Insurance considerations for the transfer of intellectual property risk
Intellectual Property (IP) is a key business asset which can confer a competitive advantage onto an organisation or individual. IP rights legally protect an owner’s IP and infer the exclusive right to profit from its use for a specified period of time.
IP can take the following forms:
- Patents: protecting inventions of new ideas and useful processes, machine, manufacture or composition of matter, or any new and useful improvement.
- Trade marks: protecting distinguishable words, names, symbols, devices and uses in commerce, which identify and differentiate the trade mark owners’ goods or services, from others.
- Trade secrets: protects the idea but only last as long as the material or concept used is secret. These can include a formula, pattern, a device or specific information used in business which provides a distinct competitive advantage in the marketplace.
- Copyrights: protecting the expression of the idea and covering the artistic aspect of recorded work such as plays, books and software. The copyright holder has the right to allow others to apply, adapt, distribute, sell, rent or perform their work.
- Registered designs: protects the visual design of a product.
IP is a key asset in some businesses. As such, it is important to understand how to protect your IP. There are strict procedures which can be followed by organisations to formally protect IP in Australia and if relevant, overseas. Simply put, a registered Australian trade mark, design or patent does not protect your IP in other countries.
It is equally important to ensure that your business does not infringe on the IP rights of another.
Who should be aware of IP exposure?
Industries with IP infringement exposures which would require appropriate insurance coverage include:
- Software as a service providers and hardware designers
- Pharmaceuticals and life sciences
- Aviation and automotive
- Utilities
- Consumer electronics
- Engineering
- Retail
- Chemicals
The above list is not exhaustive as other industries such as banking and finance, construction and manufacturing can also be exposed to IP infringement risks. The global economy necessitates that IP infringement risks be considered both locally and internationally. The increase in local companies transacting with overseas suppliers, customers and manufacturers reinforces this risk area.
Types of coverage available
Bellrock can provide tailored advice relating to all manner of IP exposures including the appointment of external experts to provide independent audits of IP registers to ensure IP rights are properly identified, kept in a regularly updated asset register and appropriately protected. Bellrock can develop insurance programmes to transfer risks identified. Our team can advise and inform clients by:
- Assessing the extent of IP insurance coverage required to address your specific exposures, on a first-party and / or third party basis. Coverage can also be arranged to cover international risks where business is undertaken globally.
- Performing a comprehensive analysis on the level of cover required for your IP with due consideration of exclusions and cover that nay be available under other existing insurance policies for example:
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- Whilst professional indemnity (PI) insurance has some cover for breach of IP, patents and trade secrets are generally excluded. Also, most PI policies exclude any claims from the sale or supply of a product and limit cover to professional services, which would exclude the IP product. As PI is a liability insurance it excludes first party cover.
- General liability insurance is restricted with IP and requires specialised knowledge to address unique infringements such as advertising. In these instances, cover may be available where the advertising incorporated copyrighted material of the actual method of advertising itself was patented.
- A legal expenses policy would only provide limited cover for defence costs and/or litigation expenses in pursuing claims. As for any substantial damages or agreed settlements awarded under agreement to an infringer, no cover is provided under this policy.
- IP as an intangible property, property insurance will not cover this intangible form of property and any damage/infringement to it.
- Directors and officers (D&O) policies generally exclude IP. IP liability cover would be required to address legal fees, expenses or damages incurred in defending judicial proceedings against the D&O of the organisation.
- Assist to arrange coverage for IP risk under a tailored IP insurance policy.
For the scope of coverage provided by IP Liability policies, please see our article here.
For further information and advice relating to IP Insurance and to obtain a quote please contact us via the form below.
