by , Obren Jankovic, from Embroker, https://www.embroker.com/
The value of any business venture is increasingly tied to its ability to generate great ideas. There’s always going to be someone who can do something in a way that’s faster and cheaper than the way you do it. However, what separates the truly successful businesses and industry leaders is their ability to generate lasting ideas, which is why the world is rapidly shifting its focus from tangible to intangible assets and investing more and more in the latter.
Getting the full benefit out of your ideas and shielding your business from the potential risks your intellectual property is exposed to can be a somewhat confusing space to navigate. Whether your patent is being infringed on or you’re being accused of abusing someone else’s IP, it’s essential to have a good risk-management system in place to protect you and your business from such threats.
Let’s talk a little bit about the basics of intellectual property management in business and delve into some of the risks that you should be protected against with the help of a quality insurance policy.
What is intellectual property (IP)?
Intellectual property (IP) refers to any product of your imagination and creativity, be it a song, an invention, a novel, or a symbol. An IP holder will, of course, want to receive the benefits of their idea but also see it protected against anyone trying to claim it as theirs and ensure that any financial gain arising from it should belong to them. That is where copyright, patents, and trademarks come into play.
Different Types of IP Risks
Your biggest worry should be safeguarding what you have created from any potential violations, which is why it’s imperative to pay close attention to the many risk factors concerning IP, including:
Hackers and counterfeiters: Your product will not be yours in a matter of seconds, duplicates will flood the market, and all your hard work will amount to nothing.
Managing agreements with 3rd parties: Primarily IP offices, patent assertion entities, government departments, and the like. You need to be wary of which fees are being paid, and when, how they are calculated, various interpretations of what Licensed Products are, and so on.
Collaboration agreements: Your partner suddenly decides to start his or her own business and brings your trade secrets to the new business. Or you keep the secrets, do since it was your idea in the first place, but you aren’t sure of who owns rights to what.
Open-source software risks: If you own the copyright for open-source software, you can share it with anyone, which has its fair share of advantages. Allowing others to contribute and develop their ideas with the software can be a major benefit. However, the number of infringement issues is also high since you won’t have a lot of control over the software. Additionally, coupling proprietary software with open-source software can lead to it being treated as open-source as well.
Risks to the brand: If your brand is a part of the IP, you’ll have to go above and beyond to protect your image. Good PR and careful exposure are keys to not jeopardizing your brand.
Availability: You want the public to see your IP, share it, and use it as much as possible. It’s also important to weigh the benefits of making it as accessible as possible with the risks of your rights being breached.
Rising Costs of IP Litigation
Any idea that you believe has the potential for profit needs to be secure and protected. But what happens if someone disputes your right to that idea? They could potentially take you to court, and that where you need to start learning about IP litigation. The complex intricacies surrounding IP litigation can be a real headache and the cost of such litigation is continuously on the rise.
Here’s an example of a complicated IP claim that you could potentially face: The development of new technologies had made it difficult to pinpoint which industries your patent belonged to when it was made and to which industries it belongs to now. What if someone starts using it for something it wasn’t intended for and refuses to acknowledge your rights to it? What can you do? What are your chances of winning the legal battle?
Litigation in this field has skyrocketed on a global level, both in the number of claims and the costs. This means that if you take an IP case to court, prepare for a long and costly legal battle.
The head-spinning costs are sometimes related to the time that has passed since the inception of the IP and the claim. The later the claim was filed, the greater the damages, as it has had more time to accumulate revenue. The complexity is reflected in the fact that infringements are often claimed on multiple grounds so that if one gets dismissed more can still remain. Add the rise of the global markets to that mix and you also have to think about jurisdictions and creating a unified strategy on all frontiers.
While being careful, properly registering IPs, and keeping meticulous records are all excellent ways to reduce risk, it’s also good to think about insuring yourself.
Investing in insurance will allow you to transfer most of the financial risks related to IP to the insurer and make sure that you can survive the potentially crippling legal and operational costs in the case of a long and drawn out copyright or patent-related lawsuit.
It’s important to note that most standard insurance policies don’t really address IP risks.
For instance, you’ll get certain protection from a preferred errors and omissions policy. These policies that will protect you from mistakes and oversights that you commit in your professional capacity that cause harm to your clients or third parties. They will usually cover media liability, which will protect you from claims related to copyright, trademark, logo, and similar infringements. However, patents are almost always excluded from these policies.
To be fully covered without any potential gaps and unforeseen exposures, you’ll need to secure a specialized IP policy. These policies are typically split into three distinct coverages: defense, abatement, and indemnity.
- Defense will cover legal fees, settlements, and penalties for claims brought by third parties against you infringing on their IP.
- Abatement will cover legal expenses that you’ll have when enforcing your patents.
- Indemnity will cover defense costs and settlements if you agree to assume a client’s liability if it is alleged that you’ve infringed on a patent.
These three covers can be combined or taken separately, depending on your needs.
Insuring your business from IP risks does have its own set of complexities. Because of the potentially astronomical costs of litigation, many policies will be fairly expensive. Additionally, because it covers such a complicated set of risks, underwriting an IP policy can take a very long time. This is why it’s a good idea to talk with an expert broker that’s familiar with your specific industry to assess your risks and exposures and ensure you aren’t overpaying for your coverage, IP and otherwise.