A handful of weeks ago, a potential client approached our firm seeking Intellectual Property Coverage. He didn’t fully have an understanding of the coverage but was adamant that a policy be issued as immediately as you can. Obviously this raised some red flags. Upon further discussions, it was noted that his application organization was getting sued for copyright infringement from a US based company. Due to the fact there was a pending litigation in spot, we have been unable to help in giving coverage and suggested he get in touch with law firms that specialize in Intellectual property disputes. This unfortunate incident could happen to be avoided if his existing insurance coverage broker along with the client took the necessary time to totally understand the business model and achievable exposures. The policy issued to this client was a standard CGL policy covering premises liability and specifically excluded trademark, patent and copyright infringement. In today’s quick paced & uncertain economic environment, intellectual property suits involving infringement of trademark, copyright and patents are becoming filed and litigated at alarming rates with crippling costs to both parties involved.
So just what is Intellectual Property? It may be categorized as follows:
Industrial property – includes inventions (patents), trademarks & industrial designs
Copyright – includes literary & artistic works such as articles, novels, drawings, paintings, designs.
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These exclusive legal rights allow the owners of intellectual property to prosper from the property they have created, thus allowing a financial incentive for the creation and investment in their intellectual property. However, several new start-ups in addition to small and medium sized companies do not fully realize their benefits or potential implications. These organizations may have very valuable rights but are unable to use them effectively while others are unintentionally violating intellectual property rights of others without becoming aware of costly legal ramifications.
Some important terminology was used above and really should be discussed additional.
Patents – Cover new inventions including process, machine, manufacture or any new and useful improvement of an existing invention.
Trade-marks- Provide exclusive rights to word(s), symbols and designs to distinguish goods or services from others in similar marketplace.
Copyright – Only the copyright owner, often the creator of the work, can produce, reproduce, or grant permission to others to do so.
As technology moves ahead at lightning speed, it has made it increasingly easy to reproduce countless varieties of materials that are subject to copyright. Companies must be very careful not to infringe on the rights of others. Penalties for trademark, patent and copyright infringement have become very costly and will damage the reputation of these companies on a world wide scale. Up until the mid 1990’s, the primary assets of most companies was their building, equipment, stock etc. Not anymore. Although these items still are very valuable, intellectual property, computer data, customer information are just as valuable and could lead to financial hardship if they are not protected with proper security measures and specific insurance coverage coverage’s.
When dealing with the various forms of IP, it is advisable to seek out a lawyer/law firm that specializes in copyright, patents, trademarks, or trade secrets. They should totally understand your small business model and your technology as well as you do while being able to explain the legal issues in this complex field in clear, practical language that you can comprehend.
Another important way to protect IP is to obtain Intellectual Property Insurance. This coverage protects companies for copyright, trademark or patent infringement claims arising out of the company’s operation. An Intellectual Property policy will pay the costs to defend you if someone tries to claim the rights to the same business model, process, or application. As long as the firm is not aware of any pending litigation, infringements or violations, one can apply for insurance coverage to protect your trademark or patent. Very couple of regular insurance policies protect companies from loss or damage to their intellectual property. Similar to looking for out a prudent lawyer, it is just as important to seek out a business that specializes in this type of insurance coverage. Make sure the policy is not limited to your specific province or state but rather on a worldwide basis. With more and more insurance coverage companies entering this market, it should be rather easy to obtain a policy that fits your exposure.
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