Unprecedented Experience in IP Insurance
Nearly all businesses will have some form of intellectual property, though they may not be aware that this is the case, nor be aware that they need to protect it.
Whilst awareness levels are increasing, often a business will unfortunately only realise how much of its value was intrinsically linked to its IP when it is too late.
What is my Intellectual Property?
Intellectual Property encompasses a number of different rights which businesses, or individuals, possess. They have value legally, and can be bought, sold, or licensed to others.
The main IP rights are:
- Trade Marks
- Design Rights
There are various other rights which are included under the banner of Intellectual Property such as database rights, confidential information (including trade secrets), and goodwill attaching to your brand (including the right to sue for passing off).
Some IP rights have to be registered, but some automatically become created under the law. You should not assume that just because you have not registered your intellectual Property that it has no value within your business. This will usually be far from the case, particularly with regard to your brand identity, whether or not you have registered a trade mark or a design.
Just how valuable is my IP?
IP is often referred to as "hidden value", and your balance sheet will not truly reflect how important it is to your business.
Because your IP portfolio consists of intangible assets you will not necessarily be able to place an exact value upon it. However, imagine how your business would fare if the brand you had so carefully built up, or the distinctive trade mark you had registered, were lost?
Imagine some of the most high-profile brands in the world, and where they would be if they lost their identity? The companies would just become another computer manufacturer, or another burger chain, or another generic cola drink supplier.
Studies have indicated that 40% of an average company's real value is derived from its intellectual property, but the balance sheet is unlikely to reflect this fact. This can increase much further in some sectors such as technology.
Why do I need to protect my IP, and if I have registered my IP isn't it already protected?
The modern business which hopes to maintain its position in the market place, and its value, must protect its IP portfolio.
Registering any IP which is capable of being registered is an essential starting point for IP risk management. However, this is just the beginning. The prudent business will then monitor the market place, ensuring that competitors are not copying its patents, designs, and trade marks, whilst making every effort to prevent over-use of its distinctive brand which will dilute its value, and cause it to become generic.
If a competitor is infringing your IP rights through publication, or a process or product, then you are faced with the prospect of enforcing your rights through the courts. This can be entirely necessary, even if your IP rights are all registered rights. Your competitor will also be aware that many companies cannot afford to bring an IP action, as it is widely considered that IP litigation is the most expensive form of litigation someone can conduct.
How would you, as a business, propose to bring an IP action if a competitor is infringing your IP rights through their actions? The cost of an IP action in the High Court is generally in excess of £350,000. There are caps on costs and damages now in the Patents County Court, but your action may have to be heard in the High Court, or you may need to bring your action in an entirely different jurisdiction.
The cost of defending your IP through the courts is prohibitive, and very few companies have the available cash-flow to bring a High Court action, or to sue overseas.
What happens if we inadvertently infringe a competitor's IP?
Some companies copy a competitor's IP, or change small elements of the brand hoping to "ride on the shirt tails" of a more well-known brand. If you are on the receiving end of these types of activity, whether deliberate or inadvertent, you will have to look at bringing an infringement or passing off action.
What then, if you do this to a competitor? Whether you have done so deliberately or not, you may be on the receiving end of an IP action yourself. The defence costs alone, particularly in the High Court, or in another jurisdiction, can be too high for many companies to carry. If a damages award is made against you as well, then such awards can be too much for most SME organisations to bear. Even the cap on damages in the Patents County Court is £500,000. There is no limit on damages in the High Court for an act of inadvertent infringement that has caused a loss to your competitor.
What insurance solutions are available from Sybaris Legal & IP?
Sybaris Legal & IP is in a position to offer flexible IP insurance solutions which can protect even the smallest new start-up. More comprehensive protection is available for SME clients with a varied IP portfolio, and sophisticated programmes can be arranged for larger companies. Larger companies will often consider programmes with high self-insured excesses, effectively capping their potential IP risk exposures, and allowing them to budget more easily.
Clients can choose from the following options:
1) Comprehensive IP Package Solution (for both Pursuit/Enforcement and Defence costs, Damages Awards and optional Contractual Indemnities) - This is a high-level protection option which will provide very sophisticated IP risk transfer to the insurance market, and ensure that clients can survive when an IP damages award is made against them, as well as enabling them to bring an IP action against a competitor. Limits of up to £5,000,000 as standard, and higher limits may be achievable depending upon the risk through subscription placements with coinsurers, or excess layers.
2) After-the-Event (“ATE”) Insurance and Litigation Funding - This option may be available for clients who have not already purchased IP cover, and have a pre-existing dispute with good prospects of success. Clients will, however, require a case where there are good (usually a minimum of 60%) prospects of success based an opinion from a suitable advocate / Counsel. Additionally, the damages that you are seeking must be high enough to allow for the risks which a litigation funder will take. We have access to a panel of funders, and After-the-Event insurers, so, if this is a viable option we should be able to arrange a package for our clients. Clients would be best placed to consider insuring "before-the-event". This is not only because litigation funders will frequently charge a noticeable percentage of the damages award to fund a case, but also because they may not take on a case where the damages claimed are too low relative to the costs incurred, or where an injunction is being sought rather than a damages award.
How much does it cost, and is it worth it?
The Comprehensive IP Package, which includes awards for damages as well, will generally start at about £5,000 upwards, and the price will depend on factors such as the limit of indemnity, the excess level, and the territories covered.
Full IP insurance solutions are relatively expensive to insure, which is why we are in a position to offer a number of options to clients. Both costs and awards can be extremely high compared to other forms of litigation; therefore it is essential to realistically consider the consequences of IP litigation, and whether your business could survive losing an IP action. Additionally, the high costs of bringing an action against a competitor mean that many businesses simply cannot afford to sue a competitor for infringement. Your competitors will often know this, and will therefore know that you are not in a position to fight back. Your larger competitors will often use their stronger financial position as a weapon against you, so they copy and/or use your IP, and drive you out of business knowing that there is little that you can do. Your IP insurance programme will "level the playing field" in today's aggressive environment.
Financing litigation funding and ATE insurance can cost you a large percentage of any damages you could be entitled too, so to protect against IP disputes we do recommend insuring before the event whenever possible to manage your risk on an annual basis.
With potentially more than 40% of your company value tied up in your IP, can you really not afford to insure it?
How can I now protect my IP and my business?
Underwriting IP insurance is a complex, and bespoke, underwriting process. Every risk is different, and requires individual review and assessment. We will generally require fully completed proposal forms, and supporting information. We may, however, be able to provide "very rough indications" with more basic information.
We will generally be in a position to provide you with more accurate premium indications within a week, but if your risk is particularly unusual, or your IP portfolio is larger than one or two IP rights, then it may take up to 10 days.
Sybaris Legal & IP is now in a position to discuss your IP insurance requirements, and for your IP portfolio to be considered by our scheme Underwriters.
In the first instance, please contact:
Paul Wishart LLB(Hons)