This document summarizes intellectual property (IP) rights and protections for management general agents (MGAs) in the insurance industry. It discusses how MGAs fit within the overall insurance structure and where their key IP resides, including underwriting models, management information, know-how, and customer connections. The document outlines the main IP rights that apply, including rights in confidential information, database rights, copyright, trademarks, and patents. It provides details on ownership and enforcement of these rights, as well as practical precautions MGAs can take to protect their IP.

1. PROTECTING IP IN UNDERWRITING MODELS,
MANAGEMENT INFORMATION AND KNOW-HOW
20th January 2016
By David Wilkinson and Donald McCombie

2. 1 50030894.1
• Introduction – David Wilkinson
• What are the IP rights and who owns them? – Donald McCombie
• Enforcement and practical steps to avoid problems arising – David
Wilkinson
• Questions
OVERVIEW

3. 2 50030894.1
HOW MGA’S FIT INTO THE OVERALL
STRUCTURE OF THE INSURANCE INDUSTRY
Insurer
MGA
Policyholders
Policyholders
Brokers
MGA Agreement
Centre of the Market
TOBA

4. 3 50030894.1
• Underwriting models
• Management Information
• Know-How
• Customer connections
WHERE DOES IP RESIDE?

5. 4 50030894.1
• MGAs do not provide the capital
• MGAs do not necessarily own the client if introduced by the broker
• But MGAs have:
– Considerable underwriting and market knowhow
– Considerable amounts of data
WHY SHOULD IP MATTER TO MGA’S

6. 5 50030894.1
The key IP rights:
 Rights in confidential information
– Contractual versus equitable/implied obligations of confidence
– Employee duties and restrictive covenants
 Database rights
– Copyright in databases
– Standalone database right
 Copyright
– Rights in software and limits of copyright protection
– Rights in content
 Trade marks, passing off and patent rights
WHAT ARE THE IP RIGHTS AND WHO OWNS
THEM?

7. 6 50030894.1
May be protected using legal or practical means
 Practical measures often cheapest and most effective
– Must strike a balance between strong protection versus ease of
commercial exploitation
 Legal rights often expensive to enforce, and difficult to police
– Breaches of confidence often go undiscovered
 Legal protection is via action for breach of confidence in UK
– Information must:
1. have the ‘necessary quality of confidence’
2. be subject to an obligation of confidence
3. Have been ‘misused’ by recipient
– Rights only enforceable against person owing obligation of confidence
• Once disclosed to the world, can’t put genie back in bottle
Rights in Confidential Information

8. 7 50030894.1
‘Necessary quality of confidence’
 Must be able to define information said to be confidential
 Information must be genuinely confidential
– If already in public domain, cannot be confidential
– BUT collections and analysis of public information can be confidential
 English law recognises different types of confidential information
– Trade secrets
• Business plans and methods
• Financial and statistical information
• Customers lists and databases
• Computer source code and algorithms embodied in code
– Employees’ skill and knowledge
Rights in Confidential Information

9. 8 50030894.1
Obligations of confidence may be contractual or equitable/implied
 Contractual
– Express contractual provisions, written or otherwise
– Provides greatest certainty about existence of obligation
• Should also define the information itself and what constitutes ‘misuse’
 Equitable
– May be implied from the circumstances of disclosure of information
• Not mutually exclusive to existence of contractual obligation
– Will arise automatically from certain relationships
• lawyer/client
• employer/employee
• fiduciary duties – directors and executives
Rights in Confidential Information

10. 9 50030894.1
Misuse of information
 Contracts should define permitted uses
– Permitted use often purpose-bound
 Even if no contract, misuse often easy to characterise
 PROOF of misuse often most difficult aspect of breach of confidence claim
– Practical safeguards may be implemented before breach arises
– Post-breach evidence-gathering methods often expensive
– Covered later in presentation
Rights in Confidential Information

11. 10 50030894.1
 Databases are protected by copyright and by standalone right
– Standalone right most relevant to insurance industry
 Database rights can be very valuable, but often overlooked
– If breach of confidence fails, database right may come to the rescue
 Protection arises automatically
– Requires ‘substantial investment in obtaining, verifying or presenting’
information
 Standalone database right prohibits extraction or ‘re-utilisation’ of
whole or ‘substantial part’ of contents of database
– Repeated and systematic extraction of ‘insubstantial part’ of database
also prohibited
 Owned by person who ‘takes the initiative’ or ‘assumes the risk of
investing’ in making the database
– If made by employee, employer owns the database right
Database Rights

12. 11 50030894.1
 Copyright covers many types of content
– Literary, dramatic, musical and artistic works, sound recordings, films
 Copyright protects form not function
– Underlying meaning is not protected
 Software code is protected as a literary work
– Verbatim copying of code is infringement of copyright
– Re-writing code to perform the exact same function generally not an
infringement
– Algorithms and mathematical models implemented in code generally not
themselves protected
 Confidentiality of source code therefore important
 Copyright owned by author of code
– Belongs to employer if written by employee in course of employment
– Copyright belongs to contractor/contractor unless assigned in writing
Copyright

13. 12 50030894.1
 Trade marks
– Registered rights that protect brand names, logos
 Passing off
– Unregistered right that protects trading ‘goodwill’ in a name or business
– If name of start-up business confusingly similar to previous employer’s
business, may be liability for trade mark infringement or passing off
– Should avoid making ‘trade mark use’ of name of previous employer in
promotional materials
 Patents
– Registered rights that protect ‘inventions’
– In Europe, business methods, software, mathematical methods excluded
‘as such’
– In US, fewer exclusions from patentability
• ‘non-practising entities’
Other IP Rights

14. 13 50030894.1
• Causes of action
• Remedies
• Practical precautions
ENFORCEMENT OF IP RIGHTS

15. 14 50030894.1
• Breach of employment contracts
• Breach of restrictive covenants
• Breach of confidence
• Database right infringement
• Other causes of action: e.g. inducing a breach of contract; copyright
infringement; trade mark infringement/passing off.
CAUSES OF ACTION

16. 15 50030894.1
• Injunctions:
o Interim
o Springboard
o Final
• Search and seizure orders
• Delivery up
• Damages or account of profits
REMEDIES

17. 16 50030894.1
• Forensic IT investigations
• Document management systems
• Seeded databases
• Software tools
PROVING INFRINGEMENT

18. 17 50030894.1
• Clauses in employment contracts/commercial agreements
• Raise awareness of confidentiality
• Restrict access to confidential information
• Keep records of time and resources spent creating databases
• Secure ownership of copyright works
• Be aware of warning signs
• Take action promptly
PRACTICAL PRECAUTIONS

19. 360+ 1800+ 3000+ 45
Partners Legal professionals
worldwide
Total Staff Offices across 6
continents
Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored
in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. © Clyde & Co LLP 2016
ANY QUESTIONS?