Don’t overlook insuring your most valuable asset!

As a business owner or manager you will appreciate the benefit of insurance. Whether it be for contents of your premises, employers’ liability, manufacturers’ liability, public liability, freight or business interruption – and of course directors’ and officers’ liability – the knowledge that you’re protected for unforeseen risks is of great comfort.

But what about the most valuable assets of your business – your intellectual property (IP) – have you got insurance to cover that? How do you protect your business from the risks that come from launching an innovative new product? Will your business be able to cope if a competitor copies your most successful product lines?

There are plenty of policies out there which will pay a claim if you breach a third-party’s intellectual property, such as a trade mark or patent. However, bringing a claim when you have discovered a third party is infringing your IP is traditionally something you would need to fund yourself.

The initial cease and desist letter could incur fees of between £750 to £4,000 plus VAT depending on the complexity of this infringement, but if the alleged infringer ignores this and court action becomes necessary, or the issue is so urgent that you need an interim injunction to protect your intellectual creations, legal costs can run to £60,000 to £100,000 plus VAT.  Then there is the lost revenue caused by the infringement which can be between £100,000 and £600,000 depending on the IP right and how long the infringement goes unchallenged.

Many SMEs will have invested similar sums setting up their businesses and obtaining patent protection or securing a substantial trade mark portfolio to protect their services. Against this background, funding litigation becomes ever more daunting. That means a significant number of infringements go uncontested, and those SMEs end up losing their ‘first-mover’ advantage.

However, there are now a growing number of insurers offering more comprehensive cover for your IP rights. Typically, such policies will provide cover not only for defence costs if you have infringed another’s IP, but also:

• Pursuit costs, such as bringing a claim against the infringer or opposing a trade mark application which is too close for comfort
• Indemnifying losses of those in your supply chain – we are seeing a rise in primes insisting on an indemnity if your supply to them is deemed to have infringed another’s IP
• Loss of profits
• Payments of damages
• The loss of the IP right altogether.

Specialist IP insurance brokers can find the right policy for you and your business.  As you might expect, the premiums reflect the amount of cover required and range from £1,500 per annum for £250,000 of cover, to £5,000 per annum for cover up to £1m.

Contrast this with adverse costs insurance after a claim has been intimated (‘After The Event’, or ‘ATE’ cover). Traditionally, the premiums for ATE will be a percentage of the cost risk potential, sometimes 60%, so if cover for £1m was needed, that would be a premium of £600,000!

Such policies can cover all your business’ IP without having to complete extensive forms detailing your IP assets. That said, knowledge is king, and understanding the extent of your IP estate is imperative for portfolio management and enforcement.  Please see here for more information on IP audits and the potential of reducing the cost of the same with a £2,500 grant from the Intellectual Property Office.

You have insurance for the vehicles that get you to work, so why not insure the assets that will get your business the success it strives for?