Intellectual Property Insurance

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.

The modern business which hopes to maintain its position in the market place, and its value, must protect its IP portfolio.

Registering any IP 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 trademarks; 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 authority.

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. As a result, it is often found that small companies cannot protect their IP sufficiently enough to grow.

There are 3 stages that parties are expected to go through to resolve an infringement claim. It is worth noting that claims are expensive and may leave a business out of pocket if unsuccessful.

The first of these stages is a negotiation stage. This is where the parties will come together with legal representatives and try to agree a deal around the IP. This may be one party purchasing a license from the other.

If negotiations stall it is expected that both parties then mediate and discuss exactly what it is they require. You can pay for a mediation session but again this will carry a cost. Mediation is legally binding, and contracts will be drawn up based on what is agreed.

The last step in the process is litigation this is when disputes haven’t been settled and need a legal ruling. But as you can imagine this is an extremely expensive solution. However, you can halt proceedings and return to one of the previous steps.

This process will also take place if you are accused of infringing on another businesses IP.

Intellectual property can be protected by; patents, trademarks, registered designs, copyright, and trade secrets. But overall these are just providing you with the rights to use your registered IP, they don’t protect you against what if somebody infringes on your IP. If somebody is infringing on your IP, then you have rights from holding the correct licences to launch a claim against that party.

However, launching a claim is not going to be cheap as its important to seek legal advice to understand the legitimacy of the claim. Also, it is important to note that claims may end up in a legal battle in court which is also costly. This is why it is important to initially try to negotiate a position whereby both parties are satisfied and are able to continue operating. This may include a legally binding contract that is drawn up by professionals, at a price of course.

This is where IP insurance comes in, small businesses without the resources to get legal advice will be trampled on by larger companies infringing there IP. IP insurance is a way of giving smaller companies the power to use there IP without the worry of larger businesses using it and not being able to defend themselves.

IP insurance is a form of legal expenses cover that can be purchased for both pursuit and defence costs. This means that should somebody infringe your IP you have resources to pursue a claim against that party. Likewise, should somebody claim that you are infringing there IP you have the resources to defend your position.

IP insurance is important in enabling smaller companies to capitalise on their IP with the security of being able to pursue a third party should they infringe upon it. IP is often the biggest asset to a small business and without it they would struggle to grow. IP powers small businesses and protecting it is instrumental to their success.
Remember that IP has a value to your business and it should not be given away freely.