Intellectual Property Liability Is Everywhere – But Where Is The Insurance Coverage?
Intellectual Property Insurance Coverage
It seems as though virtually anything created can be patented, copyrighted, trademarked or otherwise protected. Oddly enough, even with patent protection there is danger. It is easy to believe that if you hold a patent, copyright or trademark you cannot possibly infringe on someone else’s intellectual property – but that’s not true. George Harrison certainly had a copyright on his song “My Sweet Lord” but that didn’t prevent highly publicized and successful litigation against him due to its similarity to the old Shirelle’s hit “He’s So Fine” in the 1970’s.
With an average cost of $1.2 million to litigate, patent infringement trials weigh in as one of the most expensive types of litigation in the US today. What was once the realm of the individual like Ben Franklin or Thomas Edison, or the very nearly individual (think Wright Brothers), has now become big business. IBM, which annually tops the list of companies applying for and receiving patents, has received over 22,000 patents from 1993 to 2002, with patents accounting for about $10 billion in royalties during that ten year period according to the company’s website. Complicating matters is the relatively recent innovation in its own right of the “Business Method Patent.” Examples of these controversial patents are Amazon’s Internet shopping cart, or the “reverse auction” process that Priceline created and patented.
Contrary to popular belief, however, intellectual property is not the patent or copyright that one applies for, but rather the idea behind it. The registration process, be it copyright, patent, or other method, is merely a form of evidence or proof of the origin of the idea, and its timeline. The piece of paper that one might receive acknowledging a copyright is merely a statement that the Office of Copyrights has not received anything else prior to the submission of the material that resembles it enough to call into question the authenticity of the work. Conceivably, one may apply for and receive a copyright or patent for a piece of work and yet be sued. But where’s the insurance coverage you say? Good question. The answer is – it depends.
Take the Recording Industry Association of America’s litigation against numerous individuals in the summer of 2003. Would your homeowners’ insurance policy apply if you were sued for negligent supervision of your teenager leading to the illegal uploading of music to the Internet? The answer is probably “no” because there is no bodily injury or property damage (theft of intellectual property is unlikely to be perceived as a form of property damage), and the insurance policy is not designed to respond to pure financial loss claims. So in a personal sense, you are probably out of luck.
For businesses the news is not as grim. In a business scenario, the General Liability Insurance Policy has often been called upon for coverage in patent, copyright and trademark infringement cases. If there is insurance coverage to be found, it is the Advertising Injury portion of the policy but the catch is that the offense must then occur in the course of advertising one’s product, and not, for example, in the delivery of the product. So although a computer-consulting firm may infringe on another firm’s copyright or patent (source code is patentable), it is probably not covered under the General Liability Insurance Policy because the offense did not occur while advertising the firm’s services.
The good news is that there are an increasing number of insurance products that are available for intellectual property insurance coverage in the course of business operations. Patent Infringement Liability Insurance is available from a select few niche insurance markets, though premiums are usually high, and coinsurance and retentions can be steep too. Professional Liability Insurance for technology consultants and other companies with an intellectual property exposure can often be endorsed to cover copyright or trademark infringement, though usually not patents. Advertising agencies or media businesses may find intellectual property insurance coverage available for their operations as well. If you are concerned about your intellectual property exposure, you need to talk to your Trusted Choice Independent Insurance Agent to see what coverages are available. Another good idea would be to speak to a lawyer who is well-versed in intellectual property law to learn what steps you should be taking to protect your intellectual property and minimize the risk of infringement.