What Does Intellectual Property Insurance Cover?

intellectual-property-stampIntellectual property is the legal concept that intellectual creations can have exclusive rights in a business sense. Intellectual property law gives small and large business owners exclusive rights over an array of intangible assets, which can range from artistic works to inventions and even corporate phrases.

The role of intellectual property in business is increasingly prominent as economies around the world transition from manufacturing to information-based markets. Both businesses and their insurance providers, therefore, should stay apprised of intellectual property law and intellectual property insurance to mitigate the chance of blunders given the evolving information landscape.

Intellectual Property and IP Insurance

These are actually two distinct issues. Intellectual property is secured when a company seeks infringement protection for their copyright, patent or trademark; intellectual property insurance, on the other hand, follows an intellectual property search and successful registration of a copyright, patent or trademark.

Intellectual property insurance is protection business owners can take out to indemnify themselves against a competitor possibly suing them for infringement of a concept or protected piece of intellectual property.

You may have heard of the drawn-out patent infringement litigation between Apple and Samsung. A ban of certain Apple devices was eventually upheld by an international trade commission, yet the case illustrates the importance of IP insurance in the IT industry, and the general salience of intellectual property rights in all business sectors.

Logistics of IP Insurance

Intellectual property coverage ensures that a company’s copyrights, trademarks and patents are protected from infringement. This kind of insurance coverage finances the defense’s costs and court judgments up to the policy’s upper limits.

There are fundamentally two types of IP insurance coverage:

  • The first kind protects your company if you are sued for any kind of infringement, and your defense is covered
  • The second type of IP insurance is called a pursuit policy.

In the field of IP insurance coverage, a pursuit policy helps defray the legal costs if you deem it necessary to sue a potential copyright, patent or trademark infringer. It is convenient to think of the first type of intellectual property insurance as defensive and the second type as offensive.

Intellectual property insurance is frequently bundled by insurance providers with Technology Errors and Omissions Liability. That said, intellectual property insurance can be purchased independently, and should be purchased in some capacity if there is any chance of infringement.

America Invents Act and Patent Overhaul

The Leahy-Smith America Invents Act is a piece of federal legislation signed into law in late 2011 by President Obama. The America Invents Act effectively changes the rules of prosecuting intellectual property infringement by changing the protocol from “first to invent” to “first to file.”

This rule change means that businesses need to commit to an intellectual property search and file for patents before thinking about IP coverage. The “first to file” rule means that litigation will favor the company who successfully filed for intellectual property rights rather than the company who supposedly invented the app, service or product first.

In today’s world of burgeoning online commerce and transactions, companies are competing to be the innovators of new products, ideas and apps. Even if you feel you are in the right as a small business owner, failure to secure a copyright, patent or trademark and purchase IP insurance could cripple your long-term financial aspirations.

Legal fees for patents or trademarks can run in the tens of millions and without IP coverage, those costs may ultimately be fronted by unsuspecting business owners modestly looking to defend their products and ideas. Patent insurance and patent infringement liability insurance are good first steps to ensure protection.


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