first is self-funding — drawing on reserves, investor capital or borrowing to fund a claim. This is the most direct route but places enormous strain on resources and carries real risk. If you lose, or if the other side runs up costs that exceed your estimate, the financial damage can be severe.

The second is third party litigation funding, where an external funder finances the claim in return for a share of any damages recovered. This is increasingly available in IP cases but typically only where the potential damages are substantial — usually several million pounds. For most SME patent disputes it is not a realistic option.

The third is before-the-event IP insurance, taken out before any dispute arises. This is where I believe the balance of the argument lies.

Why insurance is the most practical answer for most SMEs

Patent insurance covers the legal costs of enforcing your patent rights against infringers and defending allegations that you have infringed a third party’s rights. The insurer funds the action — legal fees, expert evidence, court costs — subject to a merits assessment from your solicitor confirming the claim has reasonable prospects.

For a business paying between £1,200 and £4,500 per year depending on the level of cover, that is a significant transfer of financial risk. It means that when infringement occurs — and for IP-rich SMEs it is a question of when, not if — the decision about whether to act is made on the merits of the case, not on whether the business can afford the fight.

It also changes the dynamic with potential infringers. A competitor considering copying your technology will think differently if they know the patent is insured. The existence of an insurance policy — particularly if it is mentioned early in correspondence — signals that enforcement is not contingent on your cash reserves.

The bottom line

Owning a patent and being able to use it are two different things. For most SMEs the gap between them is financial. Insurance does not close that gap entirely, but it makes it manageable — and it puts smaller businesses on a more level footing with better-funded competitors.

If you have invested in developing and protecting your technology, it is worth thinking about whether you have also protected your ability to defend it.

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This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.