Intellectual Property Insurance – A look into the Future

intellectual property insuranceThe rise of the start-up culture in India has led to a huge influx of investment in the Indian market, creating entrepreneurs by the second. As of 2020, India is only second to China in terms of Venture Capital funding. A lot of these start-ups have some form of valuable intangibles, in the form of Intellectual Property. It could be a Patented technology, or a Trademarked logo or tagline.

If you are a start-up CEO, or an entrepreneur, insuring your Intellectual Property can erase a lot of concerns while adding a veneer of extra protection to your company’s assets, trade secrets, and technology.

There are broadly four types of Insurance Coverage Policies

Infringement Defence Coverage

This policy provides money for defense costs, where a company is accused of infringing another enterprise’s intellectual Property issued. The insurance company underwrites the litigation and settlement of any disputes against you. If you’re held liable for infringing on a patent, trademark, copyright, or any other form of intellectual property, you don’t have to bankroll the litigation out of pocket. A defensive policy protects the insured from any intellectual property holder who files an infringement lawsuit against him during the policy period. Coverage under such a policy may encompass charges of patent, copyright, and trademark infringement, but it may be limited to one or more of these rights, or any combination of them, depending on the policy. The insurer pays for the defense attorney’s fees as well as any settlement costs or damages (if any) awarded under this policy. Defensive policies are based on the obligation to defend the insured, which is triggered when the claimant alleges a claim that the insurance policy may or may not cover.

Commercial General Liability Insurance

Standard-form CGL plans often cover “advertising injury” (sometimes known as “personal and advertising harm”), which can cover various forms of IP claims depending on how these terms are defined in the policy.

However, not all IP-related claims will be covered by a CGL policy’s “advertising injury” coverage. Due to differing definitions of “advertising injury,” numerous exclusions included in certain CGL policies, the specific facts of the claims, and the legal theories stated, policyholders, have had mixed results. Claims for copyright infringement, trademark infringement, service mark infringement, and trade dress infringement, for example, are frequently covered by the “advertising harm” coverage of a CGL policy (unless excluded). Obtaining coverage for unfair competition claims under the CGL policy’s “advertising injury” coverages, on the other hand, maybe more challenging unless the claims include “misappropriation of advertising ideas or style of conducting business” or “usage of another’s advertising concept.”

Coverage for Enforcement of IP Rights

This policy helps the insured party take pre-emptive actions and expeditiously enforce their rights. This helps in building an offensive approach, where the infringers are sued at the earliest sign of illegal IP infringement and use. The litigation will be funded by the insurance company, allowing you to stop infringement of your Trademarks, copyrights or patents, while also seeking damages resulting from past infringement and use. Generally, the policy covers the cause of action arising out of copyright infringement, trademark infringement, misappropriation of slogan or title, trade libel, violation of the right to privacy & publicity, and breach of an implied contract stemming from the alleged use of submission of an idea or other material. However, the policies do not insure insured for any sort of offensive litigation.

Media Liability Insurance

Media liability plans address the risks faced by enterprises such as media and entertainment companies that create or use non-patentable types of intellectual property. Liabilities arising from the dissemination of the policyholder’s creative works and/or advertising for such works throughout the insurance period are normally covered by the policies. Furthermore, they are frequently “named peril” policies, which means that they only cover a limited number of causes of action, such as one or more of the following: Infringement of copyright, theft of non-copyright ideas, trademark infringement, and breach of an implied contract relating to a third party’s submission of an idea or other intellectual property. Submission of an idea or other creative content to the policyholder, defamation, trade libel, infliction of emotional distress, and invasion of privacy rights are all covered by the policy.

In the USA, the rise of patent litigation, specifically in the Pharmaceutical Industry is leading to a sharp hike in the prices of the products. Insurance against patent infringement as well as offensive litigation solves this problem.  Intellectual property litigation can be pricey, and it is only becoming more so. The high stakes of intellectual property litigation might put a company’s survival in peril in some cases. Furthermore, the likelihood of a specific company being entangled in intellectual property litigation is increasing. Given these realities, it’s reasonable that certain insurers have developed policies particularly for companies concerned about these risks. In general, the breadth of protection provided by any of the many policies can often be tailored to suit the policyholder’s particular needs.

Intellectual property insurance is now commonplace in the states, especially in Industries that are technology-specific,  or those that require protection from infringement due to the considerable dependence of their business on their intellectual property.

Conclusion

For certain businesses, intellectual property insurance may not be necessary. The right level of insurance protection could mean the difference between survival and mortality for a small technology company with an intellectual property portfolio as its most valuable asset, or for a new competitor trying to break into an industry where aggressively enforced intellectual property rights are the rule rather than the exception. Given the value of the intellectual property, a growing number of policyholders are negotiating tailored insurance policies to better handle their intellectual property exposures.

In India, Insurance for Intellectual Property is relatively new. The One Hundred and Sixty-first report of The Department Related Standing Committee on Commerce talks briefly about the future of legislation regarding insuring Intellectual Property. The Committee suggests that the insurance industry participates in covering/protecting an IP’s increasing financial losses in order to reduce monetary risks, by amending The Insurance Act to incorporate insurance for valuable Intellectual Property.

Given the recent trends in the global market, India is likely to follow in the footsteps of the USA, where specific insurance policies will be available to enterprises, in order to ensure protection from claims arising out of misappropriation, theft, misuse, or infringement of any Intellectual Property.

Author: Sehaj Mahajan –  a student at Bharati Vidyapeeth University (New Delhi), currently an intern at Khurana & Khurana, Advocates and IP Attorney,  in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com

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