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<ul><li>Identifying and Controlling  </li></ul><ul><li>Intellectual Property Loss Exposures with Risk Management Principle...
Why Risk Management <ul><li>Risk Management  - Management of the pure risks to which a company might be subject. It involv...
Better yet, Risk Management for Dummies… <ul><li>1.  What can go wrong? (risk identification) </li></ul><ul><li>2.  What c...
What is a “Loss Exposure”? <ul><li>In insurance, areas in which the risk of loss exists. Four loss risk areas are: (1) pro...
Loss Exposures Relating to IP: <ul><li>Protecting against others using the IP of your organization  (Income) </li></ul><ul...
Potential Risk Treatments <ul><li>Once risks have been identified and assessed, all techniques to manage the risk fall int...
Four Techniques: <ul><li>Avoidance  (eliminate, withdraw from or not become involved)  </li></ul><ul><li>Reduction  (optim...
Avoidance <ul><li>Used when the likelihood and severity of potential litigation outweigh potential for gain. </li></ul><ul...
Reduction <ul><li>Risk reduction or &quot;optimization&quot; involves reducing the severity of the loss or the likelihood ...
Sharing/Transfer <ul><li>Shifting risk from one party to another  </li></ul><ul><li>Examples: </li></ul><ul><li>Indemnific...
Insurance as a means for risk transfer <ul><li>IPISC </li></ul><ul><li>Available CGL coverage's </li></ul><ul><li>Other sp...
About IPISC <ul><li>Incorporated in 1990 </li></ul><ul><li>Program Managers for: </li></ul><ul><ul><li>Gotham Insurance Co...
Policies Offered <ul><li>Abatement Insurance (Enforcement) </li></ul><ul><li>Defense Insurance </li></ul><ul><li>Unauthori...
What Kinds of Intellectual Property Risks Can Be Insured? <ul><ul><li>Infringement Abatement  (Enforcement) of: </li></ul>...
About the Abatement Policy <ul><li>Reimburses Litigation Expenses to  enforce  intellectual property against alleged infri...
Abatement   Insurance <ul><li>Sample Policy Terms: </li></ul><ul><ul><li>Claims Made and Reported Policy </li></ul></ul><u...
What Kinds of Intellectual Property Risks Can Be Insured? <ul><ul><li>Defense of Infringement Assertions: </li></ul></ul><...
About the Defense Policy <ul><li>Reimburses Litigation Expenses to  defend  against charges of intellectual property infri...
Defense Insurance <ul><li>Sample Policy Terms: </li></ul><ul><ul><li>Claims Made and Reported Policy </li></ul></ul><ul><u...
Average Policy Premiums   Based Upon Applicants Quoted   <ul><li>Policy Limits $2MM/$2MM-  Average Risk   </li></ul><ul><l...
Additional Products Offered by IPISC <ul><li>Multi-Peril </li></ul><ul><ul><li>First-party coverage to cover the unexpecte...
Coverage's available in standard commercial policies <ul><li>Some limited coverage does exist in commercial general liabil...
Generalizations: <ul><li>CGL coverage for   “personal and advertising injury” </li></ul><ul><li>Caused by an offense arisi...
Specifics: <ul><li>Recent cases- trademark infringement lawsuit was covered under advertising injury: </li></ul><ul><li>-S...
2007 ISO CGL Form <ul><li>Exclusion: </li></ul><ul><li>Infringement of Copyright, Patent, Trademark Or Trade Secret </li><...
Travelers Policy Forms <ul><li>“Web Xtend” liability </li></ul><ul><li>By endorsement </li></ul><ul><li>Splits up “persona...
St. Paul Policy Forms <ul><li>Advertising injury offense covers libel, slander, and unauthorized use of any advertising ma...
St. Paul continued <ul><li>But… Nor will we apply this exclusion to advertising injury that results from the unauthorized ...
“nor will we cover” exclusion <ul><li>-upheld in  Molecular Bioproducts, Inc. v. St. Paul Mercury Ins. Co.,  2003 WL 23198...
Chubb policy <ul><li>Similar language to the St. Paul except: </li></ul><ul><li>This exclusion applies, unless such injury...
Other Specialty Markets <ul><li>Usually stand alone policies </li></ul><ul><li>Generally accepted definitions- IP insuranc...
