When commenting on the trade mark case Dick Smith Investments Pty Ltd v Ramsey [2016] FCA 939, Mr Smith is supposed to have said: “[t]his is an example of the ridiculous cost of the law, we’ve spent $550,000 on this case so far, and Aussie Mite has spent something like $400,000.”

His criticism is fair. Intellectual property rights are costly to enforce.

In this article, Minter Ellison – Gold Coast Senior Associate Hayley Tarr considers a possible solution to this problem.

Where a trade mark owner sends a cease and desist letter and the infringer decides to adopt the stonewalling tactic, the trade mark owner has limited alternative recourse but to commence legal proceedings. Even with the new case management provisions laid down in the Federal Court Intellectual Property Practice Note earlier this year, such actions will be costly. The trade mark owner will be hard pressed to run an action for less than $100K. This leaves IP enforcement out of reach of most SMEs.

That is, a registration for an IP right may grant a monopoly in theory, but it is not much good in practice if the owner does not have the funds to take action to enforce that monopoly against infringers. This is an identifiable risk*. As lawyers,  it is our responsibility to recommend risk minimisation strategies. We should be telling our clients of the option to obtain insurance that will enable them to enforce their IP rights if need be.

Some clients may already be covered by their general policy, but they should at least be encouraged to check the scope of this policy and to consider taking out specific intellectual property insurance in the event that they are not covered.

Note that the policy needs to be selected carefully. Clients should be encouraged to read the fine print to ensure that lawyers’ fees are covered. Moreover, clients should be advised that, even with the best policies, the insurer will likely retain the final say as to whether the action will be covered such that the insurer can:

  • only fund actions which they deem have a good chance of success;
  • withdraw funding if, for example, the client doesn’t accept reasonable settlement offers; and
  • not fund unlimited legal expenses (the level of cover is determined by the policy).

The importance of such insurance has never been more evident. Accordingly to the 2016 Australian Intellectual Property Report, the number of Australian trade mark applications lodged in 2015 represented a 14% growth on the number lodged in 2014. With the register becoming more and more crowded, people are more and more likely to push the envelope by adopting and using an infringing mark.

* IP insurance doesn’t just cover your client in the event of third party infringement, but also in the event of third party allegations of passing off at common law or misleading and deceptive conduct under the ACL.