Patent Insurance

What is it?

A patent itself is a kind of insurance. The definition of a patent is an exclusive right granted by the government to make, use or sell the patented products. In other words, no one other than the patent-holder can manufacture or market the patented products.

Patent insurance has been around for many years on the international scene but not many businesses know about it. With more and more firms entering the knowledge-based business and fighting hard to safeguard their interests and achieve their business objectives, insuring one's intellectual assets have now become an imperative and vital strategic business decision.

Why do you need it?

Most companies, including well-established ones, may not want to use their gross profits to fight any Intellectual Property or Patent matters that may arise during the course of their business. Small to Medium Businesses, that have weaker cash flows, fear the idea of patent litigations. It can have a huge  impact on their growth, affects their research and development, and ultimately on their turnover.

Some companies do not apply for patents because of the mistaken belief that it costs too much in money and time in obtaining and protecting the patents. On the contrary, the cost of applying and securing a patent is only a fraction of the cost of developing the new product. If the invention has financial viability, then it makes good sense to apply for a patent.

Once the patent is granted, insuring the patent should be the next step as it reduces the financial burden of fighting any legal suits. An insured patent also discourages probable infringement, as the infringing firms would fear the financial strength of the patent holder (due to the presence of a big insurance company) in fighting any legal battle.

How does it work?

It is Insurance that protects a patent holder against loss due to infringement of a patent. There are various forms including:

  • Patent infringement liability insurance which is a form of professional liability insurance for manufacturers, users and sellers accused of infringing a patent holder's rights. Coverage is provided for defense and indemnity and can include profits and royalties that must be turned over to the patent holder. Coverage is written on a claims-made basis.
  • Patent enforcement litigation Insurance for a holder of a patent against infringement by another person. Coverage is written on a claims-made basis and includes the cost of legal defense to enforce the patent. The policy includes a co-payment provision, usually 25%. Excluded are liability for compensatory or consequential damages, fines, punitive damages, exemplary damages, and multiple damages.

If new technology is patented by the company, they will benefit from the patent pursuance or enforcement insurance. If the patents are not held by the company, it is possible that some other company holds the patents, and therefore the company must have the patent litigation insurance, to mitigate the risk of possible infringement suits against the company.

Who Should Obtain Patent Insurance?

Patent insurance of both kinds (defence and offence) should be obtained by Businesses of all sizes – small, medium and large. Basically, if you have your own patents, you should have Patent Enforcement Insurance. If you don't have patents on your product line, it is recommended you have Patent infringement Liability Insurance.

Effective management of intellectual property basically involves creating, maintaining, and safeguarding its patent portfolio, apart from strategic planning of risk management. This requires constant vigilance for any infringement by competitors. The company also needs to be cautious in its research and development work while expanding its portfolio, so that it does not infringe on others' patents. According to American Intellectual Property Law Association, depending on the amount of infringement in question, the average cost of a patent litigation is $0.5 million to $5 million for both the plaintiff and defendant,. In some cases, the costs could also go as high as even $500 million.

For small and medium enterprises and firms entering a new business, it could be a question of survival as a single infringement case might impair their entire portfolio of products and services. The invisible costs may include the stress on the employees involved and also loss of many man-hours as they go about fighting an infringement or an allegation of infringement. The company's business and its image may also take a beating as customers and investors lose their confidence when a lawsuit is filed.

How much does the Insurance Cost?

Insurance companies carefully consider the following aspects of the insured company:

  • Past attempts at handling and enforcing patents
  • Licensing programmes
  • Detailed patent claims of the insured's patented product
  • Steps taken by the company to protect and monitor conflicting patents
  • Existing and potential competitors in related markets
  • Sales and market share of top five companies in the market
  • The known patents and patent-holders in a particular field
  • The availability of capital resources for marketing a competitive/patented product.

Premiums for patent insurance depend on the patent and/or the product being protected. The rates are usually between 2 to 5% of the insured amount. Damages can be covered up to $1 billion under the insurance, while $20-30 million are common. Insurance limits up to $15 million coverage per patent are available. Deductibles can start around $50,000 to $100,000 and include a co-insurance percentage after the deductible. The co-payment can vary from 15% to 25%. Defence expenses such as legal fees, declaratory statements, injunctions, and appeals are usually covered by the policies. The insurance coverage premiums for a $1 million patent start at $25,000 plus charges.

 

Who can help?

An Insurance Broker who specialises in this cover can find the right Insurer for you with the most appropriate policy wording. An insurance broker's role is to act as your representative and work in your interests, seeking the best cover at the best price for you with their skill, market knowledge and experience. Call a good one.

 

Call CPR –Experts who will save you

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Latest News

CPR joins Ausure

We would like to announce to all our Clients, Prospective Clients, Suppliers and Insurers, that Cooper Professional Risks Pty Ltd trading as CPR Insurance Services, will be leaving National Adviser Services Pty Ltd (NAS) and joining Ausure Pty Ltd as a Corporate Authorised Representative from 5 March 2018.

Fundamentally, there is no difference to you, except our Invoices will look a little different, and the Banking details will be in a different name and account number. Everything else at CPR stays the same.

There are a number of reasons we have made this decision, but the primary reason is for what we believe is best for our clients.

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Special offer to CPR Insurance clients

Employsure are providing a FREE Business Health Check to all our clients and gives you the opportunity to receive an analysis of the health and safety requirements in your workplace. Also. Employsure  will review your employment agreements as well as your wage rates helping you to avoid workplace claims.

Ordinarily this would cost you at least $1,250 but because you are a CPR Insurance client, it is free!

It involves the following review for you.

SAFECHECK

A specialist Work Health and Safety Consultant will visit your workplace and carry out:

A review of your business’ current work health and safety policies, procedures and systems to identify areas of concern or non-compliance

Following the review, you will receive a report summarising the findings and the health and safety

Status of your workplace

WAGE CHECK

A Wages Adviser will review your rates of pay and produce a Wage Check report.

The review will be conducted against the industrial instrument applicable

A report will be supplied advising if the wages are compliant and what steps to take to achieve compliance

CONTRACT REVIEW

A Document Consultant will review an employment agreement and provide recommendations.

The review will highlight compliance issues with the Fair Work Act 2009 as well as best practice

The report will make recommendations to achieve compliance and provide protection to your business.

This will remove any areas of potential dispute and risk

So what do you have to lose? Contact us on 07 3123 1137 and arrange 

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