Companies offering some form of patent infringement coverage: <ul><li>Chartis </li></ul><ul><li>Glencairn </li></ul><ul><l...
recap <ul><li>Avoidance  (eliminate, withdraw from or not become involved)  </li></ul><ul><li>Reduction  (optimize - mitig...
Retention <ul><li>Can be a self insurance plan, but often the inadvertent result of failure to plan </li></ul><ul><li>Must...
QUESTIONS? www.patentinsurance.com
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Identifing And Controlling Intellectual Property Loss Exposures

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Transcript of "Identifing And Controlling Intellectual Property Loss Exposures"

  1. 1. <ul><li>Identifying and Controlling </li></ul><ul><li>Intellectual Property Loss Exposures with Risk Management Principles </li></ul><ul><li>Presented by: </li></ul><ul><li>Maureen L. Veterano </li></ul><ul><li>Associate General Counsel </li></ul><ul><li>Intellectual Property Insurance Services Corp. </li></ul><ul><li>www.patentinsurance.com </li></ul>Tuesday, June 8th, 2010
  2. 2. Why Risk Management <ul><li>Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures. </li></ul>
  3. 3. Better yet, Risk Management for Dummies… <ul><li>1. What can go wrong? (risk identification) </li></ul><ul><li>2. What can we do so it doesn’t go wrong? (risk control) </li></ul><ul><li>3. How do we pay for it if it does go wrong? (risk financing) </li></ul>
  4. 4. What is a “Loss Exposure”? <ul><li>In insurance, areas in which the risk of loss exists. Four loss risk areas are: (1) property; (2) income; (3) legal vulnerability; and (4) key personnel in an organization. </li></ul>
  5. 5. Loss Exposures Relating to IP: <ul><li>Protecting against others using the IP of your organization (Income) </li></ul><ul><li>Avoiding the use of others IP (Legal Vulnerability) </li></ul>
  6. 6. Potential Risk Treatments <ul><li>Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories: </li></ul>
  7. 7. Four Techniques: <ul><li>Avoidance (eliminate, withdraw from or not become involved) </li></ul><ul><li>Reduction (optimize - mitigate) </li></ul><ul><li>Sharing (transfer - outsource or insure) </li></ul><ul><li>Retention (accept and budget) </li></ul>
  8. 8. Avoidance <ul><li>Used when the likelihood and severity of potential litigation outweigh potential for gain. </li></ul><ul><li>Simple Examples: </li></ul><ul><li>Importer receives a cease and desist letter from competitor. Importer holds no IP on the product and manufacturer will not indemnify for losses. Profit margin is low, inventory is low, and noninfringing alternate products are readily available. </li></ul><ul><li>Prior to going to market, manufacturer obtains freedom to operate opinions. Opinions rely primarily on arguments of invalidity of competitors patents, rather than noninfringement. Competitor has a history of litigation. </li></ul>
  9. 9. Reduction <ul><li>Risk reduction or &quot;optimization&quot; involves reducing the severity of the loss or the likelihood of the loss from occurring. </li></ul><ul><li>Examples: </li></ul><ul><li>Established protocol to safeguard against infringing upon IP </li></ul><ul><li>Nondisclosure agreement and noncompetes used regularly </li></ul><ul><li>Trusted advisor relationships- attorneys, accountants, insurance agents </li></ul><ul><li>“ everyday” due diligence- trade shows, vendors </li></ul>
  10. 10. Sharing/Transfer <ul><li>Shifting risk from one party to another </li></ul><ul><li>Examples: </li></ul><ul><li>Indemnification and hold harmless agreements </li></ul><ul><li>Alternate fee agreements for litigation </li></ul><ul><li>Insurance </li></ul>
  11. 11. Insurance as a means for risk transfer <ul><li>IPISC </li></ul><ul><li>Available CGL coverage's </li></ul><ul><li>Other specialty markets </li></ul>
  12. 12. About IPISC <ul><li>Incorporated in 1990 </li></ul><ul><li>Program Managers for: </li></ul><ul><ul><li>Gotham Insurance Co. </li></ul></ul><ul><ul><li>Lloyd’s of London </li></ul></ul><ul><li>Specialize in Intellectual Property (IP) insurance policies to manage the costs associated with litigating IP cases. </li></ul>
