Category Archives: Intellectual Property

3D Printers Will Change The World As We Know It

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 After reading an article, “The Printed World”, in the February 12th issue of The Economist, I was taken back at the possibility of a new world of innovation where it will be just as cheap to produce single items as it is to make thousands of items and therefore, undermine the whole concept of economies of scale and how businesses bring products to the market.

3D printing or additive manufacturing, as it is also called, is a technology that will change society so profoundly it defies the imagination.  Think of a world where products being made no longer have go through the start-up steps or costs to be manufactured, where anyone with an imagination can bring a product to reality and manufacture 10 units to determine if there is a demand for the product. No molds or lathes required, just a computer and a 3D printer.  Inventors and start-ups will thrive, as never before seen in the history of man because making and trying new products will become less risky and expensive. 

For example, under today’s standards of manufacturing, to make a plastic part you need to create the mold.  To make a completed product several molds may need to be made before the product is ever completed and brought to market.  To offset the fixed costs required to make the molds, assemble and deliver the product to market, a product must be mass produced and sold by the thousands, thus creating the economies of scale.  With additive manufacturing or 3D printing, you pull up the blueprint on your computer screen, make the necessary changes to the shape and color and then press print.  A machine or 3D printer builds the product by progressively adding on material, one layer at a time.  No molds or factories are required. 

Today, most 3D printers are used primarily to build prototypes and then current manufacturing techniques such as molds and reduction machining are used to build the final products. Currently, only 20% of the output of 3D printers are used to build the final products.  However, by 2020 it is estimated final products produced by the 3D printers will grow to 50%.  In 50 years, it is possible that complete planes, trains and automobiles and anything else you can imagine will be made entirely from 3D printers.

The other great thing about 3D printing is it not just limited to consumer products. 3D printing has already progressed into the areas of human health.  In the future, it may be standard practice to print replacement parts for the human body from layers of human cells.  A company called Organovo apparently has already managed to make blood vessels and cardiac tissue via a printer that dispenses cells instead of ink. 

From an insurance point of view, there are going to be some monumental hurdles to be cleared.  How does a business protect it’s intellectual property rights, if anyone with a 3D printer can make an exact replica of their product almost immediately after it has hit the market?  Because products can be duplicated so quickly, will this cause businesses to push to get products to market quicker; therefore, forgoing valuable testing to make sure the products are safe for the consumers?  How will the patent offices keep up all the new products? And will a businesses want to submit their products to be patented because of the risk of notifying potential competitors to their new products?

Intellectual Property Insurance – The Most Underrated Insurance!

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Did you know that Intellectual Property (patent, copyright, trademark) claims are 5 times more frequent than Directors & Officer (shareholder) claims?  Yet, while most companies carry D&O insurance, very few companies will cover their intellectual property exposure.

Intellectual Property insurance reimburses the litigation expenses to enforce or defend against Intellectual Property infringement and protects against certain violations involving patent, trademark and copyright infringement.

The average patent infringement lawsuit cost $2.6MM, when the amount in controversy is between $1MM to $25MM.  The median litigation expense for an infringement suit through trial can range from $250,000 for copyright to $2,000,000 for patent.

With the economic downturn and companies’ operating revenues being less liquid or non-existent, a company’s ability to adequately defend itself in an Intellectual Property infringement lawsuit may be the key its survival.

By not having Intellectual Property Insurance you face the following risks:

  1. Abandon your accused products.
  2. Try to obtain a license from the accuser from a position of weakness.
  3. Defend yourself by using your cash reserves and available credit lines.

In my opinion, importers should be twice as cautious of getting embroiled into an infringement claim.   Since the overseas manufactures do not share in any of the risk of an infringement claims or expense, they are not as diligent or concerned about potential infringement claims.  I have seen countless instances and claims involving artwork on imported products and packaging.  For example, rug importers have to pay particularly close attention that their rug patterns are not similar or the same as their competitors and many of the foreign outsourcing manufactures have garnered bad reputations for using the same artwork on packaging for their different customers as a way to hold down development and production cost.

When Should You Buy Intellectual Property Abatement Insurance?

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On average, we get about three calls per month from inventors, patent holders and current product liability clients that are looking for insurance that would allow them to sue or protect their rights from those individuals or businesses that steal their patents or intellectual property. 

 Intellectual Property Abatement Insurance covers litigation expenses incurred in enforcing the insured’s intellectual property (IP) against infringers up to the policy limit (typically $100,000 to $3,000,000).

My advice for those looking to purchase Intellectual Property Abatement Insurance is always the same – only insure those patents that have the potential to make you very rich.   While intellectual abatement insurance does potentially provide you with financial resources that you otherwise would not have access too, it also requires that you pay a large part of the expenses to prosecute the offenders of your intellectual property rights.  Typically, the deductible is 2% or more and co-insurance is 20% or higher.  In other words, if your insurance carrier spent $100,000 going after a company that infringed on your intellectual property or patent in court, you are going to be responsible for slightly more than $20,000 of this expense.

From the insurance carrier’s perspective, they puposely want you to have some skin in the game and share a large portion of the expense because they want you to be thoughtful about choosing cases that are winnable and not seeing the insurance carrier as a deep pocket to sue every business that may have a similar patent or products. 

In summary, if your product has potential to earn millions of dollars of future revenues, Intellectual Property Abatement Insurance is a small price to pay to protect your interest.

Three Reasons Why Your Attorney May Discourage You From Purchasing Intellectual Property Abatement Insurance

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While many attorneys are looking out for the best interest of their clients and will recommend their client purchase Intellectual Property Abatement  coverage so their clients have the financial means to enforce their Intellectual Property rights or patents against infringers, it has been my experience many attorneys are quick to discourage their clients from purchasing this coverage. I believe there are three reasons why many attorneys will discourage their clients from purchasing Intellectual Property Abatement Insurance.

Intellectual Property Abatement Insurance covers litigation expenses incurred in enforcing the insured’s intellectual property (IP) against infringers up to the limits of the policy.

First, one of the conditions of the policy requires that before you can prosecute an infringer that stole your intellectual property or patent, you must submit to the insurance carrier a favorable letter from outside patent counsel (independent of the counsel you have chosen to litigate), at your cost, on matters of validity, infringement and legal impediments.  In other words, you must chose an unbiased attorney and present them with the facts of the case.  The unbiased attorney must provide a favorable opinion letter that your case is winnable based on all the facts.  

A second reason is when choosing an attorney to litigate against infringers your attorney 1)must be independent of the insured and 2) cannot have participated in the prosecuting or the securing of your Intellectual Property or Patent.

The third reason is, even if you current attorney passes the first two conditions or requirements, the insurance carrier requires that your attorney propose a reasonable budget for the work to be done to get you through a lawsuit.

In summary, the first two reasons above may exclude your attorney from being involved in the prosecution of infringers of your Intellectual Property; therefore, denying them an opportunity to make money. If you attorney passes the first two conditions, the third reason may limit what your attorney can charge.