Offensive Intellectual Property Insurance

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Offensive Intellectual Property Insurance

Offensive Intellectual Property Insurance, sometimes called “Abatement Insurance” pays legal expenses you incur to pursue someone who is infringing your patent. Abatement Insurance can be useful to small inventors and manufacturers, artists, and production companies.


As an example, companies with trade secret industrial processes often need to enlist the help of larger companies to exploit the technology or as subcontractors or distributors. This can put inventors in a vulnerable position, because they might not have the money to pursue the big company if the big company decides to cut them out, steal their ideas, and misappropriate their trade secret information.


In A Hurry And Need A Quote?

Go to our Intellectual Property Insurance Quote Page for information on quickly starting the process.


No Coverage For Frivolous Suits

The most important factor in determining if Offensive Intellectual Property Insurance is right for you is the nature of the coverage itself. There is no coverage if at the outset of potential legal hostilities, you cannot get an opinion from a lawyer that you are more likely than not to succeed in the litigation. When you think about it, given that this is an offensive policy, that is the only way the policy could be written. Otherwise it would be a license to conduct frivolous litigation, sort of akin to Trolling with weak Patent Assertion Claims.


Wouldn’t I Be Able To Get A Contingency Lawyer?

When looking at this, what you need to do is weigh the benefits and costs of Abatement Insurance against the possibility that a patent litigation attorney would take a case on a contingency basis. When doing so you also need to account for that fact that the patent litigation attorney would take 25-40% of any win. A patent litigation attorney is more likely to take a case that has a higher probability of success and less likely to take a case that has a lower probability of success.


Similarly, the attorney is more likely to take a case that would result in higher damages if it is won, and less likely to take a case where the amount of potential damages is limited. For a contingency attorney, a case with a lower probability of success but very high potential damages or settlement might be more attractive. They consider the expected value and they consider the uncertainty/risk.


Both the insurance policy and the attorney are responsive to the probability of success. But the attorney is far more sensitive to the size of the case than the insurance policy would be.


To illustrate, take a look at the following hazard matrices:

Offensive IP Hazard Matrix
Offensive IP Insurance

Plaintiff Win Less Likely              Plaintiff Win Likely

Big
$$$

Not Covered

Coverage Very Likely

Small
$$$

Not Covered

Coverage Likely*

*Litigation needs to make economic sense.

Also, note that the insurance company may recoup litigation expenditures from proceeds of settlement of judgement.

Offensive IP Hazard Matrix
IP Litigation Attorney

Plaintiff Win Less Likely                 Plaintiff Win Likely

Big
$$$

Might Take The Case

Likely To Take The Case

Small
$$$

Won’t Take The Case

Unlikely To Take The Case

Remember that the Attorney will take 25-40% of whatever you win.


Underwriting

In addition to this contractual language, the policies are carefully underwritten. If known or likely infringing parties are identified, then it is likely that the underwriter will require a high retention (like a deductible) or an exclusion in relation to the specific threat.


Offensive IP Insurance – Advanced Coverage Discussion

For a more thorough discussion of Intellectual Property Insurance at a relatively advanced level, refer to Eric Weibel’s New Matter article, which is reproduced here. For a quicker rundown read on. As always, this discussion is informational in nature, and not professional advice. To determine the actual scope of coverage you must refer to the actual policy contract and endorsements, preferably with your intellectual property attorney’s advice and counsel.

Some of the key areas to focus in on when considering an Offensive Intellectual Property Insurance policy include:

  • Covered Claims
  • Choice of Litigating Counsel
  • Reimbursement
  • Third Party Retaliatory Claims
  • Coinsurance and Retention

Covered Claims

As we mentioned previously, Offensive policies are designed to support the enforcement of claims where the insured is likely to prevail. They are not designed to encourage frivolous litigation. Offensive policies typically require independent counsel to opine that the insured is more likely than not to prevail. These provisions should be carefully scrutinized and negotiated.


Choice of Litigating Counsel

Generally, the insured selects the litigating counsel, but the insurance company must approve of that counsel. The litigating counsel must abide by a fee agreement and other agreements. Disputes may be handled through mediation. Again these provisions should be carefully scrutinized and negotiated.


Reimbursement

In the event that litigation is successful, the insurance company generally may recoup part or all of its expenditures supporting the litigation.


Third Party Retaliatory Claims

Policies can be written to provide some coverage for defenses against retaliatory claims that attempt to invalidate the insured’s IP.


Coinsurance and Retention

Generally, all policies require a small, minimum self-insured retention, which is expressed as a percentage of the coverage limit. For instance, a ten percent coinsurance in this context would require the insured to pay ten dollars for every ninety dollars of loss paid by the insurer.


Get An Offensive Intellectual Property Insurance Indication

Alta is focused on this line of business. Contact us today if you are interested in applying for Offensive Patent Insurance. You may visit our Get An Intellectual Property Insurance Quote Page for details on how to apply and to obtain application forms.


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