£50,000 cap on claims against IP ABSs criticised

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By Legal Futures

14 September 2012

Compensation: unduly restrictive cap

A proposed £50,000 cap on compensation claims against alternative business structures (ABSs) licensed by the Intellectual Property Regulation Board (IPReg) is too restrictive, it has been argued.

The criticism was made by the Legal Services Consumer Panel (LSCP) in response to a consultation by IPReg – regulator of trade mark and patent attorneys – on its regulatory approach. The body is shortly expected to apply to the Legal Services Board (LSB) to become an ABS licensing authority.

The LSCP raised a number of concerns about IPReg’s proposed regime, covering such issues as financial protection, the definition of a lay client, compliance, fitness to own and whistleblowing. But it prefaced its remarks by saying that it “welcomes the thrust of the proposals”.

IPReg published a timeline in May, saying it would apply for a licence in October 2012 in the expectation of accepting ABS applications from the start of 2014, subject to LSB approval.

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The LSCP noted that IPReg plans to obtain an insurance policy in place of a compensation fund to cover dishonesty, and expressed satisfaction that it would be an adequate safeguard. But it was concerned that a £50,000 per claimant cap is “unduly restrictive” and that no explanation had been given on how it had been decided upon or what time limits would be applied.

In a general comment on the IPReg proposals and consumers, the LSCP said it hoped the full application would set out the “intended benefits for… lay clients, SMEs and small charities”. This was “necessary not only to assess the potential benefits for consumers, but also to help identify the risks and whether the proposed measures will mitigate these”.

Other concerns raised by the panel were a lack of detail on proposed consumer protections, “such as fitness to own arrangements and how compliance with the financial protection regime will be monitored”. It also argued that IPReg’s definition of a lay client should include small charities – described as those with an income of under £1m.

It disagreed with an IPReg proposal that persons currently authorised by IPReg should be “automatically passported” into the roles of head of legal practice and head of finance and administration. The roles require “specific expertise as well as integrity”, said the LSCP. It also argued that IPReg’s plan to defer the roles until at the earliest July 2015 created “a potentially lengthy accountability gap”.

The panel expressed concern over IPReg’s policy of publishing the names of both respondent and complainant in cases coming before its disciplinary board. “Whistleblowers may be discouraged from bringing misconduct complaints if complainant names are routinely disclosed,” it said.

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