web ~ insurance payments will not hit the claimant's books but the books of the insurance company
the claimant will only continue paying its premiums.. .somewhat increased
but also it depends what the insurance covers
it could be that the insurance covers 80% which will hit the insurance company books
only 20% will hit the (claimants) books as an expense
for example ~
from insurance company to infringer (UOIP)
infringer receives cheque.. .cheque goes to "other income account"
infringer writes out cheque to UOIP which goes to Legal expenses paid.. .here you will be able to see it in Cisco's books
from Insurance company directly to UOIP
CANNOT VIEW transaction EXCEPT in UOIP books (and insurance company)
(we ALL know billy has been SECRETIVE regarding settlement, uoip documents)
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The Rising Costs of Intellectual Property Litigation
1% of patents come under litigation in their lifetime. However, intellectual property insurance litigation rose 29% from 2011 to 2012 due to the largest number of cases ever (5,189). Certain industries are also more likely to face lawsuits.
Pharmaceutical patents have a 25% chance of being involved in a lawsuit. Key technologies come in second at 10%. The reason that these industries have a higher likelihood of litigation is that they represent big money. In addition, they have small tweaks on existing patents that current patent holders fight to protect their interests.
On the whole, intellectual property lawsuits are the result of companies trying to gain an advantage over other businesses. The problem is that these lawsuits aren't always factual. Larger companies get an edge just by throwing a smaller company into the litigation process. Some companies also take an aggressive stance on copyright infringement or patent design. This almost guarantees a conflict.
One problem you may find is that the United States Patent and Trademark Office (USPTO) keeps its patent applications hidden. This causes infringement even if your company acts in good faith. There's no notice of liability until you receive a lawsuit notice. Changes in USPTO policy may prevent this in the future, but there's still a chance that you will become the victim of a lawsuit.
If the defendant wins the case, the court may award them lawyer's fees. However, this won't happen for years. In the meantime, defendants are responsible for paying their own legal costs. This causes you to come up with cash for fees while running a business at the same time. The costs of fighting are high, but losses are even worse. Here's a sample of the expenses associated with large intellectual property infringement cases.
Stac Electronics v. Microsoft - $120 million
Honeywell v. Minolta - $128 million
Fonar v. General Electric - $128 million
DCS Communications v. General Instruments - $140 million
Polaroid v. Kodak - $900 million
Honeywell v. Litton - $1.2 billion
In addition, Kimberly Clarke and Procter & Gamble waged an estimated billion dollar "diaper war." However, both firms had enough assets and resources to see the intellectual property battle to the end.
Awards issued by the court include several factors.
Lost profits
Attorney fees
Interest assessments
Royalties
Punitive enhancement
This may not bankrupt a company, but it can cause problems. For this reason, smaller firms offer to settle out of court to limit costs. This includes both plaintiffs and defendants.
What Are the Types of Intellectual Property Insurance?
Intellectual property insurance policies have grown by over 300% in recent decades. Most of these policies are "defense," although "pursuit," "abatement," or "enforcement" policies are growing in popularity.
Defense
This type of policy covers settlements and judgments resulting from a lawsuit against the policyholder.
This insurance is best for companies with revenues from $500,000 to $25 million.
This can also include indemnity insurance.
Pursuit, Abatement, Enforcement
This type of policy is known by all 3 names. It allows the policyholder to sue intellectual property infringers.
This covers all legal costs associated with an intellectual property lawsuit.
It deters infringement.
It strengthens the licensing attractiveness for other companies.
It protects executives from personal liability.
Without coverage, a company has alternatives such as:
Abandon the intellectual property rights
Settle outside of court
Pay a forced royalty
Enter into a licensing agreement. This is typically done in an instance of financial weakness.
Rely solely on their commercial general liability policy
Use reserve capital to fight the case
Sue or file a countersuit against the other party
Thankfully, most insurance companies tailor these policies to meet the needs of the policyholder. Policies also help shift the power structure. Larger companies know that the smaller company isn't paying for the litigation. This allows small companies to get a favorable settlement out of court.
These tailored policies also provide coverage for intellectual property exposure. This is namely in patent infringement. However, each policy is entirely based on the unique concept and design of the intellectual property. Because of the one of a kind nature, each insurance company makes a policy based on clients' needs, objectives, and the coverage amount. This falls under three categories:
Offensive Policy
Also known as infringement abatement insurance or enforcement insurance
This policy reimburses the insured for any legal costs when pursuing an infringer.
Defensive Only Policy
Also known as defense cost reimbursement insurance
This policy covers defense only against the suing party.
