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How to Manage Intellectual Property Infringement Litigation Risk
LGL001
Speakers:
• Courtney Dillon, VP Marketing & Business Development, Intellectual Property Insurance Services Corporation
• Bob Fletcher, President & CEO, Intellectual Property Insurance Services Corporation
Learning Objectives
At the end of this session, you will:
• Understand IP litigation statistics and costs associated.
• Find out how to identify and assess IP exposure.
• Learn about IP specific insurance to mitigate cost of IP infringement.
• Gain knowledge about the recent history of legislative and judicial actions important and pending federal legislation.
Intellectual Property Risk Guru
What is Intellectual Property?
• Patents: protect inventions
• Trademarks: identify the source (maker or provider) of products and services
• Copyrights: protect original works of authorship, such as literary works, music, art and software
• Trade Secrets: protect confidential information or secrets
Do You Know The Statistics?
• Average cost of Patent Infringement Litigation
$2.8 million Dollars
• Average length of business disruption due to an IP lawsuit
1 ½ to 3 years
• Growth in patent lawsuits since 2010
71%
• Number of patent infringement lawsuits filed in 2015
5,868
Second Most Filings in History
Patent Litigation
Amount in controversy
< $1 M | $873 K
$1 M - $10 M | $2.2 M
$10 M - $25 M | $3.5 M
Copyright Litigation
Amount in controversy
< $1 M | $325 K
$1 M - $10 M | $663 K
$10 M - $25 M | $1.1 M
Intellectual Property Litigation Costs
Trademark Litigation
Amount in controversy
< $1 M | $354 K
$1 M - $10 M | $670 K
$10 M - $25 M | $1.1 M
*2015 AIPLA Report of the Economic Survey- Litigation Costs reported are average litigation costs through trial, without
assessed damages and/or settlements.
Patent Lawsuits vs.
Stockholder Lawsuits = 22:1
©2016 Intellectual Property Insurance Services Corporation Ver 0216016
Patent Lawsuits trigger IP policies
Stockholder Lawsuits trigger D & O policies
Any Business Holding IP Rights Can Experience Infringement
Who is at Risk?
Case Study: Peticure
All Companies Making, Using or Selling Products and/or Services
Case Study: Octane Fitness
Who is at Risk?
Who is at Risk?Fortune 500 Companies
20151982 1992 2002
62%
38%
62%
87%
38%
13%
Tangible Assets
Intangible Assets
Intangible Assets as a % of S&P 500 Market Capitalization
83%
Source: Brookings Institute and Newlight Capital
17%
What is Intellectual Property?
• Patents: protect inventions
• Trademarks: identify the source (maker or provider) of products and services
• Copyrights: protect original works of authorship, such as literary works, music, art and software
• Trade Secrets: protect confidential information or secrets
What Exactly is Intellectual Property (IP) Anyway?
• It’s Property, just like other legal rights are property –intangible property.
• It’s Products of the mind.
• It’s Exclusive Rights to use and prevent others from using a thing, not unlike owning land.
Intellectual Property (IP)… Products Of The Mind
• Innovation leads to Patents
• Identity Symbols become Trademarks/ Trade Dress
• Literary Ideas are Copyrighted
• Know-how becomes Trade Secrets
• Aesthetics are protected by Design Patents
Innovation
Innovation
Innovation
IP is everywhere…Packaging & Appearance
–
Design Patent / Trade
Dress
Advertisements
& Marketing
–
Copyright ©
Ocean Spray® - Registered Trademark
Recipe
-
Trade Secret or
Utility Patents
Source: 2011 PLUS Conference, “How to Overcome Your Intellectual Property Fear Factor”
The Product Itself:
Production, Container,
Filling, Labels, etc.
–
Utility Patents
Assessing the Risk
IP insurance should be secured to protect strategic business assets. Questions to ask…
• Do you have rights in Patents, Trademarks and Copyrights?
• Are you making, using, selling or importing products or services?
• Do you have sought-after technology enabling products or processes?
• Have you ever done a risk assessment to detect your potential risk and exposure to IP infringement?
• How litigious are competitors in your industry?
• Have you ever been involved in an IP lawsuit?
• Have you budgeted for a $2.8M, worse case scenario, lawsuit?
• Could your company survive even a relatively “inexpensive” lawsuit?
What Are The Real Risks?
