Intellectual Property Insurance
Intellectual Property Insurance coverage is complex. Only a few companies offer it. Coverage can be provided for risks emanating from patents, copyrights, trade secrets, trademarks, trade dress and a few others.
Typically, coverage can be provided to defend you if you are sued. But there are other forms of coverage as well. Offensive coverage, also called abatement insurance or a pursuit policy, provides small and medium sized firms with the funds necessary to pursue those who infringe their intellectual property. First Party coverage, also called multi-peril insurance, is also available; it can cover losses stemming from the invalidation of your intellectual property in litigation.
Alta is an expert in this field. We use this expertise to do more than quote you “intellectual property insurance.” At Alta, we can help you quickly determine whether cheaper broader coverage can be obtained to serve your needs, or whether you really require a full blown Intellectual Property Insurance policy.
Whether your Intellectual Property Insurance coverage needs can be met with a standard E&O, Content and Media, Cyber Risk or General Liability policy, or whether you need a special Intellectual Property Insurance policy, Alta will get you competing quotes from multiple providers. Not everybody does this. Alta has access to multiple markets for both standard professional liability insurance policies, and for full-blown Intellectual Property Insurance policies.
Alta is a Patent Insurance and Intellectual Property Insurance Expert. As our client, we will explain the various ways to get coverage, guide you through the intensive underwriting process to get proposals from multiple companies, and then help you to negotiate the best coverage provisions and pricing. Get A Price Indication Here. Or, read on and learn more first.
Standard Policies Sometimes Providing Intellectual Property Coverage
As we indicated, Intellectual Property coverage can be obtained with a special Intellectual Property Insurance Policy. Or, under some circumstances, the desired coverage may be contained in other more standard forms of insurance. Standard policies that may provide some intellectual property coverage include:
- E&O Insurance
- Content and Media Liability Insurance
- Cyber Liability Insurance
- and even General Liability Insurance (GL) or a Business Owners Policy (BOP)
Typically, companies that are looking for insurance to defend them against claims of copyright or trademark infringement can obtain coverage via one of these more standard forms of insurance.
When a company seeks coverage for patent related claims, or they are looking for offensive or first party coverage, they can only obtain it via a special Intellectual Property Insurance Policy. Only Intellectual Property Insurance policies cover patents. And only Intellectual Property Insurance policies will provide Offensive (Abatement) coverage or First Party (Multi-Peril) coverage.
Patent and Intellectual Property Insurance policies are extremely specialized, and heavily underwritten. Patent Insurance is a form of Intellectual Property Insurance. If that is what you are interested in, you should go to our Patent Insurance page.
What Are Offensive and First Party Coverage?
Previously we mentioned these two forms of coverage as only being available on an Intellectual Property Insurance policy. Offensive coverage can reimburse you for legal expenditures made in pursuing those who infringe your intellectual property. First Party coverage protects the value locked up in a company’s intellectual property itself. An example of a first party exposure would be a company with a revenue stream tied to a patented product. The patent allows it to price the product at a significant margin. If the patent were to be invalidated, the company might lose considerable revenue as prices drop after new firms enter the market. A First Party Intellectual Property policy could be written to cover this exposure.
Other Forms Of Intellectual Property Insurance Are Easier To Obtain
Copyright and trademark defensive coverage can often be provided with General Liability, Media Liability, E&O or Cyber Liability Insurance. Prices are often cheaper and coverage is often better with these policies because they are intended for lower hazard customers.
Trade secret defensive coverage is difficult to find in standard markets, but Alta does have a special E&O insurance provider that offers it.
GL policies typically cover alleged trademark, copyright and similar IP infringement when it is associated with the advertising of a company’s own products. This may include product packaging. This coverage occurs in the advertising and personal injury section of the policy.
Frequently, when an insurance company writes GL insurance for companies in the media business, or those that are otherwise perceived as having a high level of exposure to media-related claims, it amends the policy to eliminate copyright and trademark infringement coverage, or eliminates the personal and advertising injury section entirely. Specialty companies offer media liability policies, or modified E&O or cyber-risk policies to customers who are subject to this exclusion in their GL policy.
It is presently difficult to obtain copyright and trademark infringement coverage for certain kinds of businesses. Insurers are hesitant to cover websites that allow user generated content involving music or videos. In order to be insurable, these websites generally must have appropriate safeguards in place, including the technological means to screen for obvious infringement, and adequate take-down procedures. Video game makers are also having a tough time getting IP coverage.
While the IP coverage afforded in GL, Media Liability, E&O, and Cyber-Risk policies may be superior in price and quality to stand-alone IP coverage, as we indicated, the coverage may not be available for some risks. And an Intellectual Property Insurance policy is the only way to cover patent risk, or offensive and first party exposures.
IP Insurance Application Process
If we do determine that Intellectual Property Insurance is the best choice for you, you should be aware that it is heavily underwritten. And the number of entities selling coverage is quite small.
The application process for IP Insurance is unique and consists of two phases. In the first phase, an abbreviated application is completed. Within about a week, the underwriters indicate whether they think the risk is likely to be insurable, and what the price range is likely to be. They also provide a quote for the underwriting fee associated with the second phase.
We proceed to the second phase if it you are still interested in procuring the coverage at the likely terms. In the second phase, you complete a very detailed application. After several weeks, a firm decision on price and availability of coverage is made. This often involves quite a bit of negotiation, and the exchange of further information. Many aspects of the coverage are negotiable, but may require additional underwriting information or higher premiums. Negotiation can be a very important part of the process for the client. In some instances, the underwriting fee must be paid before commencing the second phase of underwriting. In other instances, the fee need only be paid if a policy is purchased.
The economics of IP litigation sometimes favor large companies or trolls rather than the party with a stronger legal position. This is what Intellectual Property Insurance policies are designed to prevent. These policies help to level the playing field, allowing small and medium sized companies to assert their rights based on legal merit. The policies accomplish this by funding meritorious litigation. When a claim is presented, the policy requires some sort of determination that you are likely to prevail in the litigation. The defensive policy thus protects the insured against trolls and competitors who bring weak claims knowing that the insured does not have the funds to litigate. The policy also provides leverage when a competitor or troll brings a weak case in order to attract a nuisance settlement. This can be extremely valuable because a high proportion of today’s IPR assertions are based on weak allegations, where the plaintiff is simply taking advantage of perverse IP litigation economics. The case is similar for the offensive policies. For example, sometimes a cash strapped start-up or inventor with a great idea may attempt to find partners to produce their concept. Sometimes these potential partners decide to misappropriate the intellectual property of the start-up or inventor, believing the inventor will not have the resources to litigate. The standard Intellectual Property Insurance products do not cover infringement situations that the client knew about or should have known about before a policy is issued. For this and other reasons, it is important to insure as early as possible.
Coinsurance and Retention
Typically there is a minimum retention (like a deductible) of 2% of the limit of insurance ($20,000 per million), and coinsurance of at least 7.5% (the insurance company reimburses 92.5% of legal expenses and damages).
Purchasing Intellectual Property Insurance
If you are interested in being helped by an expert, who will explain your options, help you with the demanding underwriting process, get you multiple quotes to compare, and aid you in negotiating the best pricing and coverage provisions, don’t look any further. At Alta we are focused on this line of business. Contact us today.
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