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 a range of 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) "Opinion Only" Policy - this is the cheapest option, and is specifically designed for new start-up companies. Clients can insure up to two IP rights (e.g. a patent and their trade mark) and if they have potentially infringed another party inadvertently, or if a competitor has potentially infringed their IP through their actions, they may obtain a full IP legal opinion. The policy provides up to a limit of £25,000 costs cover for the opinion, which should be adequate for even complex opinion-based advice. The IP opinion then allows the client to make an informed decision as to what action to take. If the client has no case, then it can swiftly attempt to negotiate with the other party, reassured that this is the best course of action. If the client has a case with good prospects of success, based upon the opinion, then Sybaris Legal & IP will look to arrange litigation funding and/or After-the-Event (“ATE”) insurance (please see below), wherever possible, and to assist with bringing an infringement action.
2) IP Legal Expenses Cover (for both Pursuit/Enforcement and/or Defence Costs) - This option provides a much more substantial solution, and will pay the legal costs of bringing an IP action against a competitor, or for a client to defend an IP action brought against them. Cover is available for jurisdictions throughout the world, if required, and clients can purchase up to a limit of £500,000 Any One Claim, and£1,000,000 in the Aggregate. Higher limits of indemnity may be achievable, depending upon the risk. Clients can use their own expert representation, or Underwriters' panel representatives. Patents County Court (PCC) pursuit only cover can also be purchased, which will provide a cheaper option, whilst still affording an excellent solution to protect your IP portfolio, and to enforce your IP rights.
3) Comprehensive IP Package Solution (for both Pursuit/Enforcement and Defence costs, and Damages Awards) - 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. Defence costs and damages can be insured for up to a limit of £5,000,000 as standard, and higher limits may be achievable depending upon the risk. In most cases the pursuit cover will be limited to £500,000, although again this may be negotiable.
4) After-the-Event (“ATE”)Insurance and Litigation Funding - This option may be available for clients who have not purchased IP cover or have purchased the “Opinion Only” Policy, and have a case with good prospects of success. Clients will, however, require a case where there are good (usually a minimum of 60%) prospects of success. Additionally, the damages that they 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 up to 40% 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 “Opinion Only” cover will generally cost clients only a few hundred pounds, as it is designed to be an option for new start-up clients.
The IP Legal Expenses Cover for Pursuit/Enforcement and/or Defence Costs will be typically a few thousand pounds upwards depending upon the jurisdictions covered, the limits of indemnity, the IP rights to be insured, the marketplace which the client operates in, and the risk in general. Patents County Court (“PCC”) only pursuit cover will be more affordable, whilst still offering protection in this court to enforce your rights and protect your business, and premiums start below a £1,000.
The Comprehensive IP Package, which includes awards for damages as well, will generally start at £5,000 upwards.
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.
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)