• You are sued in an attempt to put you out of business (Defense Policy)
• A larger competitor completely ignores your IP (Enforcement Policy)
• You haven’t the funds to recover from either of the above even if you win the IP suit (Multi-Peril Policy)
• You are sued by a Non-Producing Entity – NPE (Troll Defense Policy)
• An employee “jumps ship” and takes secrets (Unauthorized Disclosure Policy)
• A third party challenges your patent in an IPR (Post-Grant Proceeding Policy)
• You need more development money but don’t want to give up control and can’t get a loan (Collateral Protection Policy)
Cyber
Cyber does not cover products and services
limited to trademarks and
copyrights, at best
Coverage Gaps for
IP Infringement
Media
No patent coverage
Trademarks and copyrights have limited coverage
Professional Liability
Professional advice must be a direct cause of the infringement
allegations
CGL
Advertising Injury-Narrowly, limited
patent coverage, if any
Patent must “claim” the actual way the
product or service is advertised
Trademarks and copyrights only as
exclusively used in advertising
D&O
No intellectual property
infringement litigation expenses
or damages covered
More Coverage Gaps for
IP Infringement
E&O
No patent coverage
Trademarks and copyrights, may
have some coverage older
policy forms
Stand Alone IP Policies
• IP Enforcement Insurance• A unique, plaintiff’s policy to help your customers pay the cost to enforce IP
rights
• IP Defense Insurance • The solution to the gap left in conventional policies for IP risks to help your
customers pay the cost to defend charges of IP infringement
Additional Stand Alone Policies• Multi-Peril IP Insurance
• A first-party coverage, business interruption policy due to the loss of the insured IP litigation.
• Unauthorized Disclosure Insurance• Coverage for the unintentional exposure of a 3rd party’s entrusted confidential
information.
• InventPro® Enforcement Insurance• A starter enforcement policy for inventors, start-ups, and small companies
with limited IP.
• Troll Defense Insurance• Specifically covers infringement charges brought by pre-identified patent trolls
and/or patent troll-related patents.
• Post Grant Defense Insurance• Provides coverage for inventors by paying the legal costs of responding to AIA
(American Invents Act) actions and maintaining the validity of the patent in question.
• Collateral Protection Insurance• Policy allows using patents as collateral for a loan, with collateral default
covered by the insurance.
Other IP Risk Mitigation Techniques
• Patent Pools (Patent Aggregators)
• Association memberships
• Customized Low Limit Policies
• Contingent Fee Arrangements
• IP Glossary Protection Policies
Identifying & Assessing IP Exposure
• Industry considerations• Main factors are size of industry and rates of litigation (i.e. how much money
is there to win from lawsuits?)
• Competitive Landscape• What is the size distribution of competitors and how active are the bigger
players in obtaining patents?
• Technology Inventory• What is your company’s technology strengths, which are being patented, and
which overlap with your competitors’ patented technology?
• Innovation Updates and Advantages• Which competitors are most often applying for patents on their innovations in
areas that overlap your innovations?
Real Life Industry ExamplesE
nfo
rcem
ent
IndustryPolicy
LimitsSIR Premium
Top 6 Most Litigated
Industries
Management Consulting
Services$3M/$3M $60,000 $23,000
± Business/Consumer
Services
Waste Water Treatment Industry $1M/$1M $20,000 $15,000 ± Industrial/Construction
Compliance Technology Tools
and Services$1M/$1M $60,000 $14,000 ± Computer Hardware
Software Technology $2M/$2M $60,000 $16,000 ± Software
Defe
nse
Manufacturing Technology $2M/$2M $40,000 $39,000 ± Industrial/Construction
Wireless Communications $5M/$5M $100,000 $53,000 ± Telecommunications
Software $2M/$2M $40,000 $88,000 ± Software
Medical/Surgical Devices $2M/$2M $250,000 $29,000 ± Medical Devices
Recent HistoryLegislative and Judicial Actions*
• U.S. Supreme Court Decision: Octane Fitness vs. ICON Health & Fitness
• Congressional Remedies• America Invents Act
• Innovation Act
• Federal Court Decisions• Alice Corp. v. C.L.S. Bank Int’l
• Mayo v. Prometheus
• State Actions• TX, FL, CO et al prohibit bad faith assertion of patents
*See “Patent Trolling in the Wake of the Octane Fitness Case”
New Matter, volume 40, number 3, page 24
Thank You
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