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Patent Insurance. A Worthwhile Solution. Finally.

The costs to defend and enforce patents are significant. These expenses can jeopardize the financial well-being of most organizations. Although insurance for Intellectual Property infringement has been available for quite some time, it had mostly remained cumbersome and cost prohibitive. Annual premiums were typically in the 6 figures, even for smaller organizations.

There have been noteworthy changes in the last few years which is great news for organizations facing increasingly litigious IP environments. Coverage is now more readily available and affordable than ever. The underwriting process no longer requires expensive and lengthy patent searches. In terms of cost, we now see premiums under $20,000, which was unheard of only a few years ago.

In addition to the risks of accidentally infringing on a competitor’s IP, there is no denying that Patent Trolls have taken the Patent Infringement concern to a whole new level. In 2006, suits initiated by Patent Trolls represented 19% of all patent ligation. Six years later, Patent Trolls filed 62% of all patent claims in 2012 (RPX Corporation). The trend continues to this day.

Concerns over the cost of potential patent litigation are well founded. The median cost to defend a patent infringement claim from a patent troll is US$983,000 at the end of discovery, and US$1.75M after trial (Am. Intellectual Prop. Law Ass’n, Report of the Economic Survey 35 - 2013). This does not account for potential damages paid to claimants, such as awards or royalties.

In the face of such potential expenses, Patent Insurance can be a great risk management tool. There are two main components to the coverage;

  1. The Shield: Providing coverage for legal expenses and potential damages against third party allegations stating you are infringing their IP.
  2. The Sword: Providing coverage for legal expenses to enforce your IP against an infringing third party.

With increased availability of coverage and competitive pricing, the timing might be right to explore Patent Insurance. Securing terms will help better asses the cost-benefit of this unique insurance solution for your organization. I encourage you to explore this coverage with your corporate insurance broker. And of course it would be a pleasure for us to assist. Feel free to reach out to discuss in more detail.

Serge Paquette, Vice President
Risk Balance Inc.