The Benefits of Intellectual Property Insurance

Intellectual property is important to many businesses across a variety of industries. As intellectual property litigation continues to rise, it’s not just the largest corporations at risk for an IP lawsuit; small and mid-sized companies are particularly vulnerable to attacks on their intellectual property.

What is Intellectual Property?

There are four types of intellectual property that your business may use:

  1. Copyright: Original works of authorship found in tangible mediums, such as artistic and literary works, computer programs, graphic works, motion pictures, and other audio-visual works.
  2. Trademarks and Service Marks: An identifying word(s), phrase, symbol or design, such as a brand name, slogan, or logo.
  3. Patents: Protect the making, selling, or using of a product or process.
  4. Trade Secrets: Formulas, patterns, methods, processes, techniques, or programs that offer an advantage over competitors -- often secret or not well-known.

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What does an Intellectual Property Threat Cost?

Two competing companies with similar intellectual property assets could take their products to market and let consumers decide which is superior. Or, as is often the case, they could fight it out in court with IP litigation.

Unfortunately, the company who emerges victorious from an IP battle is not always the company that deserves to win. In many cases, it is the company that can best survive a costly and drawn-out court battle who ends up the winner.

Which doesn’t bode well for a startup, small, or mid-sized business going up against larger, more established companies prepared for the high cost of an IP war. A larger, better-financed competitor may find it easier to vanquish your company in the courtroom over an IP dispute rather than let your product or process make it to market.

Even if you are successful in defending your intellectual property, a “win” may still feel like a loss.

According to a 2009 American Intellectual Property Law Association (AIPLA) economic survey, the average total litigation costs in patent infringement cases costs in excess of $3 million when the amount in dispute is between $1 million and $25 million.

Industries with the Highest Median Patent Litigation Damages

A 2014 patent litigation study revealed that median damages awarded were highest in the telecommunications industry. Other industries at risk for high-cost patent litigation costs include:

  • Telecommunications: $22.3M
  • Biotechnology/ Pharmaceutical: $19.8M
  • Medical Devices: $15.9M
  • Computer Hardware/ Electronics: $10.6M
  • Software: $6.9M
  • Business/ Consumer Services: $3.8M
  • Industrial/ Construction: $3.2M
  • Consumer Products: $2.2M

AIPLA also found that smaller cases with dispute amounts less than $1 million often faced total litigation costs which exceeded the very amount at stake.

Even if your company is on the “right”, it could be put out of business by the high cost of litigation. IP litigation could also damage your business in other ways, such as devaluing a company pre-IPO, shorting a company stock, or scaring away valuable startup investors.

Defending your intellectual property against a legitimate claim is one way your business could find itself in court, but there’s a more insidious threat that could risk your business assets, as well.

And your company doesn’t even need to hold a patent, copyright, or trademark in order to face it.

Patent Trolls: The Ugly Side of Patent Litigation

In 2002, a patent was granted for Method of Swinging on a Swing, and in 1995 one was granted for Method of Exercising a Cat. If you have ever swung on a swing or had your cat chase a beam of light from a laser pointer around the room, you could be violating someone’s patent.

These examples may sound a bit ridiculous, but the point is clear: patents aren’t always granted for novel and groundbreaking processes. A patent may be issued for a process that is already widely used, or a patent could be vague enough in its wording that many pre-existing technologies and processes could be argued to violate it.

Patent Trolls (officially known as Non-Practicing Entities) are companies that are in the business of litigation. Patent Trolls obtain patents that have expired or are being sold by companies in financial trouble, and then use those patents to launch lawsuits against “infringing” companies.

Could you imagine going to court to defend your business's’ practice of processing telephone orders, analyzing consumer behavior for marketing strategies, using third-party payment methods, or updating software?

These are all real examples of Patent Trolls at work.

As discussed above, patent litigation can cost millions to defend. And the litigation process can go on for years. Patent Trolls are happy to settle with your company, however, and take what you can give them in order to avoid the entire process.

The percentage of lawsuits filed by Patent Trolls is steadily increasing.

  • In 2009, NPEs filed 28% of all patent infringement lawsuits.
  • In 2013, the number of patent infringement lawsuits filed by trolls increased to 67%.

Court case or settlement, the trolls win either way. And your business is the one who pays for it.

Protecting Your Business from IP Threats

Business owners have a solution against the threat of costly IP litigation. Whether you are defending your patent against a competitor, fighting someone’s use of your proprietary process, or simply shielding your business from a ridiculous infringement threat brought on by a Patent Troll, you can protect your hard-earned assets.

Intellectual Property Insurance offers a safety net against patent litigation and other intellectual property risks for your business.

Intellectual Property Insurance offers defense coverage which generally covers the defense cost of an intellectual property infringement suit, and any resulting judgments or settlements.

Small companies with valuable intellectual assets may also benefit from this coverage, which can aid your company in pursuing infringers, as well.

Whether it’s a frivolous lawsuit or a legitimate fight against a competitor in the courtroom, only intellectual property insurance provides coverage for the long, arduous, and costly battle for your intellectual property assets. And that’s a benefit for companies of all sizes and across every industry.




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