  13. 13. Policies Offered <ul><li>Abatement Insurance (Enforcement) </li></ul><ul><li>Defense Insurance </li></ul><ul><li>Unauthorized Disclosure Insurance </li></ul><ul><li>Multi-Peril Insurance </li></ul><ul><ul><li>Available as a rider to the above policies or stand alone </li></ul></ul>
  14. 14. What Kinds of Intellectual Property Risks Can Be Insured? <ul><ul><li>Infringement Abatement (Enforcement) of: </li></ul></ul><ul><ul><ul><li>Patents </li></ul></ul></ul><ul><ul><ul><li>Trademarks </li></ul></ul></ul><ul><ul><ul><li>Copyrights </li></ul></ul></ul><ul><ul><ul><li>Trade Secrets/Confidential Information </li></ul></ul></ul>
  15. 15. About the Abatement Policy <ul><li>Reimburses Litigation Expenses to enforce intellectual property against alleged infringers. </li></ul>
  16. 16. Abatement Insurance <ul><li>Sample Policy Terms: </li></ul><ul><ul><li>Claims Made and Reported Policy </li></ul></ul><ul><ul><li>Limits: $250K to $5MM </li></ul></ul><ul><ul><li>Self Insured Retention </li></ul></ul><ul><ul><ul><li>Minimum 2% of claim limits </li></ul></ul></ul><ul><ul><li>Co-Pay </li></ul></ul><ul><ul><ul><li>20% [can buy down co-pay to 10%] </li></ul></ul></ul>
  17. 17. What Kinds of Intellectual Property Risks Can Be Insured? <ul><ul><li>Defense of Infringement Assertions: </li></ul></ul><ul><ul><ul><li>Patents </li></ul></ul></ul><ul><ul><ul><li>Trademarks </li></ul></ul></ul><ul><ul><ul><li>Copyrights </li></ul></ul></ul><ul><ul><ul><li>Trade Secret / Confidential Information </li></ul></ul></ul>
  18. 18. About the Defense Policy <ul><li>Reimburses Litigation Expenses to defend against charges of intellectual property infringement and pay damages or settlement. </li></ul>
  19. 19. Defense Insurance <ul><li>Sample Policy Terms: </li></ul><ul><ul><li>Claims Made and Reported Policy </li></ul></ul><ul><ul><li>Limits: $250K to $10MM </li></ul></ul><ul><ul><ul><li>Higher Limits May be Available </li></ul></ul></ul><ul><ul><li>Self Insured Retention </li></ul></ul><ul><ul><ul><li>Minimum 2% of claim limits, higher limits may be required to offset risk and/or premium. </li></ul></ul></ul><ul><ul><li>Co-Pay </li></ul></ul><ul><ul><ul><li>10% </li></ul></ul></ul>
  20. 20. Average Policy Premiums Based Upon Applicants Quoted <ul><li>Policy Limits $2MM/$2MM- Average Risk </li></ul><ul><li>Abatement </li></ul><ul><li>Coverage for: 1 (one) Patent: $15,200 </li></ul><ul><li>2 (two) Patents: $22,400 </li></ul><ul><li>Defense- with Damages </li></ul><ul><li>Coverage for: 1 (one) Product: $20,300 </li></ul><ul><li> 2 (two) Products: $30,400 </li></ul>
  21. 21. Additional Products Offered by IPISC <ul><li>Multi-Peril </li></ul><ul><ul><li>First-party coverage to cover the unexpected loss of an intellectual investment. Can cover loss of commercial advantage, business interruption and/or redesign, remediation and reparation activities. </li></ul></ul><ul><li>Unauthorized Disclosure of Confidential Information </li></ul><ul><ul><li>Provides the legal expenses associated with accusations that the insured has committed an unauthorized disclosure of another party’s confidential information, such as: </li></ul></ul><ul><ul><ul><li>Trade Secrets • Privacy Policy Violations • Personal Information • Break-Ins • Software Programs </li></ul></ul></ul> 
  22. 22. Coverage's available in standard commercial policies <ul><li>Some limited coverage does exist in commercial general liability policies. </li></ul><ul><li>Most likely as part of Advertising Injury </li></ul><ul><li>If CGL coverage, insurer has a duty to defend </li></ul><ul><li>Currently: 2007 ISO CGL; Travelers; St. Paul; Chubb </li></ul>
  23. 23. Generalizations: <ul><li>CGL coverage for “personal and advertising injury” </li></ul><ul><li>Caused by an offense arising out of your business </li></ul><ul><li>Infringing upon another’s copyright, trade dress or slogan in your “advertisement.” </li></ul><ul><li>The use of another’s advertising idea in your “advertisement.” </li></ul>
