Patent Coverage: Everything You Need to Know
Patent coverage may assist you if another party infringes upon your patent or if you are accused of patent infringement yourself.3 min read
Patent coverage may assist you if another party infringes upon your patent or if you are accused of patent infringement yourself. There are numerous reasons why patent insurance coverage may be a wise idea for your company.
What Is a Patent Anyway?
When a person invents something, he or she may be able to claim exclusive right over the invention with a patent. In general, a patent may cover a product or process that offers a new technique or technical solution to an existing problem. To acquire a patent, technical information about the product or process must be provided to the public in a patent application.
The patent owner (inventor) is able to grant permission (license) to other parties to use the invention upon mutually beneficial terms and formal agreement. In addition, the owner can sell the rights to another party, who then becomes the new owner of the patent. Patent protection ends once the patent expires, and then the invention enters the public domain. Once this occurs, anyone can make a commercial venture using the patent without infringing upon it.
Patent insurance, as a type of intellectual property insurance, is intended to protect the patent holder in case another party infringes upon the patent and causes a loss in business. This kind of insurance is like a liability policy for manufacturers. If someone claims a business is infringing upon another's patent, the insurance policy will cover the associated legal costs of the accusation.
It may seem like an unnecessary policy if you don't intend to steal anyone else's idea, but patent infringement occurs more often than it would seem. Even if you did not intend to threaten someone else's patent, the patent holder may still sue you for losses.
There are two kinds of patient infringement insurance:
- If you're sued for infringing upon a patent, a defensive policy will cover it.
- If you need to sue another party for patent infringement, patent litigation insurance will assist you.
It is not necessary to buy both kinds of insurance, but it is a more complete policy approach.
Why Purchase Patent Insurance?
As companies compete to develop the next big idea, intellectual property claims are becoming more common. General commercial insurance policies aren't meant to protect a business from loss as a result of intellectual property theft or an accusation of patent infringement. In business, it doesn't necessarily matter whether an invention was created by you, but whether or not you are able to financially defend the idea. You may have obtained a patent, but if a large international business sues you in relation to your patent, will you be able to pay the associated legal fees?
Even smaller businesses may need intellectual property insurance. As companies grow and expand globally, it's important to examine insurance policies. Keep in mind that if you have an action lawsuit, you'll be unable to apply for patent insurance at that point, so being proactive during the initial stages of patent application is the best idea.
Cost of Patent Insurance
How much does patent insurance cost anyway? If the idea in dispute is worth anywhere between $1 million and $25 million, patent infringement lawsuits cost about $2.8 million on average. Associated damages are typically about $9 million. For smaller businesses, a lawsuit of that amount would easily put the company out of business. Consider the financial risk of a lawsuit as compared to patent litigation insurance , and you might discover that you'd rather pay for insurance.
Patent insurance premiums will vary based on numerous factors, and may run from a few thousand dollars to over $25,000 yearly. Insurance coverage limits and amounts will also affect your premium. Patent insurance also involves underwriting, which enables a business to consider the strengths and weaknesses of a patent. Using those results, a business can actively take measure to eliminate the chances of a claim arising and keeping premiums low.
Before you sign up for a policy, keep in mind that for an insurance company to pay your litigation fees, you'll need to acquire the opinion of a patent counsel who states that you have a likely winning chance. This patent counsel opinion typically costs about $5,000. You'll have to pay everything yourself if the counsel doesn't like your odds of winning and you decide to continue with litigation.
If you need help understanding patent coverage, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.