The 6 must-have intellectual property covers, and when to use them

Not every business understands the intellectual property risks they face, and how insurance can help.

With millions and millions of IP rights in existence, any business activity creates a risk of stepping on third party IP rights. It’s a common misconception that infringement has to be wilful or deliberate but that’s not the case in most situations. In fact, wilful acts would not be covered by the insurance.

Here are 6 key areas of intellectual property insurance cover, and situations that could make insurance vital.

1. Claims against the insured business

Another business, or even an individual, can claim that the insured’s activities - such as selling, licensing, manufacturing or importing - infringes on their rights.
This risk exists regardless of the insured’s intellectual property rights.

Even if a business has elements of cover from another policy, it is important to identify any gaps in cover and assess the relevance to the insured.

Our IP policy can be tailored to meet the needs outside of existing policies, such as Pen’s Technology Professional Indemnity policy.

2. Claims against the insured’s customers and licensees

If a customer or licensee is using the insured’s technology or products, they are also at risk of someone making an allegation against them. The insured business could have an obligation under the contract to defend them.

As well as the financial damage of the claim, the relationship with the customer or licensee can be at risk too. It’s important to be able to demonstrate strength if a company has an obligation to defend.

3. Contract disputes

Contract partners could allege the insured has breached their contract in relation to intellectual property. This could include defending allegations of straying outside the allowed license, not paying appropriate license fees, or misappropriating trade secrets.

4. Mergers and acquisitions

Intellectual property is an asset that can be quantified and transferred during a merger or acquisition.

If the insured is involved in buying or selling all or part of a business, including IP assets on a stand-alone basis, a warranty and indemnity (W&I) policy may provide intellectual property protection, if they choose to buy a policy. But W&I policies may also have restrictions, or it may not be an available or appropriate policy for the situation.

A stand-alone IP policy can provide comfort for the buyer if the W&I policy is not the right answer, or for exposures that fall outside of the W&I cover.  For example, forward-looking exposures arising out of the new uses of the intellectual property by the buyer.

This is one of the situations where a stand-alone IP insurance can be tailored to fit specific requirements.

5. Claims to intellectual property

Employees, or other parties, can claim entitlement to intellectual property. Third parties, such as competitors, may challenge the validity or attempt to revoke registered IP rights. 

Unsurprisingly these can lead to time consuming and sometimes costly disputes, even with contracts or employment contracts in place.

IP insurance can help – both for sourcing expert support and managing the costs.

6. Enforcing own intellectual property

Many businesses recognise the importance of intellectual property, and the competitive advantage it gives them. But that competitive advantage could be lost if they can’t enforce their intellectual property rights. 

Insurance can provide the legal costs of enforcing the rights, and insurers can provide guidance from the outset in respect of choosing a suitable strategy.

 

Contact our Intellectual Property team for quotes and more information at UK.IntellectualProperty.Insurance@penunderwriting.com