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:
- Abandon your accused products.
- Try to obtain a license from the accuser from a position of weakness.
- 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.