Tag Archives: intellectual property abatement coverage

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.