A few weeks ago, a prospective client approached our company seeking Intellectual Property Coverage. He did not fully understand the coverage but was adamant that a policy be issued as quickly as possible. Of course this raised some red flags. Upon further discussions, it was noted that his software company was being sued for copyright infringement from a Dubai based company. Since there was a pending litigation in place, we were unable to assist in providing coverage and suggested he contact law firms that specialize in Intellectual property disputes. This unfortunate incident could have been avoided if his current insurance broker and the client took the necessary time to fully understand the business model and possible exposures. The policy issued to this client was a standard CGL policy covering premises liability and specifically excluded trademark, patent and copyright 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.
So what exactly is Intellectual Property? It can be broken 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 allow the owners of intellectual property to prosper from the property they have created, thus allowing a financial incentive for the creation and investment in their intellectual property. However, many new start-ups in addition to small and medium sized companies do not fully understand their benefits or potential implications. These organizations may have very valuable rights but are unable to use them effectively while others are unintentionally violating intellectual property rights of others without being aware of costly legal ramifications.
Some important terminology was used above and should be explained further.
Patents - Cover new inventions including process, machine, manufacture or any new and useful improvement of an existing invention.
Trade-marks- Provide exclusive rights to word(s), symbols and designs to distinguish goods or services from others in similar marketplace.
Copyright - Only the copyright owner, often the creator of the work, can produce, reproduce, or grant permission to others to do so.
As technology moves ahead at lightning speed, it has made it increasingly easy to reproduce countless types of materials that are subject to copyright. Companies must be very careful not to infringe on the rights of others. Penalties for trademark, patent and copyright infringement have become very costly and will damage the reputation of these companies on a world wide scale. Up until the mid 1990's, the primary assets of most companies were their building, equipment, stock etc. Not anymore. Although these items still are very valuable, intellectual property, computer data, customer information are just as valuable and could lead to financial hardship if they are not protected with proper security measures and specific insurance coverage's.
When dealing with the various forms of IP, it is advisable to seek out a lawyer/law firm that specializes in copyright, patents, trademarks, or trade secrets. They should fully understand your business model and your technology as well as you do while being able to explain the legal issues in this complex field in clear, practical language that you can understand.
Another important way to protect IP is to obtain Intellectual Property Insurance. This coverage protects companies for copyright, trademark or patent infringement claims arising out of the company's operation. An Intellectual Property policy will pay the costs to defend you if someone tries to claim the rights to the same business model, process, or application. As long as the company is not aware of any pending litigation, infringements or violations, one can apply for insurance to protect your trademark or patent. Very few standard insurance policies protect businesses from loss or damage to their intellectual property. Similar to seeking out a prudent lawyer, it is just as important to seek out a company that specializes in this type of insurance. Make sure the policy is not limited to your specific province or state but rather on a worldwide basis. With more and more insurance companies entering this market, it should be rather easy to obtain a policy that fits your exposure.
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