Intellectual Property Insurance
More than ever before, intellectual property claims involving infringement of patent, copyright and trademark are being filed and litigated at a tremendous cost to both parties. While corporate giants like Kimberly Clark and Procter & Gamble have the resources to wage long-term patent litigation for a billion dollar market in the famous "diaper wars", the majority of companies that have developed and maintained valuable intellectual property, often lack the financial resources to either defend or enforce it. Yet, preservation of the intellectual property asset is the lifeblood of many of these companies.
Bryant Asset Protection, Inc. is a licensed broker in the states of CA, FL, GA, MA, MD, NJ, NY, PA, RI and VT. To receive a proposal, call us at 800-439-6051 today!
Over the past several years, a number of insurance companies have developed specific contracts to provide coverage for intellectual property exposures, with an emphasis in the area of patent infringement. To evaluate them, it is critical to understand that each is unique in concept and design and should be considered based on the client’s needs and objectives, along with the coverage afforded by the policy. There are three basic types of policies:
- Defense and Indemnity: This type of policy will provide defense coverage for the insured in the event of a patent infringement suit and, in the event of liability, will pay damages, including prejudgment interest.
- Defense Only: Referred to as "defense cost reimbursement insurance," this coverage is for defense only and does not pay any damages under the contract.
- Offensive Policy: Known as "infringement abatement insurance" or "enforcement" coverage, this policy is designed to reimburse the insured for legal expenses associated with pursuing an infringement party.
When a firm possesses intellectual property, it is, in many instances, the firm’s most valuable asset. Every act of infringement reduces its value if unabated, such acts can render IP worthless. Methods of dealing with infringement include the following
- Abandoning the IP rights
- Attempting to license fee infringer( i.e. allows the infringer to sell the product, in return for compensation) bought from a position of financial weakness
- Sue or be sued by the infringer, and expend cash reserves
Given the costs associated with each of these alternatives, there are a number of benefits of having Infringement Abatement Insurance.
Benefits of Infringement Abatement Insurance
Prevent loss of market share by timely and forceful response to infringement
- Prevent unexpected cash drain on operations, thereby protecting the company’s balance sheet
- Provide adequate litigation funds to increase the possibility of obtaining a favorable decision for the intellectual property holder
- Deter infringement by demonstrating the financial ability to protect corporate intellectual property
- Reduced pressure on the intellectual property holder to settle for unfavorable terms given mounting legal expenses
- Increase the value of the company to investors because its intellectual property is protected
- Strength in the “licensability” of the intellectual property
- Protect company. directors and officers against personal liability arising from alleged failure to enforce patents and pursue litigation where appropriate
Written on a "reimbursement" basis, the duty to enforce the patent remains with the insured. Reimbursement for litigation is authorized by the insurance carrier upon the insured completing a claim form and submitting a current letter from IP counsel stating that the patent is likely to be found valid based upon a search of the U.S. Patent and Trademark Office and that, more likely than not, a trier of fact would come to a finding that infringement occurred. The insured must pay the cost of providing the opinion letter and may use the counsel of his choice—provided, however, that he does not later choose that counsel as litigation counsel.
Underwriting for IP Insurance takes into consideration the profitability of the patented item, the ease of entry into the marketplace and the initial capital investment required. Other key factors that underwriters consider are 1) knowledge of or suspicion that Infringements are occurring 2) activities taken to abate such infringements 3) requests from others that they receive a license for the product 4) any current disputes from licensees, 5) any existing licenses issued to others and,6) notification received from other firms that he insured’s products are infringing on their products .