Intellectual Property Insurance
Sponsored By:
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Participation
 Q & A is welcomed during the presentation and at the end of
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 Write your question in that box and send it to the
presenter/organizer.
 The presenter will take those questions in the order
submitted.
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Polling
 Throughout the class we will be conducting periodic
polls.
 We need 100% participation on the polls.
 The polls are intended to check participation but also
to create discussion topics throughout the
presentation.
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Forms To Complete for CE
 After class ends:
 Return attendance form.
 Proctors- return your form to email address. [Email
address is in chat window or in email sent to you
today.]
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DOI Requirements
 We will file your hours with the DOI after the completion of this
webinar and we have received the attendance form.
 You have 48 hours to return the form.
 You will be sent a Certificate of Attendance/Completion by
email. Please retain this for your records for five years.
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Intellectual Property Insurance
Your Presenters Today
Chuck Baxter J.D.
Laurie Infantino AFIS, CISC, CIC, CRIS,
General Counsel and Senior Underwriter,
ACSR, CISR
Intellectual Property Insurance Services
President, Insurance Community Center,
Corporation
Insight Insurance Consulting
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Disclaimer
Insurance forms and endorsements vary based on insurance company, changes in
edition dates, regulations, court decisions and state jurisdiction. The
instructional materials provided in this class are intended as a general
guidelines and any interpretations provided do not modify or revise insurance
policy language. The authors of these materials, are the Insurance Community
Center (ICC) and Intellectual Property Insurance Services Corporation (IPISC).
In providing these materials, ICC and IPISC assumes neither liability nor
responsibility to any person or business with respect to any loss that is alleged
to be caused directly or indirectly as a result of the instructional materials
provided.
Copyright 2010 – 2012 All Rights Reserved
www.insurancecommunitycenter.com
laurie@insurancecommunitycenter.com
www.patentinsurance.com
cbaxter@patentinsurance.com
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Presentation Topics
 Background on Intellectual Property
 Types of Intellectual Property
 Intellectual Property Law Issues
 Cyberspace, Intellectual Property Issues
 Intellectual Property and Insurance
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Intellectual Background
You read about it everyday
in the Newspaper.
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Intellectual Background
In no particular order, the three areas of liability claims
that seem to make carriers the most unhappy (or
suspicious) are:
1. Employment claims
2. Environmental claims
3. “Coverage B”-type claims- Intellectual
Property, false advertising, etc.)
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“Adidas Trademark Suit has Legs”
Boston Herald
Adidas was awarded a $304.6 million verdict
against Payless Shoe Source on May 5th for selling
knockoff, striped sneakers. Adidas is poised to win
even more from Wal-Mart Stores, Inc. in a lawsuit
making similar claims.
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Mattel awarded $100 million in
Bratz lawsuit
 MGA and its chief executive officer were told to pay
a combined $90 million in three causes of action
related to Mattel’s employment contract with
designer Carter Bryant, who developed the Bratz
concept. The jury also ordered MGA, Larian and
subsidiary MGA Hong Kong to pay $10 million for
copyright infringement.
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BlackBerry vs. Research in Motion
 BlackBerry maker, Research in Motion, said
Friday that it agreed to pay $612.5 million to
patent holding company NTP to settle a longrunning dispute that had threatened to shut
down the popular wireless e-mail service for
its 3 million users.
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BlackBerry vs. Research in Motion
Blackberry
Icon Patent Holder
Process(s) Patent
Holders
Case Manufacturer
Keyboard and button
technology
Sound Technology
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Headphone
Technology
Could This Happen to Your Client?
 “Hi my name is Aden and this is my first post. I am
in a somewhat unusual intellectual property issue
and, though I have done a lot of searching, I cannot
find a direct answer to one of my questions.”
http://answers.onstartups.com/questions/35008/transf
er-of-intellectual-property-due-to-use-of-a-businessequipment-australian
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Could This Happen to Your Client?
 “Basically, I was doing work experience for an organization
(I was definitely not an employee) and I created some
software for another organization while I was there.
Recently the question of intellectual ownership of my
software has come up and the organization where I
originally created the software claims that they have the
right to take possession of the intellectual property of my
software.”
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Could This Happen to Your Client?
