A fintech that uses third-party in-licensed software found itself facing a breach of contract claim dealt by the technology company (TC) that provided the software. The dispute quickly escalated from trade secret misappropriation to also include patent infringement, and took eight months of negotiation to resolve. But thanks to the insurance policy in place, the fintech avoided what could have been a significant impact on both its business operations and financial stability.
Helping to drive the finance industry’s convergence with technology, this fintech is known for developing systems that enable banks to let customers manage their accounts while allowing investment into micro businesses with their spare change. It doesn’t handle payments directly, instead using third-party in-licensed technology plus its own proprietary technology. After winning several contracts across the UK, the US and France, the fintech needed to ensure everything went smoothly. But dark clouds loomed.
The TC who licensed the software began to accuse the fintech of breach of contract, alleging it’d used the software outside the bounds of the agreement—amounting to trade secret misappropriation of their source code. This began with back and forth emailing, the TC pushing for additional royalties until the amount equalled $840,000.
Fortunately, the fintech had the right cover in place. It’d purchased a $1 million limit of standalone intellectual property (IP) cover with CFC, and notified our in-house claims team as soon as the contract partner began alleging trade secret misappropriation. The claims team recommended a lawyer who specialised in breach of contract and IP law, however the insured decided to go with their own choice—something the CFC policy allows freely.
Escalation, via additional forms of IP, is common in IP disputes, typically as part of an intimidation strategy designed to make opposing parties settle. Here, the story is no different, with the TC going on to include patent infringement in the dispute. While the fintech’s combined policy excluded infringement of patents and held trade secret misappropriation to a severe sub-limit, this wasn’t an issue for the CFC IP policy which provides full cover for all types of IP including patents.
After eight months of negotiation the dispute was settled, resulting in $450,000 in legal fees and a $150,000 settlement which allowed the insured to use the TC’s software for the next five years.
All in all, the insured fintech managed to avoid paying the full cost of the dispute, which could have had a significant impact on business operations and endangered its short- and long-term future. More than that, CFC provided key advice and assistance in monitoring the activity of the appointed law firm, ensuring the fintech got full value for their limit of liability.
Find out everything you need to know about CFC’s comprehensive IP policy by speaking to our expert team.
