Intellectual Property Insurance

Nearly all businesses will have some form of intellectual property, though they may not be aware that this is the case, nor be aware that they need to protect it. Whilst awareness levels are increasing, it is often when it is too late that a business will realise how much of its value was intrinsically linked to its Intellectual Property (“IP”).

What is my Intellectual Property?
Intellectual Property encompasses a number of different rights which businesses, or individuals, can possess. They have value legally, and can be bought, sold, or licensed to others.

The main IP rights are patents, trade marks, registered designs and copyright.

Other rights that can be included under the banner of Intellectual Property are database rights, confidential information (including trade secrets), and goodwill.

Some IP rights have to be registered, but some automatically become created under the law. You should not assume that just because you have not registered your Intellectual Property that it has no value to your business. This will usually be far from the case, particularly with regard to your brand identity, whether or not you have registered a trade mark.

Just how valuable is my Intellectual Property?
IP is often referred to as “hidden value”, and your balance sheet will not truly reflect how important it is to your business. Your IP portfolio consists of intangible assets and therefore you may not be able to place an exact value upon it; however, imagine how your business would fair if the brand you had so carefully built up, or the distinctive trade mark you had registered, were lost?

Studies have indicated that 40% of an average company’s real value is derived from its intellectual property, but the balance sheet is unlikely to reflect this fact. In some sectors, such as medical devices, technology, this can increase much further.

Why do I need to protect my IP, and if I have registered my IP isn’t already protected?
The modern business which hopes to maintain its position in the market place, and its value, must protect its IP portfolio.

Registering any IP which is capable of being registered is an essential starting point for IP risk management; however, this is just the beginning. The prudent business will then monitor the market place, and ensure that competitors are not copying their patents, designs, and trade marks; and making every effort to prevent over-use of its distinctive brand which will dilute its value, and to cause it to become generic.

If a competitor is infringing your IP rights through publication, or a process or product, then you are faced with the prospect of enforcing your rights through the courts. This can be entirely necessary, even if your IP rights are all registered rights. Your competitor will also be aware that many companies cannot afford to bring an IP action, as it is widely considered that IP litigation is the most expensive form of litigation someone can conduct.

How would you, as a business, propose to bring an IP action if a competitor is infringing your IP rights through their actions? The cost of an IP action in the High Court is generally in excess of £350,000. There are caps on costs and damages now in the Patents County Court, but your action may have to be heard in the High Court, or you may need to bring your action in an entirely different jurisdiction.

The cost of defending your IP through the courts is prohibitive, and very few companies have the available cash-flow to bring a High Court action, or to sue overseas.

What happens if we inadvertently infringe a competitor’s IP?
Some companies copy a competitor’s IP, or change small elements of the brand hoping to “ride on the shirt tails” of a more well-known brand. If you are on the receiving end of these types of activity, whether deliberate of inadvertent, you will have to look at bringing an infringement, or passing off, action. What, then, if you do this to a competitor? Whether you have done so deliberately, or not, you may be on the receiving end of an IP action yourself. The defence costs alone, particularly in the High Court, or in another jurisdiction, can be too high for many companies to carry. If a damages award is made against you, then such awards can be enough to destroy most SME organisations. Even the cap on damages in the Patents Count Court is £500,000. There would be no limit on damages in the High Court for an act of inadvertent infringement that has caused a loss to your competitor.

What intellectual property insurance solutions are available from ADF Insurance?
We are now in a position to offer a range of IP insurance solutions which can protect even the smallest new start-up. More comprehensive protection is available for SME clients with a varied IP portfolio, and sophisticated programmes can be arranged for larger companies.

Clients can choose from the following options:
1) “Opinion Only” Policy – this is the cheapest option, and is specifically designed for new start-up companies. Clients can insure up to two IP rights (e.g. a patent and their trade mark) and if they potentially infringed another party inadvertently, or if a competitor has potentially infringed thir IP through their actions, they may obtain a full IP legal opinion. The IP opinion then allows the client to make an informed decision as to what action to take.

2) IP Legal Expenses Cover (for both Pursuit and Defence) – This option provides a much more substantial solution, and will pay the legal costs of bringing an IP action against a competitor, or for a client to defend an IP action brought against them. Cover is available for jurisdictions throughout the world. Clients can use their own expert representation, or Underwriters’ panel representatives. Patent County Courts only cover can also be purchased, which will provide a cheaper option, whilst still affording a solution to protect your IP portfolio.

3) Comprehensive IP Package Solution (for both Pursuit and Defence costs, and Damages Awards) – This is a high-level protection option, which will provide very sophisticated IP risk transfer to the insurance market, and ensure that our clients can survive when an IP damages award is made against them, as well as enabling them to bring an IP action against a competitor.

How much does it cost, and is it worth it?

Premiums start from a few hundred pounds and increase accordingly dependant upon the jurisdictions covered, the limits of indemnity, the IP rights to be insured, the marketplace which the client operates in and the risk in general. Patent County Court (PCC) only cover will be more affordable, whilst still offering protection in this court.

Costs and awards can be extremely high compared to other forms of litigation; therefore it is essential to realistically consider the consequences of IP litigation, and whether your business could survive losing an IP action. Additionally, the high costs of bringing an action against a competitor mean that many businesses simply cannot afford to sue a competitor for infringement. IP insurance will “level the playing field” in todays aggressive environment.

For more information regarding Intellectual Property insurance please contact us.