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Insurance unicorn Marshmallow faces further legal battle over IP ‘misuse’

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One of Britain’s fastest-growing fintech unicorns faces the threat of renewed legal action over allegations that it stole and misused intellectual property owned by a former commercial partner.

Sky News understands that Marshmallow, the motor insurer that achieved a $1bn-plus valuation in a funding round last year, is likely to be hit by further litigation from Mulsanne Insurance after the delivery of a judgement in a months-long dispute this week.

Insiders said Mulsanne, which is owned by Abacai, an insurance investment group, was expected to lodge additional claims in the coming weeks.

The trial contained allegations surrounding the theft of trade secrets and breaches of contract, with the judge ruling that elements of Mulsanne’s confidential information had been misused by Marshmallow.

The judge also rejected many of the claims made by Mulsanne as part of its case.

Marshmallow was founded in 2017
Image:
The Marshmallow app

Marshmallow partnered with Mulsanne before the launch of its own insurer in January 2021.

Mulsanne had been seeking as much as £40m in damages, though the question of costs and potential damages is now expected to be settled at a later date.

Alexander Kent-Braham, one of the twins who founded Marshmallow, said he expected that a resolution of the costs issue would result in it being paid money by Mulsanne because the size of its legal bills would be outweighed by any damages it was forced to pay.

He accused Mulsanne of attempting to damage Marshmallow’s reputation and inhibit its growth, saying it had pursued its legal claim after seeing an offer to buy a stake in his company rejected.

Those claims were dismissed by people close to Mulsanne, which said: “We welcome today’s judgment and will now move forward to establishing appropriate financial recompense for the damages we have suffered.”

Mulsanne is expected to request that the court to order a full investigation of the extent and impact of Marshmallow’s misuse of confidential information.

Sources close to Marshmallow said that most of Mulsanne’s claims had been rejected, though they acknowledged the judge’s decision “regarding the very insignificant number of ‘incidental, and almost accidental breaches’ of confidence” contained in Friday’s ruling.

The case, and its potential fallout, highlight the financial value stored in insurance pricing models as the industry uses consumer in an increasingly sophisticated way to improve its efficiency.

It also underlines the arms race in the fast-growing insurtech arena, with companies now able to command multibillion-dollar valuations from a standing start within a few years.

A Marshmallow spokesperson said on Friday: “We are delighted that Mulsanne’s false allegations that Marshmallow had copied its underwriting model have failed in court and their claims for £40m have been shown to be ridiculous.

“We always knew their claims were completely unrealistic and designed to damage our reputation following their attempts to gain a share of or buy Marshmallow.”

The statement added that Mulsanne’s claims had “failed” – a characterisation rejected by people close to the claimant.

“All the claims made against us by Mulsanne were either so weak they were dropped before trial, have been rejected by the Court completely, or have been shown, we believe, to be of little or no consequence,” the statement continued.

“We were particularly pleased that the Judge recognised that we were conscientiously trying to avoid the use of any Mulsanne material.

“We look forward to recovering our costs and continuing our focus on the business and its growth following the successful completion of the necessary consequential hearings.”

Marshmallow secured a deal last year to add its name to the ranks of British-based fintech “unicorns” – companies worth more than $1bn.

Founded in 2015 by identical twins Oliver and Alexander Kent-Braham and David Goaté, the company targets customers who are typically underserved by the insurance market, including immigrants and expats.

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