You may not have realized that insurance is available to protect your intellectual property. But what is intellectual property (IP) insurance: What does it cover, and who is it for?
Intellectual Property insurance provides your company with protection if someone accuses you of infringing on someone else’s intellectual property. It may also allow you to protect your own IP from improper usage.
Defining Intellectual Property
The term “intellectual property” acts as an umbrella descriptor for many different things. For example, trade secrets, slogans associated with your company, or the image you use to represent your company.
Generally, you have the right to patent, copyright, or trademark pieces of intellectual property. Creative endeavors, like books, paintings, music, and even photographs, represent a type of intellectual property that you can protect with copyright.
Types of Intellectual Property Policies
Intellectual Property insurance serves as a form of protection for companies and investors. Two primary kinds of IP insurance exist:
Defense Policies
Defense policies protect anyone who gets accused of infringing on someone else’s intellectual property. In many cases, companies include IP insurance as part of their risk management plan because it can cover monetary damages and legal fees associated with these accusations.
A defense policy may include indemnity insurance, thought it is not a requirement when considering IP insurance. Defense costs to handle IP violations often run into millions of dollars; it’s worth considering this type of insurance your company.
Pursuit, Enforcement, and Abatement Policies
Pursuit, abatement, and enforcement policies cover the expenses associated with suing someone for infringing on your intellectual property. Depending on the needs of your business, our team can support and craft a policy that ensure there are no gaps in your coverage – encompassing comprehensive protection.
A pursuit policy covers all of your legal expenses if you file a legal claim, like a patent infringement lawsuit. In addition, many people find that pursuit policies serve as an effective method to deter infringement by other companies who might otherwise consider your IP an easy target.
Why get IP insurance for your company?
This form of insurance coverage protects companies in today’s ever-changing business world. As a result, many companies decide to take out a policy to protect the following:
Market Share of Their Company
The competitive nature of the business world makes it very important to protect your market share. Competitors may try top move in on your share by imitating your company’s name, trademarked catchphrases, or even design. IP coverage takes the worry from these scenarios.
Against Lawsuits
Other companies could accuse you of an IP violation at any time. Many of these lawsuits are frivolous and end up getting dismissed. However, handling them on your own can still result in high legal expenses. Your insurance policy can cover these expenses, allowing you to defend yourself legally without stresing about the cost.
IP Insurance and Patent Trolls: What You Should Know
Have you heard of patent trolls? These companies file lawsuits with the aim of securing licensing fees. You may also hear these companies called patent assertion entities (PAEs).
In many cases, these companies sue smaller companies that have limited funds to handle a lawsuit. The lawsuit causes disruptions in the defendant’s operations, often preventing the company from operating correctly, producing products, or caring for customers.
Even when the defendant wins these claims, they often end up with high legal expenses that could drive them out of business. IP insurance protects you in these situations, providing you with the funds necessary to launch a defense.
Additional Benefits of Intellectual Property Insurance
An IP insurance policy provides your company with numerous additional benefits. Be sure to consider these benefits carefully when deciding whether to set up a plan for your business. These policies offer protection to:
- Executives
- Directors
- Officers
IP insurance also directly increases your company’s value and may reduce pressure to settle an IP lawsuit in the future.
What are the Possible Costs of an IP lawsuit?
The costs to handle IP litigation continue to rise around the country. We also see increased numbers of intellectual property lawsuits every year. Thousands of these cases move through the court system annually, often leading to millions of dollars in fees and penalties.
Some industries see more IP lawsuits than others. For example, around a quarter of all patents for pharmaceutical products end up involved in a lawsuit at some point. Technological patents also end up challenged frequently in court.
If your company successfully defends against an IP lawsuit, you may still end up facing high court fees. Generally, the court orders the other company to cover these fees. Still, they may hold you responsible for the charges for years, making it difficult to continue operating your business successfully.
The Average Cost of IP Lawsuits
The cost to handle an intellectual property lawsuit can vary significantly based on several factors. However, some of them cost millions of dollars. The expenses often come from fees to attorneys, as well as:
- Punitive enhancements
- Assessments of interest
- Royalties
You may also lose profits during the court case, increasing your overall losses. In some cases, the fees associated with an IP lawsuit can result in a company going bankrupt, even if the court later finds them not guilty of infringement.
IP Conflict & Insurance Alternatives
Some companies wonder about their options if they decide not to purchase IP insurance and then face a lawsuit for IP infringement. This situation could lead to several different outcomes, depending upon the company’s available funds.
In some cases, companies get forced to pay royalties or end up settling out of court. You might also end up in a licensing agreement with the company that filed the infringement complaint. Some companies have to abandon their IP rights because they do not have the funds to fight the claim.
You might also set aside capital to use in the event of IP infringement allegations. In addition, some companies count on a general liability insurance policy to provide them with protection from these accusations. Finally, you might even countersue the entity that filed a claim against you.
Comparing General Liability Insurance to IP Insurance
What is intellectual property insurance, and how does it compare to general liability insurance? IP insurance specifically offers protection in copyright, patent, or trademark infringement situations.
General liability insurance covers some specific aspects of trademark and copyright infringement. However, it usually only applies to infringement claims involving advertising content. It cannot protect your company from patent infringement.
Additionally, general liability policies will not sue another entity for infringing on your IP rights. Therefore, while general liability insurance is usually cheaper than IP insurance, it does not provide you with the same levels of protection.
The Problem with Media Liability Policies
Some businesses consider getting a media liability insurance policy instead of IP insurance. Media liability coverage provides protection for publishers and covers content posted on your website, making it more comprehensive than general liability insurance.
However, media liability insurance is still a standard policy. Therefore, it does not provide patent infringement protection.
Factors to Consider Before Getting IP Insurance
Are you ready to set up an IP insurance policy for your company? You may need to take a few steps before applying for the policy. Generally, insurance companies require you to perform an IP search or show proof that you filed for a:
- Service mark
- Patent
- Trademark
- Copyright
Taking these steps may allow you to qualify for this type of insurance policy. Not sure if you qualify? Connect with a JGS IP insurance team member by clicking the link below.
