This document summarizes a presentation by Alex Fjelstad on insuring intellectual property. It discusses the history of patent insurance and the basics of infringement defense and enforcement insurance policies. Infringement defense insurance covers defending against patent infringement claims, while enforcement insurance funds enforcing one's own patent rights. Typical clients include startups, technology companies, those with vendor requirements, and public companies facing aggressive competitors. Premiums usually range from 1-3% of coverage limits.

1. Insuring Intellectual Property
Presented at:
The Carlson School of Business
University of Minnesota
September 27, 2016
Presented by:
Alex Fjelstad

2. Patent and Copyright Clause
“The Congress shall have Power… To promote the
Progress of Science and useful Arts, by securing for
limited Times to Authors and Inventors the exclusive
Right to their respective Writings and Discoveries”
ARTICLE I, SECTION 8, CLAUSE 8

3. First Patent Issued

4. About Alex
 Senior VP- Twin City Group
 Patent holder- RFID technology
 Patent holder-Insurance processes
 CEO- Insurance company
 CEO-Technology company
 Work exclusively in IP insurance
Alex Fjelstad
Twin City Group
4500 Park Glen Road
Minneapolis, MN 55416
952-924-6910 afjelstad@twincitygroup.com

5. Client’s Comment
“Hi Alex,
Yes, we were very pleased with the insurance
company and their claims agent in the US. Having
the insurance made all the difference. I hope we
can continue the coverage (although our other
competitors are not this aggressive or
unreasonable, I believe, there are still trolls out
there that we will want to protect against).
Because of the insurance, we received a very
favorable settlement.
Thanks for all your help over the years.”

6. Topics to be Covered
 Patent Insurance History
 Basics of Patent Insurance
 Infringement Defense Insurance
 Enforcement Insurance
 Other Coverage
 Typical Clients

7. Patent Insurance History
 Available under insured’s comprehensive general
liability coverage until ‘70’s
 Large global insurer wrote until ‘90’s
 Insurance industry Issues with Insuring IP risk
 Limited specialty insurers today
(Coverage still available under CGL for trademark and copyright infringement)

8. Basics of Patent Insurance
 Reimbursement of covered expenses
 Policy forms unique to each insurer
 Coverage can be modified
 Limits up to $20 million
 Claims-made basis

9. Basics of Patent Insurance
 Self-insurance retention (deductible) will apply
 Co-payment will apply
 Contractual indemnity relationships-very important
 Insurers have right to approve litigation counsel
 Insured’s “pre-knowledge” of potential claim
important

10. Infringement Defense Insurance
To defend products accused of patent infringement
US and worldwide coverage available
Advantages of insurance
 Prevents abandoning market share
 Prevents unexpected cash drain
 Provides litigation funds to optimize favorable outcome
 Deters frivolous suits
 Reduces financial pressure to settle
 Makes company more attractive to investors

11. Infringement Defense
Policy terms applicable to all insurers
 Coverage triggered by a circumstance; verbal, written or filed
litigation
 Products listed on policy. Insured decides what product(s) to cover
 $5,000 minimum self-insured retention. Higher SIR’s available
 Minimum co-payment of 5% of claim paid amount. Higher
percentages available
 Additional insured coverage available
The premium runs 1-3% of the per claim limit
 Example: 2% of a $1 million limit equals $20,000 premium per year
 Premium will vary depending on industry and number of products

12. Infringement Defense
Process to obtain a quote
 NDA signed if appropriate
 General discussion regarding issues and strategy
 Application for coverage completed (one insurer requires a
non-refundable search fee)

13. Additional Insured Coverage
 Required to extend coverage from insured to customer
 Must have written indemnity agreement
 Indemnity clause in contract issues
 Timely reporting of claim issues
 Cost runs 5-15% of premium

14. Enforcement Insurance
Provides funds for patent holder to enforce IP rights
US and world wide coverage available
Advantages of insurance
 Prevents loss of market share by timely response to
infringement
 Prevents unexpected cash drain
 Provides litigation funds to optimize favorable outcome
 Reduces pressure to settle
 Makes company more attractive to investors
 Strengthens the “licensability” of the IP

15. Enforcement Insurance
Policy terms applicable
 Coverage triggered by insured with approval of
insurer
 Patents and/or patent applications covered listed
on policy
 $5,000 minimum self-insured retention. Higher
SIR’s available
 Minimum co-payment of 5%. Higher co-payments
available

16. Enforcement Insurance
Premium runs 1-2% of limit purchased
Process to obtain a quote
 NDA signed if appropriate
 General discussion regarding issues and strategy
 Application completed and submitted for quote

17. Other Coverage
Post Grant Review
 Provides coverage to patent holders for post grant
review expense
 Inter Parties Review cost
 Premium cost-1% of limit

18. Other Coverage
Collateral Loan Insurance
 Guarantees repayment of bank loan up to value of
the IP as collateral
 Must purchase defense and enforcement
coverage
 Premium runs 10-12% of loan amount

19. Typical Clients
 Startup to $500 million revenue
 Technology based (SAAS)
 Vendor required
 Public companies
 Aggressive competitors

20. Questions?