Our company was approached by a potential client a few weeks ago to obtain Intellectual Property Insurance. Although he didn’t fully understand the coverage, he demanded that a policy be issued as soon as possible. There were some red flags raised by this. After further discussion, it became apparent that his software company was being sued by a US-based company for copyright infringement. We were unable help him in providing coverage because of the pending litigation. Instead, we suggested that he consult law firms that are experienced in Intellectual property disputes. If the client and his broker had taken the time to understand the business and potential exposures, this unfortunate incident could have been avoided. This client received a standard CGL policy that covered premises liability, but excluded trademark, copyright and patent infringement. In today’s fast paced & uncertain economic environment, intellectual property suits involving infringement of trademark, copyright and patents are being filed and litigated at alarming rates with crippling costs to both parties involved.
What exactly is Intellectual Property? You can break it down as follows:
Industrial property – includes inventions (patents), trademarks & industrial designs
Copyright – includes literary & artistic works such as articles, novels, drawings, paintings, designs.
These exclusive legal rights give the owner of intellectual property the ability to profit from the property that they create, and thus provide an incentive to the creation or investment of their intellectual property. Many start-ups, as well as small and medium-sized businesses, do not understand the potential benefits of these rights. These companies may be able to exercise very valuable rights, but they are not able to do so effectively. However, others are inadvertently violating intellectual property rights without knowing the consequences.
The terminology used in the above paragraph is important and should be clarified.
Patents – These patents cover new inventions, including machine, process, manufacture, or any useful improvement to an existing invention.
Trademarks – Gives you exclusive rights to certain words, symbols, and designs that can be used to differentiate goods or services from other products on a similar market.
Copyright – Only the owner of the copyright, often the creator, can create, reproduce, and grant permission to others to do this.
It is becoming easier than ever to reproduce many materials that are subjected copyright as technology advances at lightning speed. Companies need to be careful not infringe upon the rights of others. The reputation of companies that violate trademark, patent or copyright rights can be damaged worldwide. Penalties have become extremely costly. Until the mid 1990’s the company’s primary assets were their buildings, stock, and equipment. No longer. These items are still very valuable but intellectual property, computer data, and customer information are equally valuable and can lead to financial hardship if not properly secured and covered by insurance.
It is best to hire a lawyer/lawfirm that specializes in IP law, including copyright, trademarks and trade secrets. You should be able to communicate in a way that is easy for you and the lawyer you choose will understand your technology and business model.