With the continuous growth
of export, international sales, and the development of valuable patents by
Australian businesses, the number of IP infringement cases brought to court has
been steadily growing. The fact that locally placed design clusters form a part of the global
supply chain entails that designs pass through many different hands and
countries, and each new partner increases the risk of an infringement claim and
a contractual indemnification dispute.
risk through insurance
the high legal and representation costs, businesses must assess their capacity
to easily and quickly respond to an intellectual property claim or proceedings
in terms of both defense and enforcement of their IP rights. An adequate IP
strategy for such protection of intellectual property is Intellectual Property
Insurance (IP Insurance).
Insurance is available from specialized brokers and covers all intellectual
property aspects—including, but not limited to, trademarks, patents, designs,
copyright, and trade secrets. An example of typical policy cover may include
coverage: An example
Adverse Costs and/or Damages and/or Defense Costs
Extensions may include
Obligations to Contractual Parties/ Product Infringement Recall
Adverse Costs and/or Assertion Costs and/or
Extensions may include Contractual Disputes
Cost of Counterclaims
to the costs of defense in court or taking forth a legal challenge, IP
Insurance is a relatively more accessible option. Some policies start from
approximately $3,800 for the limit of $500,000 and, in some cases, go up to
$25,000. The factors that determine the IP Insurance cost include the given
risk profile, previous ownership dispute history, due diligence undertaken, as
well as whether or not the insured is an importer or exporter of IP. The cost
of IP Insurance can also be affected by past history of ownership disputes, which
requires further assessment from an IP insurer company.
should consider IP Insurance
present, businesses that adopt digital supply chains and online channels for
reaching new customers face considerable challenges regarding their ownership
rights’ protection. The factors that make these businesses vulnerable to IP
ownership claims are as follows:
Online sales with more prominent digital trademarks;
International export through retailers and distributors;
Designing or manufacturing some or all products outside of Australia through multiple supply chain partners;
Registering trademarks in countries with local systems for IP registration in local languages;
Distributing products with pending patents while trying to capture the market share.
Finding the best
Similarly to other types of
insurance, navigating the policies for IP Insurance is fraught with some risks.
One reliable indication of a well-constructed policy is that it clearly and
unambiguously specifies, even to an inexpert party, what is covered. In the
remainder of this article, we outline several key elements that a high-quality
policy should include.
The first essential element
of a well-constructed IP Insurance policy is worldwide coverage. As highlighted
by the example of Penfolds, IP infringement can occur anywhere in the world.
Cross-national differences in legislation and companies’ ability to trademark
certain words and terms —as was the case in Deckers’ filing suits against Australian
companies over the use of the term “UGG”—result in that a business can (unknowingly)
infringe an internationally renowned trademark. For that reason, any IP
Insurance policy must include cover for claim both in Australia and in any
Choice of representation
The second pivotal aspect
is the possibility to choose legal representation, which guarantees that owners
and managers can non-problematically work with the existing legal teams. This
is particularly relevant for the companies that have gone through the process
of obtaining patents and trademarks and have established
strong working relationships with IP law experts.
essential element of a high-quality IP insurance policy is
upfront cost coverage. As discussed in the beginning of this article, for many
businesses, engaging legal representation to enforce IP infringement or defend
a claim can be cost-prohibitive. A high-quality IP insurance policy should allow
legal firms to directly bill the insurer, thereby eliminating the risk of the
policy holder’s financial burden or having to take out loans to cover
reliable IP insurance policy should also include contractual liability.
International growth almost inevitably means entering agreements with third
parties who may help with retailing, distribution, manufacturing, or licensing.
Under these circumstances, a high-quality IP insurance policy can, and should,
extend to the parties who have contracts with the policy holder. This will
reassure companies that they are covered and not liable in case of a claim and
open to doing business with the policy holder.
The fifth and
final essential element of a well-structured IP Insurance policy is domain
expertise. Similarly to the undeniable importance of working with a lawyer who
has IP expertise, the best IP Insurance policies are underwritten and brokered
by domain experts. This expertise ensures that the insurance policies not only
cover the current IP landscape, but also factor in potential future trends. A
specialized broker with an in-depth knowledge of IP is also essential in
helping businesses to find the most appropriate policy for their size,
industry, and type(s) of IP.
In summary, IP Insurance, which is still a relatively new development in
the insurance domain, should become an intrinsic component of any business’
risk management strategy. For a comparatively low cost, an IP Insurance policy is
able to not only protect the company against and share the risk of these costs,
but also—and more importantly—provide business owners and senior managers with the
peace of mind that they will be covered in case of a claim.
Disclaimer: “The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.”