  24. 24. Specifics: <ul><li>Recent cases- trademark infringement lawsuit was covered under advertising injury: </li></ul><ul><li>-Super Duper, Inc. v. Pennsylvania Nat’l Mut. Ins. Co., 683 S.E.2d 792 (S.C. 2009) </li></ul><ul><li>-General Cas. Co. of Wisconsin v. Wozniak Travel, Inc., 762 N.W.2d 572 (Minn. 2009) </li></ul>
  25. 25. 2007 ISO CGL Form <ul><li>Exclusion: </li></ul><ul><li>Infringement of Copyright, Patent, Trademark Or Trade Secret </li></ul><ul><li>“ Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights . Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement.” </li></ul>
  26. 26. Travelers Policy Forms <ul><li>“Web Xtend” liability </li></ul><ul><li>By endorsement </li></ul><ul><li>Splits up “personal injury” and “advertising injury” into separate offenses </li></ul><ul><li>No longer includes “use of another’s advertising idea in your ‘advertisement’” </li></ul>
  27. 27. St. Paul Policy Forms <ul><li>Advertising injury offense covers libel, slander, and unauthorized use of any advertising material, or any slogan or title, of others in your advertising. </li></ul><ul><li>Exclusions: intellectual property infringement </li></ul><ul><li>“Nor will we cover any other injury or damage or medical expenses alleged in a claim or suit that also alleges any such infringement or violation” </li></ul>
  28. 28. St. Paul continued <ul><li>But… Nor will we apply this exclusion to advertising injury that results from the unauthorized use of any: </li></ul><ul><li>Copyrighted advertising material; </li></ul><ul><li>Trademarked slogan; or </li></ul><ul><li>Trademarked title; of others in your </li></ul><ul><li>advertising </li></ul>
  29. 29. “nor will we cover” exclusion <ul><li>-upheld in Molecular Bioproducts, Inc. v. St. Paul Mercury Ins. Co., 2003 WL 23198852 (S.D. Cal. July 9, 2003) because it was clear and explicit </li></ul><ul><li>-but see Align Tech., v. Federal Ins. Co., 2009 WL 4282098 (N.D. Cal. 2009). Language did not put an insured reasonably on notice </li></ul>
  30. 30. Chubb policy <ul><li>Similar language to the St. Paul except: </li></ul><ul><li>This exclusion applies, unless such injury: </li></ul><ul><li>Is caused by an offense described in the definition of advertising injury; and </li></ul><ul><li>does not arise out of, give rise to or in any way relate to any actual or alleged assertion, infringement or violation of any intellectual property law or right, other than one described in the definition of advertising injury. </li></ul>
  31. 31. Other Specialty Markets <ul><li>Usually stand alone policies </li></ul><ul><li>Generally accepted definitions- IP insurance versus Media Insurance </li></ul><ul><li>The term “Media Insurance” is used to describe liability coverage against allegations arising out of communications activities of the organization. </li></ul><ul><li>Media insurance generally covers all infringement claims except patent, however terms vary greatly. </li></ul>
  32. 32. Companies offering some form of patent infringement coverage: <ul><li>Chartis </li></ul><ul><li>Glencairn </li></ul><ul><li>IPISC </li></ul><ul><li>Kiln </li></ul><ul><li>Samian </li></ul><ul><li>See The Betterley Report April 2010 www.betterley.com </li></ul>
  33. 33. recap <ul><li>Avoidance (eliminate, withdraw from or not become involved) </li></ul><ul><li>Reduction (optimize - mitigate) </li></ul><ul><li>Sharing (transfer - outsource or insure) </li></ul><ul><li>Retention (accept and budget) </li></ul>
  34. 34. Retention <ul><li>Can be a self insurance plan, but often the inadvertent result of failure to plan </li></ul><ul><li>Must be used for current or preexisting losses </li></ul><ul><li>Advantages: no premiums </li></ul><ul><li>Disadvantages: usually cannot spread the cost over a fixed period of time; company may not have sufficient funds or credit to survive the loss. </li></ul>
  35. 35. QUESTIONS? www.patentinsurance.com
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