 “Since then I have continued working on it using my
own equipment. As I was not an employee I don't
believe they can do this but they may claim that,
because I used their equipment, that they own what
I created.”
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Polling Question #1
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Intellectual Property
Background
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Intellectual Property
 “In simple terms, intellectual property is the product of
the human intellect that has commercial value.” Patent,
Copyright & Trademark: Stephen Elias (www.nolo.com)
 Intellectual property can be in the form of an invention;
the written word such, as books or songs; designs and
art work; product names; processes; chemical formulas
or “ideas” .
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Intellectual Property
 If “intellectual property” were not protected by law
then the owner of the property would not be able to
control its use.
 The commercial value of intellectual property comes
from the ability of its owner to control its use.
 Intellectual Property laws are designed to define and
protect various forms of IP.
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Types of Intellectual Property
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Types of Intellectual Property (IP)
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Trade Secret
Trade Mark
Trade Dress
Copyright
Patent
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Trade Secrets
 Trade Secrets consists of a variety of original, inventive ideas
that the owner must keep secret in order to avoid copying and
competition.
 Many times individuals and companies seek to protect their IP
under the legal protection of trade secrets until the owner can
legally protect them with under other categories of Intellectual
property.
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Trade Secrets
Examples of IP that might be protected by Trade
Secrets include:
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designs
devices
processes
compositions
techniques
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 formulas
 information
 recipes
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Trade Secrets
Entertainment
Movie Plots
Magic Tricks
Formulas
Chemical
Food (Recipes)
Miscellaneous Appearance
Odor/Color
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Sound
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Trade Secret Business Examples
Customer Lists including Customers
Cost of Goods and Inventory Pricing
Information
Sources of Supply
Books and Records of the Business
Mailing Lists and Mailing Information
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Trademark
 A trademark is a brand name. A trademark or service mark
includes any word, name, symbol, device, or any combination,
used or intended to be used to identify and distinguish the
goods/services of one seller or provider from those of others,
and to indicate the source of the goods/services.
(www.uspto.gov)
 A trademark must be distinctive or have become well-known
through long use or advertising.
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Trade Dress
 Trade Dress is similar to Trademark.
 Trade Dress refers to the “Total Image of a
Product.” The aesthetics.
 Typically, when there is a lawsuit for violation of
intellectual property, both Trade Dress and
Trademark will be causes of action.
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Symbols
®
• Registered trademark protected by Federal
Law.
TM
• A trademark that is not federally registered.
SM
• A service mark is the same as a trademark,
except that it identifies and distinguishes the
source of a service rather than a product.
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Copyright
 Protects a different type of creative expression; an
original artistic or literary work. It does not protect an
“idea” itself.
 Examples are works of:
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authors
composers
artists
designers
programmers
web designers.
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Copyright
 A copyright notice on a published work can be noted by
using the “copyright bug” and it does NOT have to be
registered in the U. S. Copyright Office “ ©.”
 If the copyright is registered, it creates a legal presumption
that the copyright is valid and allows the copyright owner
to recover up to $l00,000 without proving any actual
monetary harm.
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Copyright
 A Copyright can last a very long time.
 As a result of the Copyright Extension Act of l998, most
copyrights for works published after January l, l978 last
for the life of the author plus 70 years.
 There are exceptions when the total life of the copyright
will last between 95 and l20 years total.
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Patent
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A Patent gives the right to exclude others from making,
using, offering for sale, or selling the invention throughout
the U.S. or importing the invention into the U.S.
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A Patent must fall within the definition five “statutory”
classes in order to be patentable:
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Processes,
Machines,
Manufactures (objects made by humans or machines),
Compositions of matter, and
New uses of any of the above.
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Types of Patents
Utility
Patents
• Applies to new processes, machines, manufactures,
composition of matter, or new uses of any of the
above if they are novel, “non-obvious” and useful.
• 20 years
Design
Patent
• Applies to unique and ornamental shapes or
designs that are also nonfunctional.
• 14 years
Plant
Patent
• May be issued for any asexually or sexually
reproducible plants (such as flowers) that are both
novel and “unobvious”.
