Insurance can help protect intellectual property assets

By Manoj K Singh, Singh & Associates, Advocates & Solicitors

In today’s business environment, where the fortunes of a business empire can depend on a moment of uncertainty, insurance is a viable option to minimize potential losses. A company’s tangible assets can be insured through various kinds of insurance schemes available in the market. Intangible assets such as intellectual property (IP) can also be safeguarded through insurance, which is a recent development in the business environment around the world.

In the past two decades IP insurance has become an important strategy to help minimize the monetary risks involved in protecting IP in a situation such as infringement, particularly for companies with a large pool of IP assets. (For example, Samsung owned around 47,855 patents in 2012, according to Statista, an online statistics provider.)

US origins

IP insurance originated in the late 1990s, when Intellectual Property Insurance Services Corporation started selling IP insurance products in the US. Following this, many big insurance companies started selling IP insurance products in the US market.

Manoj Singh
Manoj Singh

Research in 2012 by the US Economics and Statistics Administration and the United States Patent and Trademark Office shows that almost the whole US economy relies on some sort of IP. The value of IP-intensive industry was around US$5.6 trillion, or 34.8% of the US GDP. IP merchandise exports totalled around US$750 billion, or 67.8% of US merchandise exports. The IP industry directly employed around 27 million people.

The IP market in the US is so huge that taking a proactive approach to IP insurance was inevitable. IP insurance plays a particularly instrumental role in establishing start-up technology companies as such companies have limited funds available if faced with litigation.

Goals of coverage

IP litigation is a lengthy and expensive process. For example the ongoing global patent war between Apple and Samsung has so far cost both companies around US$2 billion. IP insurance provides a mechanism to help manage the cost of maintaining IP.

IP insurance can cover: (1) patent, trademark and copyright infringement litigation; (2) patent infringement defence; and (3) legal expenses during an infringement suit (a “pursuit policy”).

Generally a company or an individual insures their IP to take care of the expenses involved in IP litigation, including damages. In the absence of such a mechanism a company can easily be wrecked financially because of lack of proper management to defend its IP rights.

IP insurance covers the expenses in cases of infringement and also helps to promote research and development by providing protection for such activities at an affordable price.

The situation in India

There is no concept of IP insurance in India. In an interview some years back, CS Rao, former chairman of the country’s Insurance Regulatory and Development Authority, said that no insurance company had even applied for such a product in India.

According to data released by several intellectual property agencies, India ranked seventh in the world with 42,291 patent applications in 2012. Though India still lags far behind countries such as the US, Japan and China, which have more than 500,000 patent applications a year, the number of patent applications is increasing every year in India.

With the rising number of patent applications and growing IP awareness, litigation can be expected to increase drastically in the future. Globalization and liberalization of the Indian economy has allowed the flow of foreign goods and services into India and vice versa. The only way for Indian products to face global competition and survive in the global market is innovation and constant research.

Companies invest massively in research and development in order to compete in the market. The investment in research is a risky affair as the outcome of the research is uncertain. Having a prior claim plays a crucial role in IP enforcement and companies’ attempts to claim priority over an invention or a name often leads to litigation.

In the case of Bajaj Auto v TVS Motors, Bajaj Auto obtained an injunction to prevent the launch of TVS Motors’ two-wheeler model TVS Flame, which Bajaj claimed used its patented DTS-i technology. The case brought heavy financial losses to TVS Motors.

Corporations and even individuals could avoid such losses by insuring their IP.

IP insurance in India is the need of the hour. IP will play a major role in the development of the Indian economy and sooner rather than later the need to protect the risk involved in IP through insurance will definitely be felt in the Indian market. India still has a long way to go in the field of research and development and the introduction of IP insurance will provide breathing space for companies and individuals dependent on IP.

Manoj K Singh is the founding partner of Singh & Associates, a full-service international law firm with headquarters in New Delhi.


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