A Small Business Owner's Guide To Intellectual Property Insurance

Is your business protected against intellectual property theft? Intellectual property can be more valuable than your business’ building and the assets inside. Intellectual Property (IP) insurance can help you defend your patents, trademarks, copyrights and trade secrets against intellectual property infringement.

What Is Intellectual Property (IP) Insurance?

An intellectual property (IP) insurance policy is designed to financially protect you in the event that you are victim of intellectual property infringement. In other words, if someone steals your protected idea or design. It also provides protection if you find yourself in the unfortunate position of being forced into litigation for allegedly copying someone else’s intellectual property.

What Does IP Insurance Cover?

So what is Intellectual Property exactly?

Intellectual Property:

Intangible rights protecting the products of human intelligence and creation, such as copyrightable works, patentedinventions, trademarks, and trade secrets. Although largely governed by federal law, state law also governs some aspects of intellectual property.

Intellectual Property Insurance may be purchased to protect you against intellectual property infringement related to trademarks, trade secrets, patents and copyrights that you or your business owns. In some instances, you may even be able to purchase IP insurance to protect your ideas.

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What Are the Types of IP Insurance Policies?

In general, insurance companies offer three types of IP insurance policies.

  1. Defense Insurance: designed to protect you against lawsuits from other companies that accuse you of allegedly using their intellectual property.
  2. Enforcement Insurance: designed to help you in the event that another company steals your intellectual property, and you need to file a lawsuit against them.
  3. Defense and Enforcement Insurance: designed to provide you with both types of coverage so that you are completely protected in the event that you are involved in an intellectual property lawsuit.

What Are the Benefits of IP Insurance?

The legal costs involved in defending or protecting yourself against intellectual property infringement can be extremely high. Fighting intellectual property lawsuits can range from $650,000 to more than $5 million. However, many cases end up costing much more.

For example, an intellectual property lawsuit between Polaroid and Kodak reached an estimated cost of $900 million. A lawsuit between Stac Electronics and Microsoft cost an estimated $120 million.

IP insurance helps mitigate these costs by providing financial assistance in the form of legal fees and judgment awards. This monetary help ensures that you can successfully represent yourself and your intellectual property in order to receive the best possible outcome when faced with or facing an intellectual property infringement case.

Are There Any Limitations to IP Insurance Coverage?

When you purchase IP insurance, it is important to create a specific list of the intellectual property that you need to have covered. Many insurance companies will only cover the patents, copyrights, trademarks, trade secrets and ideas that you have specifically listed in your policy. If your intellectual property changes, you may need to purchase an additional policy or have your current policy modified to reflect your current intellectual property holdings.

You may also be subject to certain limitations within the policy. In general, IP insurance carriers will set limitations for the legal fees and the amount that can be recovered from a case, and your IP insurance may only protect you in certain geographical areas.

Why Do I Need Intellectual Property Insurance?

It is estimated that 80 percent of a company’s value resides in its intellectual property holdings, which may include patents, trademarks, copyrights and trade secrets.

Without IP insurance, your company could be forced to finance its own legal proceedings any time it entered a lawsuit for intellectual property infringement. Most companies and individuals with intellectual property holdings do not have the ability to spend potentially millions of dollars on IP lawsuits.

Lack of monetary funds could result in less than desirable outcomes for your IP lawsuit. You could be forced to settle outside of the courtroom for an amount that is less than what your infringement lawsuit is worth. You could be forced to pay royalties to the other company, impacting your current and future profits, or you could be forced to abandon the rights to the intellectual property in question.

With Intellectual property insurance, your financial reserves are at a reduced risk of being depleted. Your IP insurance policy bears the brunt of the financial costs so that you can adequately defend your business against IP and keep your resources where the should be: growing your business.




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