• 20 years
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Polling Question #2
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The Toe Binder
 Fred and Myra have developed a new
product for sun bathers to put on their toes
so that the inside of their toes do not get
sunburn. This has happened all too often
to Fred and Myra. They want to put this
on an info commercial but want to protect
their great idea. What type of protection
do they need?
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Intellectual Property
Claims
Covered on the CGL?????
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Insurance Issues
 Up until the CGL changed language in its 1998
edition, coverage was afforded under the Advertising
Injury coverage for other than Patent Infringement
cases.
 It is implicit for coverage to apply that the goods,
services, etc. be advertised in order for coverage to
apply.
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Insurance Issues
 Most plaintiffs wait until the product has actually been
advertised before filing a cause of action.
 There is more economic benefit to sue for
infringement when the product is established and
making money.
 There would be measurable damages at the point the
product has market share.
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Advertising Injury definition in the
1996 CGL
“Advertising injury” means injury arising out of
one or more of the following offenses:
1. Oral or written publication of material that slanders
or libels a person or organization or disparages a
person’s or organization’s goods, products or
services;
2. Oral or written publication of material that violates a
person’s right of privacy;
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Advertising Injury Definition in the
1996 CGL
3. Misappropriation of advertising ideas or style
doing business; or
of
4. Infringement of copyright, title or slogan.
NOTE: There is NO definition of “advertisement” in the
prior form.
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Advertising Injury definition in the
1998 CGL
14. “Personal and advertising injury” means injury, including
consequential “bodily injury,” arising out of one or more of the
following offenses.
d. Oral or written publication of material that slanders or libels
a person or organization or disparages a person’s or
organization’s goods, products or services;
e. Oral or written publication of material that violates a
person’s right of privacy;
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Advertising Injury definition in the
1998 CGL
f. The use of another’s advertising idea in
your “advertisement”; or
g. Infringing upon another’s copyright, trade
dress or slogan in your advertisement.”
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Advertising Injury definition in the
1998 CGL
1. “Advertisement” means a notice that is broadcast
or published to the general public or specific market
segments about your goods, products or services
for the purpose of attracting customers or
supporters.
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Advertising Liability
 By the inclusion of the word and definition of
“advertisement” the CGL eliminated most categories of
what is provided in an Intellectual Property Defense
policy.
 The CGL never had coverage for offense.
 The CGL never “intended” to have ANY coverage for
Patents.
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2001 CGL Form Changes
The 2001 edition date made additional modifications to
the a CGL that limited Intellectual Property claims:
 Provided some coverage for copyright; however, it
specifically removed coverage for copyright
infringement of software.
 Explicitly removed coverage for trademark
infringement of Meta Tags.
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Polling Question #3
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Look the same—don’t they?
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Intellectual Property
Law Issues
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Intellectual Property Legal Issues
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Willful Infringement vs. Passive Infringement
Contributory Infringer—Vicarious Infringer
Unfair Competition
Confusion of Customer
Counterfeit Mark
Dilution of Mark
Palming Off
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Intellectual Property and Cyberspace
Issues
 Domain Name
 Intellectual Property
 Patent
 Trademark/Trade dress
 Copyright
 Linking/Framing
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Intellectual Property &
Cyberspace Issues
 Domain Names.
 Unauthorized use of a Trademark or Service
Mark.
 Likelihood of confusion as to the origin,
affiliation or sponsorship of a product.
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Intellectual Property &
Cyberspace Issues
 Congress amended the l976 Copyright Act in l980
to provide that software be treated as a “literary
work.
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Cyberspace Copyright Issues
 Most of the case law involving copyright rights and
infringement of those rights has been based upon old
U. S. Copyright law.
 The U.S. Copyright Law has been amended to
include issues such as code, streaming video and
other digitized forms of original expression.
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Cyberspace Copyright Issues
Linking/Framing as Cyberspace concerns:
 The insured links to or allow another party to link
to insured’s web site.
 Potential exposure to infringement issues related
to the other party.
 Whether actual or alleged- your insured will be
named in the lawsuit.
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Cyberspace Copyright Issues
 U. S. Copyright Law protects the expression of
original works of authorship fixed in a tangible
medium of expression.
 Software falls within this category, even when not
stored on a disk.
 Congress amended the l976 Copyright Act in l980 to
provide that software be treated as a “literary work.”