It does not pay any type of damages.
Defense and Indemnity Policy
This policy covers defense the same way as a Defensive Only Policy.
In addition, it pays for any damages awarded to the suing party. This includes prejudgment interest.
Some of the top benefits of infringement abatement insurance include:
Prevention of market share loss
Protection of directors, executives, and officers from litigation for failure to enforce patents or pursue litigation.
Strengthen the licensing abilities of intellectual property
Protection of company balance sheet by saving cash on hand
Increase the value of the company to shareholders or investors because of intellectual protection.
Deter potential lawsuits by showing financial means to defend
Provide enough defense funds to increase the possibility of winning an intellectual property lawsuit.
Reduce pressure to settle for lesser terms due to legal expenses or lack of funds.
Types of Insurance That Cover Intellectual Property
Standard Policies
General Liability
This insurance protects businesses from bodily injury and property damage. However, it may also cover personal and advertising injury. This protects advertising activities that may fall under intellectual property. It includes copyright and trademark infringement against advertising content.
It generally costs as little as $500 a year.
Media Liability
General liability typically excludes publishing companies. Media liability is more expansive and covers publishers.
This also covers user-generated content on a company's website.
Most media liability policies come with cyber liability insurance and errors and omissions insurance.
Rates are $1,000 to $1,500 per year for $1 million of coverage.
Specialty Policies
Patent Insurance: This product protects against patent infringement lawsuits brought against a company.
Patent Infringement Insurance: This product protects against other companies infringing on your patent.
Standard policies do have limitations:
They cannot protect against patent infringement.
They cannot sue someone for infringement.
Specialty policy limitations include:
Prohibitive costs as much as $50,000 per year.
Finding a reputable underwriter for a policy.
Why You Should Consider Intellectual Property Insurance
According to a recent survey, CEOs consider intellectual property management as one of their top three risks. Intellectual property is also regarded as a company's most valuable asset. In most companies, it's 80 percent of the total value. Even for firms that don't have the resources to protect it, it's still the lifeblood that allows them to operate. Intellectual property includes:
Trade secrets
Patents
Copyrights
Trademarks
Product packaging
Advertisements
Marketing
The biggest problem is that not all companies realize they're at risk. The main reason to get intellectual property insurance is to:
Protect their market share.
Defend against frivolous lawsuits.
Deter lawsuits from occurring.
Patent trolls are also a concern. Also known as patent assertion entities (PAEs), these companies sue solely to get licensing fees on a patent.
Because smaller companies don't have the capital to deal with a court battle, intellectual property insurance is a must. This prevents any disruptions in business operations and protects the capital needed to develop new products.
For example, let's take the Octane v. Icon case. Both companies manufactured ellipticals for gyms. Icon was the larger company and sued Octane for infringement. However, they did this only to get royalties and nothing more. In the end, the court sided with Octane. Even though Octane won, they still were left with a $1.7 million legal bill.
Intellectual Property Insurance and Attorneys
Both attorneys and companies benefit from intellectual property insurance. An attorney can instill goodwill and trust in their client. The attorney can also provide:
License Agreements: When drafting a license agreement, the attorney can require that the other party have an intellectual property policy.
Supplier Agreements: This requires all suppliers to have intellectual property insurance.
Non-infringement Opinions: This provides a legal opinion on the type of intellectual property insurance needed.
Claim Submissions: Intellectual property insurance policies need a favorable opinion from a lawyer at the time of claim.
Problems With Intellectual Property Insurance
One of the hurdles of intellectual property insurance is finding an insurance company willing to take on the risk. Underwriters refuse to write these policies because of the lack of historical information. Plus, many don't consider intellectual property a tangible asset. This makes it harder to defend in court.
Companies are passing on intellectual property insurance as well. This is due to a lack of education or awareness. Some companies also falsely believe they are covered under their commercial general liability (CGL) insurance. However, these policies only deal with financial injury from advertising activities. Other intellectual property is rarely covered.
Lack of intellectual property insurance may also create unnecessary director and officer (D&O) exposure. This makes executives liable for financial damages in an intellectual property case.
It's also important to note that the insurer and policyholder must enforce the policy to get reimbursement.
Underwriting Intellectual Property Insurance
When underwriting intellectual property insurance, underwriters consider:
Ease of entry into the marketplace
Profitability of the patented item
Initial capital investment
Current disputes with licensees
Existing licenses
Notification from other companies stating an infringement
Suspicion of infringement
Activities required to abate infringement
Request from third parties that they receive a license
Companies must have most of these factors to get intellectual property insurance.
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