First Party Patent Insurance
Sometimes called Multi-Peril Patent Insurance, First Party Patent Insurance actually protects you from losses you suffer – losses in the value of your Intellectual Property. As an example, this would occur if one of your patents is invalidated in a court ruling.
One particularly interesting form of coverage is a form of business interruption insurance. It reimburses you for lost revenue in the middle of litigation in the event a court grants a preliminary injunction barring you from from selling your product. Such a ruling often forces a defendent to capitulate and settle. This insurance can give you the wherewithal to sustain meritorious litigation.
Go to our Get A Patent Insurance Quote Page for information on starting the process.
First Party Patent Insurance Coverage Provisions
The following section contains an advanced discussion of Multi-Peril Patent Insurance Coverage including material taken from my 2011 article published in New Matter.
Common 1st Party Patent Insurance Coverage Provisions
As intangible assets become an increasingly important component of the economy, the insurance industry is responding with products that insure intangible property on a first party basis. Many IP attorneys are quite surprised to learn that a client can be protected for the actual loss in value of its IP portfolio as a result of adverse legal developments. It is important to note that this is distinct from legal costs needed to defend or enforce rights. And it also distinct from indemnity – actual damages that need to be paid to someone alleging client infringement.
First party (multi-peril) coverage can be an extremely valuable addition to a defensive program. For instance, business interruption coverage can be provided in the event that a court grants a preliminary injunction against the client. The loss of cash flow from IP due to an injunction can be devastating when it occurs in the midst of litigation. It can force the client to capitulate. With business interruption coverage in place, a client is better able to sustain litigation defending its IP rights.
Underlying Policy Generally Required
First party (multi-peril) coverage is generally only available as an addition to an underlying defensive and/or offensive (abatement) policy.
Perils Insured Against
A party may insure against many different perils. As I mentioned, business interruption insurance can be provided in the event of a preliminary injunction in the course of litigation. Coverage is also available for the loss of royalties or license fees as a result of a final ruling. IP portfolios can also be insured on an agreed-value basis, where the insurance applicant and the Company agree on a value during the application process. Remediation and redesign costs can also be covered.
In order to obtain this coverage, the applicant must generally produce an opinion from a qualified attorney that the covered IP is not infringing.
Enforcement and Defense
The insured must take adequate measures to protect its IP by defending itself in lawsuits and bringing actions against infringing parties. Furthermore, the Company has the right, but not the duty, to assume the defense in those instances. In the event the Company does not do so, it may effectively associate with the insured in those actions.
Typically, the underlying defensive or offensive (abatement) policy will support the underlying enforcement or defense, either indirectly, with financing, or directly, by allowing the Company to assume control of the litigation. However, there could be instances where the Company denies the claim on the underlying policy, but the previously mentioned duties of the insured and the rights of the Company still exist under the multi-peril policy. So, is order to maintain its rights under the multi-peril policy, the insured would have to exert these efforts on its own while it disputes the adverse offensive/defensive coverage decision under the underlying policy.
In the event that litigation ultimately yields proceeds to the insured, the Company generally can recover part or all of its costs from those proceeds. For instance, if business interruption coverage is triggered as a result of a preliminary injunction, and the client is later successful in its litigation, the Company may well be entitled to recovery of its earlier outlay of business interruption costs.
Alta is focused on this line of business. Contact us today if you are interested in applying for Multi-Peril Patent Insurance. You may visit our Get A Patent Insurance Quote Page for details on how to apply and to obtain application forms.
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