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Cyberspace Copyright Issues
Unauthorized Use of a Trademark or Service Mark:
 Must show a protectable mark
 Likelihood of confusion as to the origin, affiliation or
sponsorship of a product
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Cyberspace Trade Dress Issues
Trade Dress refers to the “Total Image of a
Product.”
 Design and layout of the product (Web Site)
 Graphics, background and white graphics,
packaging including text and similar factors
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Cyberspace Patent Issues
 The most frequent source of patent litigation today as
respects the internet is the Utility Patent (new and
innovative use of the internet).
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Intellectual Property
Insurance
Intellectual Property
“People recognize intellectual property the same way they recognize real estate. People understand what
property is. But it’s a new kind of property, and so the understanding uses new control surfaces. It uses a
new way of defining property.” Michael Nesmith
Source: “Michael Nesmith.” BrainyQuote.com. Xplore Inc., 2012. http://www.brainyquote.com/quotes/quotes/m/michaelness264047.html
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Advantages of Intellectual Property
Insurance
 Prevents loss of market share by timely and forceful
response to infringement.
 Prevents unexpected cash drain on operations.
 Provides adequate litigation funds to optimize a
favorable decision based solely on the merits of the
case.
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Intellectual Property Insurance
 Written as a separate coverage by limited
property/casualty companies.
 It is written often by specialty companies such as
Intellectual Property Insurance Services Corporation
www.ipisc.com.
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Intellectual Property
 Intellectual Property can be a company’s most important
asset.
 Intellectual Property is what controls market share.
 Many companies may not realize how vulnerable they are to
other companies “stealing” their ideas/inventions and
unfairly competing with them for market share.
 Just having IP rights is not enough- you have to be able to
protect them by:
 Defending your manufactured products against charges of
infringement; or
 Enforcing your IP rights against infringers.
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Intellectual Property
 Intellectual Property litigation is very expensive as a
defendant or as a plaintiff.
 Intellectual Property lawsuits are very complex and
require attorneys with specialized knowledge.
 Insurance is available for both defending against
charges of IP infringement and for enforcing IP rights.
against infringers.(Plaintiff)
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Average IP Litigation Costs
Litigation Type
PATENT
TRADEMARK
COPYRIGHT
TRADE SECRET
MISAPPROPRIATION
Amount In Controversy
End of Discovery
Through Trial
< 1M
$490K
$916K
$1M-$25M
$1.6M
$2.8M
> $25M
$3.6M
$6M
< 1M
$214K
$401K
$1M-$25M
$607K
$1M
> $25M
$1.2M
$2.2M
< 1M
$216K
$384K
$1M-$25M
$543K
$932K
> $25M
$1.22M
$2M
< 1M
$303K
$521K
$1M-$25M
$877K
$1.6M
> $25M
$1.9M
$3.2M
*Costs exclude judgments and damages awarded.
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Patent Holder Median Damages Awarded
PriceWaterhouseCoopers, 2011 Patent Litigation Study
Excluding Settlements (2000-2010)
2010
2009
2008
2007
2006
2005
Millions
2004
2003
2002
2001
2000
0
2
4
6
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10
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Claim Frequency:
“Pricing Intangibles, Insuring IP” RIMS 2009
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Non-Practicing Entities v.
Practicing Entities
$12
$10
$8
$6
Patent holder median
damages awarded.
$4
$2
$1995-2000
2001-2005
Practicing Entities
2006-2010
Non-Practing Entities
Non-Practicing Entities (patent trolls) continue to
rake in the damages
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2012 U.S. Commerce Study on
Intellectual Property & Jobs
Intellectual Property intensive industries:
 have a significant impact on US economy and jobs creation
 support at least 40 Million jobs to US economy
 contribute $5 Trillion to the U.S. GDP
 support 35% of US economy
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2012 U.S. Commerce Study on
Intellectual Property & Jobs
Bottom line… “virtually every U.S. industry” relies on intellectual
property protections, either directly or indirectly, Deputy
Commerce Secretary Rebecca Blank said. “Clearly, making
sure we adequately protect intellectual property is vital to
maintaining America’s competitive edge and driving our overall
prosperity.”
http://www.uspto.gov/news/publications/IP_Report_March_2012.pdf
Source: InsuranceJournal.com, April 12, 2012
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IP Defense Insurance is the SOLUTION to the gap left
in CGL policy coverage for intellectual property risks.
