Understanding the patent infringement insurance cost associated with protecting your company and intellectual property is vital in selecting the right type of insurance policy. Obtaining a patent signifies that the intellectual rights associated with a specific process or a product belong to you. If your business develops and invents products, patent insurance can limit the financial risk associated with competitor challenges.

Patent Insurance

Patent insurance protects your company from the monetary risks associated with taking another party to court if it infringes on a patented process or an invention of yours. It can also provide assistance if you are taken to court by another business for infringement violations. Before making the decision on what type of policy to choose, look at your options and compare policies to find the perfect balance of coverage and cost.

Types of Patent Coverage

There are generally two types of patent insurance coverage you can have for your business: defensive and offensive. The most popular type of intellectual property coverage is defensive patent insurance, also known as:

  • Abatement insurance
  • Pursuit policy
  • Offensive patent insurance.

This policy can reimburse litigation expenses required to defend you against infringement charges, as well as potentially covering damages and settlements.

Defensive patent insurance is meant to:

  • Cover any costs associated with defending you against a patent lawsuit, as well as any settlements or judgments that may result from a lawsuit.
  • Protect you from risks associated with focusing on patent-heavy industries such as communications or technology.
  • Cover a portion of legal fees and possibly provide additional damage coverage for your business.
  • Protect against "patent trolls," or companies that only exist to bring litigation against businesses hoping for a large settlement.

An Intellectual Property Defense Policy will cover:

  • Using, making, importing, offering for sale, and selling in commerce.
  • Any process, method, or product associated with doing business.
  • Any mark or word used in commerce.
  • Any copyrightable items.

The advantages of an Intellectual Property Defense Policy include:

  • Providing forceful and timely defense of infringement claims, thus preventing market shares from being abandoned.
  • Avoiding unexpected cash expenditures on operations.
  • Allowing for adequate funds to litigate for a successful outcome.
  • Being protected financially, which deters frivolous cases from being brought.
  • Increasing attractiveness of the business to possible investors.
  • Strengthening a business's viability.

On the other hand, if you have valuable intellectual property, offensive patent insurance coverage is something you may want to consider. Sometimes referred to as enforcement coverage, it can assist you in going after larger competitors who may have more money than you but are infringing on your intellectual property rights.

Offensive patent insurance will assist with:

  • Covering legal costs associated with suits against another party for patent infringement.
  • Covering a portion of legal fees associated when suing a third party.

Cost of Patent Insurance

A defensive policy usually charges a percentage of your coverage amount. If you have $100,000 coverage and your policy charges 3 percent for coverage, you would pay a premium of approximately $3,000. Generally speaking, defensive policies run between 2-5 percent of coverage, with the exact amount varying between providers.

Patent infringement cases can be costly, so premiums for patent insurance coverage are generally higher than general liability. Most offensive policies cover approximately 75 percent of legal expenses. Businesses generally pay 10-20 percent in deductibles and may be responsible for part of the risk associated when taking another party to court.

Frequently Asked Questions

How does an insured party invoke the policy?

  • Complete a claim form indicating a possible infringement threat and outlining the relevant facts and details.
  • Submit a favorable opinion letter from an unbiased IP counsel.
  • Once policy terms are complied with, the insurance company can permit the suit and begin reimbursement of expenses associated with litigation.

Who controls the lawsuit?

  • As the policy holder, you will control the lawsuit. You are able to select counsel of your choice; however, they must follow the billing and litigation guidelines you and the insurance company agreed to.
  • The insurance company may offer suggestions of counsel they have worked with previously, but you as the insured are not required to use them.
  • As the insured, you dictate any settlement terms.

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