Intellectual property increasingly constitutes a significant portion of the value of most businesses. Businesses, as a result, have become quicker to sue to protect their intellectual property. Copyright lawsuits and other types of infringement claims can be very expensive. The attorney’s fees alone in such suits can easily surpass two or three million dollars even when they involve small businesses. The mere act of defending a copyright lawsuit can easily put a company out of business before the merits of the case are even decided. The extent to which intellectual property infringement claims are insurable depends on the jurisdiction of the suit, the nature of the claimed infringement and the policies involved.
Areas Of Insurance Coverage For Property Infringement Claims
Commercial General Liability Policies
Will over business advertising claims, which may provide coverage if a lawsuit alleges a trademark infringement in advertising activities. However, an exclusion exists if the infringement is intentional. An insurance company may still owe a duty to defend until such time as the plaintiff proves an intentional act in certain jurisdictions; some jurisdictions allow insurance companies to rely on the allegations in the complaint in determining whether a duty to defend exists. Additionally, this coverage would not protect a company against non-advertising related copyright infringement claims, such as an allegation that a business stole software code from a vendor, customer or competitor.
Specialized Intellectual Property Insurance Coverage
This type of coverage does exist and can be especially useful to small businesses in the technology field. One such form of coverage will provide litigation costs up to the limit of insurance to defend against any lawsuit claiming an infringement of intellectual property. These policies may or may not cover the costs of any resulting damages or settlement. Additionally, a plaintiff’s form of intellectual property insurance exists. Intellectual property abatement insurance is somewhat unique in that it will cover a company’s litigation costs incurred when bringing a lawsuit against an intellectual property infringer.
Smaller Businesses Feel The Heat More Than Larger Ones
Both types of policies can provide vital protection for smaller companies who may not otherwise have the necessary cashflow to protect their most valuable asset. It does a company no good to defend successfully a patent lawsuit if the legal costs mean the company has to file for bankruptcy the next day. These policies can also protect companies from being bullied by a bigger competitor seeking to infringe on their intellectual property and better able to afford costly litigation. In these situations, intellectual property insurance coverage can help level the playing field in litigation and ensure that the lawsuit is decided on its merits rather than by who has deeper pockets.
Whether purchasing this type of insurance makes sense will often depend on the specifics of each individual business, the value of its IP, and the risks the company faces; companies should speak with their insurance broker to see if coverage is worthwhile to them.