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Elements of IP Insurance
Products
Manufactured
Triggers
Lawsuit
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Unexpected
Risk
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Elements of a Bond
Company
Elects to
Manufacture
IP Owner
Elects to
Sue
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Moral Risk
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Polling Question #4
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“That was MY idea”
 Robert had worked at Paul’s roofing company.
While at the company he found out that the
company was using a special glue that they
developed to adhere roofing tiles. Robert, left the
company and took went to work for a competitor
WITH the private formula. The competitor
patented the process. Paul’s roofing company
sued both Robert and his new company. What
type of insurance would Robert and Paul’s roof
need to defend the law suit?
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Defense Insurance
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Defense Insurance
Potential Coverage
Reimburses litigation expenses to defend against allegations of
infringement, and pay damages or settlements.
 Worldwide Territory is Available
 Terms up to 3 years
 Limits up to $10 million/ Higher limits may be available
 10% Co-Pay (minimum)
 2% Self-Insured Retention (minimum)
 Claims Made & Reported
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Defense Insurance Key Elements
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Defense Insurance Key Elements
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Defense Insurance Key Elements
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Defense Claim Scenario:
Electronic Security Industry
 A leader in the electronic security industry was successfully defeated in
the favorable plaintiff venue in the Eastern District of Texas a defense
policy holder after the claim of patent infringement of electronic
surveillance tags was rejected by the jury.
 If policy holder would have lost, they could have easily been put out of
business. Fortunately, the money was available to fund a successful
defense.
 The policy holder was quoted as saying, “You never know when you
will need insurance.”
 It was the first verdict for a defendant out of the past twenty (20) cases
tried and decided in this district.
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Defense Claim Scenario:
Retail Industry
 A manufacturer/distributor of shoes was accused of infringement by a
non-practicing entity (NPE).
 The NPE’s patent had been successfully enforced against smaller
manufacturers unable to pay patent defense litigation costs, thereby
forcing them into signing license agreements and paying royalties.
 The policy holder discussed the situation with a leading insurer’s
litigation management department, which was able to offer guidance
regarding how to handle the discussion, and how to respond to the
accuser.
 Unlike the other small manufacturers that were forced to give up their
rights to manufacture, the policy holder used the power of the Defense
policy to fight the weak allegation.
 Simply holding an IP Defense policy can ward off frivolous lawsuits.
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IP Enforcement Insurance is a unique insurance
SOLUTION to enforce intellectual property rights.
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Polling Question #5
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That is MY Patent
 Your insured designed and patented the
degreaser meat loaf pan and are selling it
through TV commercials and in stores.
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That is MY Patent
 A competing company has come out with
the exact same product with the only
modification is that it is the color green.
The designer wants to stop them from
selling the competing product and see
them for the infringement. What type of
coverage would then need?
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Enforcement Insurance:
True Blended Coverage
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Enforcement Insurance:
True Blended Coverage
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Reimburses litigation expenses to enforce IP rights against
alleged infringers.
Worldwide Territory is Available
Terms up to 3 years
Limits up to $10 million/ Higher limits may be available*
10% Co-Pay (minimum)
2% Self-Insured Retention (minimum)
Claims Made & Reported
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Key Elements of Enforcement Insurance
Event of
a Loss
Pure
Insurance
Event of
a Win
Bond
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Key Elements of Enforcement Insurance
 Pre-existing commercial activity, whether known or unknown,
is generally excluded from coverage under IP enforcement
policies.
 Many enforcement policies have of a payback mechanism
when a lawsuit is won or settled favorably; an economic
benefit has been realized as:
 Monetary Settlement; Award of Damages; Gain and/or Retain Market
Share; Licensing Agreements
 Possible relief of $100K payback from non-monetary economic benefit
under some enforcement policies.
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Key Elements of Enforcement Insurance
Early Intervention Letters are available as a courtesy to
the policy holder under some enforcement policies.
