For many companies, a significant portion of their net asset value is represented by intangible assets. Intellectual Property (IP) falls into this category. While protecting physical assets is a given, "creations of the mind" can also be precious. They can drive future growth and financial success. So, how can you protect them?
A brilliant idea can quickly lead to substantial wealth for innovators and entrepreneurs. Every great idea begins as a concept. Whether it's a successful sportswear brand,1 or a billion-dollar acquisition by a tech giant like Facebook.2 For many start-ups and high-tech companies, intellectual property may account for much of their book value.
Despite this, people often overlook intellectual property risks. As well as the importance of safeguarding these intangible assets. The potential risks of not protecting your IP can be significant. To help your business defend against these risks and protect its valuable ideas, you need the right protection in place.
Depending on what you've created, there are different types of protection.3 This is where IP insurance comes in.
What is intellectual property?
IP refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. It is legally protected through:
- patents,
- copyrights,
- trademarks,
- and trade secrets, providing exclusive rights to creators and inventors.
These protections encourage innovation. They allow creators to benefit financially and maintain control over their work. IP rights help ensure creators can be recognised and compensated for their efforts. It creates an environment where creativity and innovation can thrive.
Protecting your IP makes it easier to take legal action against anyone who steals or copies it.
What is intellectual property insurance?
IP insurance is a liability policy. Its purpose is to protect a business against legal fees, damages and expenses incurred in a judicial proceeding relating to IP.
There are two main types of IP cover:
- A standalone IP policy that can cover either defence or pursuit of an IP claim.
- Defence cover provided under a tech professional indemnity insurance. This is for issues arising out of media content, user generated content, or the policy holder’s business activities.
However, as every risk is different and each tech company’s requirements may vary, cover can be tailored to suit a business’s individual needs.
What does intellectual property insurance cover?
Insurance products can cover one or more rights and a variety of IP risks, including:4
- Opinion only - covers legal costs of you obtaining an opinion on the likelihood of successfully enforcing or defending an IP claim.
- Enforcement and defence - covers legal costs of you taking action to stop others infringing IP rights and defending infringement allegations. It can cover enforcement and defence either separately or together.
- Damages - covers any damages payable if you lost an infringement action.
- Validity - covers legal costs of defending challenges to the validity of your rights.
IP insurance can help protect your business against several disputes relating to a breach, this includes:
- Trademarks – such as brand names and logos used on goods and services.
- Copyright – which protects the owner against others copying or reproducing their work.
- Patent infringement - which protects a company if they are accused of infringing upon someone else’s patent.
- Trade secrets – such as private information that is important to a business. This is usually because it gives the business a competitive advantage in its marketplace.
To decide if your business could benefit from investing in IP insurance, you must first:
- recognise,
- understand,
- and, if appropriate, protect your IP.
The Intellectual Property Office (IPO) has a range of free online tools. So you can learn more about trademarks, designs, patents, and copyrights.4
Common types of technology intellectual property disputes
When it comes to technology, specifically computer software in the UK, it is protected by copyright as it is seen as a work of literature. Here are the top three types of client dispute scenarios seen in the sector:
Software creation/adaptation
Replicating a software product is not classed as copyright infringement unless the software code is copied. However, this does not stop claims being made for legal costs to defend against the allegations.
Development
Businesses may need to outsource software development to third party contractors. When this happens the IP created is generally owned by the contractor even though they are being paid to develop it. That’s why having clear terms is essential when outsourcing development work.
Software under licence
When a business uses software under licencing agreements, it should be clear on any restrictions on how many users it can have. Otherwise, it could be exposed to breaching IP rights.
What does IP insurance not cover?
It's important to note that IP insurance products protect intellectual property. This can include software and online content. But this doesn't mean that it protects against all attacks on your digital platforms. You will need additional cyber insurance to protect against cyber threats.
Additional aspects generally not covered by IP insurance include:
- Contractual disputes - issues arising from breaches of contract, such as licensing agreements.
- Infringement prior to policy - any infringement activities or disputes that began before the insurance policy was in effect.
- Wilful infringement - deliberate infringement or unlawful actions by the insured.
- Certain legal costs - routine legal costs for IP registration or maintenance are typically not covered.
This highlights how important it is to understand the specific terms and limitations of an IP insurance policy.
If you’re not sure whether you need this cover, or if you want to purchase IP insurance contact a Marsh Commercial adviser.
Sources:
2. vlinkinfo.com/instagram-success-story
3. gov.uk/protect-your-intellectual-property
