Patent insurance: An inside view
15 April 2006
| In the second part of a series on patent insurance, M Qaiser and P Mohan Chandran, intellectual property consultants, explain the specifics of patent insurance policies; their structure, coverage, special clauses and what companies need to do to qualify. |
"Whether or not a patent is actually infringed, it costs $3 million on average to defend a patent lawsuit," says US patent attorney Dan Ravicher. That is only in attorney's fees and associated expenses, not the damages the jury may award. These can sometimes knock the entire assets off a balance sheet. In today's business scenario, risk management is a key focus, and patent liability insurance is the only effective protection available for a product portfolio. This insurance can be the best shield in the hands of all those companies — big, medium, small or start-up — that have to fight infringement lawsuits.
Though these policies have been in the market since 1995, it is only recently that large numbers of companies are opting for them, with an increase in the number of patent lawsuits being filed. The number of patent infringement lawsuits filed annually in the US increased by a whopping 111 per cent between 1999 and 2000.
Most insurance companies offer policies that cover a part of the legal expenses as well as the damages awarded in infringement lawsuits. The American International Group (AIG) offers patent insurance with high liability limits ranging from $1 million to $10.5 million, but carries a minimum deductible of $50,000 per claim.
A minimum co-insurance participation of 10 per cent by the insured is necessary. The policy covers only patent insurance, but trademark and copyright infringement may also be covered on payment of extra premium. Intellectual Property Insurance Services Corporation (IPISC), USA, offers 'defense cost reimbursement insurance', with limits ranging from $250,000 to $5 million.
In India, no insurance company, either in the public or private sector, offers any type of patent insurance for patent-holders. C S Rao, chairman of the Insurance Regulatory Development Authority (IRDA), recently acknowledged that no insurance company in India has even applied for a patent insurance product.