 Notifies potential infringer about insurance held by Insured
 85% success rate
 At the time of a claim, a 3rd party favorable opinion from
counsel may be required under some enforcement policies
opining that, more likely than not (50.01% likelihood), the
accused product would be found to infringe the insured
intellectual property.
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Impact of Enforcement Insurance on Patent Value
An insured patent is more valuable
 Insured patents have undergone thorough due diligence on
validity and enforceability.
 A policy signals that a 3rd party will assume much of the
financial risk of enforcing the IP.
 Validation of patent value, validity and enforceability.
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Enforcement Claim Scenario:
Medical Device Industry
 The policy holder purchased a policy for a pending patent.
 Before the patent issued, a large competitor began producing an
infringing product.
 Once the patent issued, the policy holder was able to pursue the
alleged infringer and assert their patent rights.
 Without the insurance policy providing the funds to enforce their
rights, the policy holder would have:
 continued to lose market share,
 gone out of business, or
 lost a high percentage of their market share
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Enforcement Claim Scenario:
New Products Industry
 Policy holder was a small company enforcing their patents,
trademarks and copyrights.
 A much larger, infomercial industry competitor copied its pet
grooming product and infomercial.
 The policy holder filed suit. When the large company
learned of the insurance, favorable settlement was
reached upon terms that are confidential.
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Enforcement Claim Scenario:
Manufacturing Industry
The policy holder pursued multiple parties:
 including the manufacturer of infringing product who ended
production and negotiated license agreements with multiple
former purchasers.
This policy holder used the same policy three times to go after
multiple infringers.
 Once one suit was settled, they paid back the amount of the
policy used to the carrier, thus reinstating the policy limits.
 Once limits were reinstated, they pursued another infringer.
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Multi-Peril Insurance: First Party Coverage
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Multi-Peril Insurance: First Party Coverage
Key Elements
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Unauthorized Disclosure Insurance: Third Party Personal
Identifier Information & Trade Secret Coverage
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Unauthorized Disclosure Insurance: Third Party Personal
Identifier Information & Trade Secret Coverage
An example of how an Unauthorized Disclosure Policy
may work
Unauthorized Disclosure by:
Coverage Type
Willful Disclosure Involved?
Associated 3rd partyincluding employee
Blended Coverage
No
Named Insured
Pure Insurance
No
Employee or Associated
3rd party
Pure Insurance
No
Employee- (Willful)
Pure Insurance
Yes: < 3 yrs. post hire date &
> 1 yr. post disclosure
Employee- (Willful)
Bond
Yes: > 3 yrs. post hire date &
> 1 year post disclosure
Associated 3rd party
Bond
Yes: > 1 year post disclosure
(Party Type)
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Case Distribution: Top 10 Industries
(1995-2010)
20%
Top 10 industries decided based on nature of the technology of subject patent
18%
16%
14%
PriceWaterhouseCoopers, 2011 Patent Litigation Study
12%
10%
8%
6%
4%
2%
0%
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Top 10 Decisions by Industry
Overall Rank
Industry
1995-2000 Number of
Cases
2001-2005 Number of
Cases
2006-2010 Number
of Cases
1995-2010
Total
Cases
1
Consumer Products
82
80
121
283
2
Biotechnology/Pharma
40
71
89
200
3
Industrial/Construction
66
57
70
193
4
Medical Devices
42
45
67
154
5
Computer Hardware/Electronics
24
32
92
148
6
Business/Consumer Services
19
33
58
110
7
Software
15
23
52
90
8
Chemicals/Synthetic Materials
31
16
32
79
9
Automotive/Transportation
24
25
29
78
10
Telecomm.
14
22
38
74
15 Yr. %
Overall
Increase
48%
123%
6%
60%
283%
205%
247%
3%
21%
171%
PriceWaterhouseCoopers, 2011 Patent Litigation Study
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When to be thinking about IP insurance
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When to be thinking about IP insurance
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When to be thinking about IP insurance
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When to be thinking about IP insurance
License Agreements
 Requiring indemnifying party to have insurance.
Supplier Agreements

Supplier has insurance, including optionally for UCC warranty of
non-infringement or as named Additional Insured
Mergers & Acquisitions
 Coverage for enforcement or defense
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IP Insurance = Crisis Avoidance
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Questions
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