IP insurance is an important tool for IP risk management. The essence of IP insurance is to provide capital to the insured, either defending their products from IP infringement claims or enforcing their IP rights against others.
According to a DLA Piper report, Critical Issues for Intellectual Property, in the 1980s, the average patent judgment was $6.2 million; in the 1990s, the average patent judgment was $13.2 million; in the last decade the average patent judgment rose again to $17.8 million. Further, according to an AIPLA study, the average patent lawsuit costs each side $3.5 M in legal fees and expenses to litigate through trial, not including damages and/or settlements. As the size of judgments and the cost of litigation legal fees continue to increase, so too does the potential value and importance of intellectual property insurance.
Anyone who sells a product is at risk of infringing one or more patents, whether held by a practicing or non-practicing entity. Conversely, if a company has a patent-protected product, the enormous litigation cost of enforcing its patent rights may be prohibitive. Intellectual property insurance is a cost-effective product that helps mitigate each of these risks and provides the client with peace of mind in the knowledge that they will be able to continue operating in the face of such formidable challenges.
The following insurance policies can be used to cover warranties and liabilities:
Defense Cost Reimbursement Insurance
This policy protects any company that makes, uses, and/or sells a product by providing reimbursement for the litigation expenses required to defend against accusations of IP infringement. The policy may also cover assessed damages or settlements. The addition of a Multi-Peril Insurance Rider will provide coverage for loss of earnings and any redesign costs that result from losing an IP infringement case.
Infringement Abatement (Enforcement) Insurance
This policy provides reimbursement of the litigation expenses required to enforce IP rights against alleged infringers, allowing policy holders to more effectively negotiate, protect and enforce their IP rights.
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