How to protect your company from copyright and patent infringement

Phil Coyne, Vice President, ECBM Insurance Brokers and Consultants

In today’s global marketplace, many U.S. companies have the desire to claim a position at the forefront of innovation. However, if your company is developing innovative ideas, it also has a higher level of exposure to the risk of patent or copyright infringement.

“A lot of companies think they have the coverage for this exposure, but they really don’t,” says Phil Coyne, a vice president with ECBM Insurance Brokers and Consultants. “Copyright and patent infringement coverage is usually limited in a standard commercial general liability policy, if it is included at all.”

By taking steps to protect your intellectual property, you can achieve an offensive position within your market, and use those protections defensively to keep others from encroaching on your market.

Smart Business spoke with Coyne about how to protect your patents and copyrights.

Why is patent and copyright infringement important?

With the increasing use of the Internet, e-commerce, technology and a global marketplace, and with many companies using these tools for their advertising and sales, there is a higher exposure to patent and copyright infringement claims.

Companies need to protect themselves from these exposures because infringement claims can have several negative consequences for a business. First, costly lawsuits can be avoided and, second, a copyright infringement claim can do irreparable damage to a company’s brand and its reputation with customers.

Is there coverage available for patents and copyright?

The simple answer is yes, but it is a little more complicated than that. While many companies may believe that they have coverage under their standard commercial general liability policies, that coverage is very limited in nature.

To trigger coverage for copyright infringement, an insured must first demonstrate that the injury occurred during the policy period and that it arose in conjunction with its advertising activities. The typical policy has an intellectual property exclusion, and there is not coverage for patent infringement.

In response to the exposure and gap in coverage in this area, the insurance industry has developed various policies. There are specialized policies available for coverage of copyright infringement outside of your advertising activities. There are also specialized policies available for patent infringement.

Examples of these policies are:

* A defense and indemnity policy that is designed to cover claims brought against an insured for its activities regarding use, distribution, advertising and/or sale of its product. This type of policy usually covers the insured’s liability for defense costs, damage awards and settlement payments. Defense costs typically erode the limits of coverage.

* Infringement abatement coverage. This type of policy covers the insured’s costs in bringing and prosecuting litigation against alleged patent infringers. Infringement abatement policies typically cover 75 to 80 percent of the litigation costs but do not cover liability for judgments or damages. Also, the insurer will share in any recovery achieved.

* Patent defense only, or patent infringement defense costs reimbursement, is a type of policy that provides coverage for an insured’s defense costs in patent litigation but does not provide for damage awards against the insured.

How can a company ensure that its patents and copyrights are protected?

There are two main steps companies must take. First, analyze this additional risk and exposure. Second, have an internal companywide intellectual property compliance program. If you do not have one already set up, begin developing one immediately. These programs will enable companies to do two very important and necessary jobs in the risk prevention process — both safeguard their intellectual property and help ensure that they do not infringe on the intellectual property rights of others.

What do companies need to know about an intellectual property compliance program?

There are four aspects of an intellectual property compliance program that companies should strive to understand and implement.

First, it should consist of a clear statement of the company’s policies and procedures regarding intellectual property and its use and development.

Second, it is necessary for personnel to have a clear understanding of their responsibilities and duties.

Third, a successful property compliance program needs a formal training portion to help employees learn about these issues.

And finally, the company must continue to monitor and update its program and all related procedures.

Are there any legal changes businesses should be aware of?

Congress just passed the America Invents Act effective Sept. 16 that is supposed to speed up the U.S. Patent and Trademark office so that the U.S. will be more aligned with the international marketplace regarding patent applications. Even though the process has been streamlined and this law is designed to try to eliminate cases of litigation and patent law, it could cause a potential increase in the number of claims as companies rush to file claims to either take advantage of the old law or the new law.

Phil Coyne is a vice president with ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or [email protected]

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