Infringement Defense Cost Reimbursement provides coverage for infringement claims brought against the insured and is the most popular type of Intellectual Property Insurance. It protects from claims that the insured infringed on patents, copyrights, trademark and trade secrets of another business. Median litigation costs for an infringement lawsuit or trial typically range from $250,000 for copyright and $2 million for patent.
Abatement Enforcement Coverage reimburses litigation expenses to enforce the insured’s intellectual property rights. This coverage provides the financial resources to the intellectual property owners to pursue a claim against businesses that have infringed on their intellectual property. This can include patents, copyrights, trademarks and trade secrets.
Modern commercial General Liability policies specifically exclude coverage for most intellectual property risks. Most businesses have some degree of intellectual property exposure because of patents on machinery, equipment, software, processes or drugs; copyrights on books, music, songs, software, and websites; trademarks such as slogans, symbols, company names, and packaging; trade secrets such as formulas, processes, customer lists and strategies. The inability to protect your company’s intellectual property could result in its diminished value as an asset and diminished licensing or product revenues. The inability to defend against an intellectual property claim can result in expensive settlement costs, design-around costs, harm to customer relationships, and negative impact on the company share price.
By not having Intellectual Property Insurance you face the following risks:
Intellectual Property (patent, copyright, trademark) claims are filed five times more frequently than Directors & Officer (shareholder) claims. Yet, while most companies carry D&O insurance, very few will cover their intellectual property exposure.
The 2013 report of economic survey reports that the average patent infringement lawsuit costs$2.8 million when the amount in controversy is between $1 and $25 million. The median litigation expense for an infringement suit through trial can range from $250,000 for copyright to $2 million 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.
Importers should be twice as cautious of getting embroiled into an infringement claim. Since overseas manufactures do not share any of the risk of an infringement claim 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. 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.