Intellectual Property Insurance

• Intellectual property insurance covers the risk of IP disputes regarding patents, copyrights, trademarks and trade secrets.

• Intellectual property indemnity insurance covers legal defence expenses, court settlements and judgements regarding IP disputes.

• Increasing threats of IP lawsuits and legal expenses in India have increased the need for intellectual property insurance.

• Individuals and businesses with substantial investments in intellectual property, including small businesses and startups, require IP insurance the most.

• The different types of IP insurance plans include infringement insurance, abetment insurance, media liability insurance and commercial general liability insurance. Standalone intellectual property insurance is not yet available in India.

Intellectual property (IP) insurance is a type of professional liability insurance that protects individuals and businesses from lawsuits and legal disputes regarding IP rights and infringement. It protects your business from claims of infringement on another person’s IP rights.

These plans cover legal expenses, out-of-court settlements and court judgments. While most plans cover damages and losses from claims regarding patent, trademark and copyright infringement, some plans pay for the cost of legal actions to defend the insured’s intellectual property rights. IP insurance protects businesses from dispute litigation, IP theft and violations or both.

While available globally, intellectual property insurance plans are not yet available as specialised or dedicated financial products in India. However, some plans like commercial general liability insurance plans offer limited IP protection insurance coverage.

Here are some key reasons why demand for IP insurance has risen:

• Threat of Lawsuits: India’s rising startup culture and rising corporate investments have increased awareness of intellectual property rights. With a record number of patents and copyrights filed in the country in recent years, the likelihood of being involved in expensive IP litigation has increased as well.

• Legal Costs: Defending against an IP infringement lawsuit is generally expensive, even for cases without merit. The cost of advocates, court fees and expert witness testimony can easily overwhelm a small business, making intellectual property liability insurance an essential safeguard.

• Business Disruption: Businesses involved in IP infringement lawsuits face immense mental stress. Such lawsuits can lead to continued business disruption, loss of customers and negative publicity, damaging the business’s future.

• Rise in Aggressive Claims: Intense market competition and IP protection measures have led to a surge in predatory litigation, where certain parties aggressively pursue legal actions with fraudulent claims. Legal right holders need IP insurance to defend their rights from false claims.

Intellectual property insurance helps businesses that own novel ideas, designs, patents and creative works protect their assets. It provides a safety net for IP rights holders by covering legal expenses, court fees, expert witness fees and business interruption cover. By covering litigation costs and providing legal assistance, businesses are free to pursue innovation and expansion.

For businesses that use and rely on intellectual property, IP infringement insurance protects businesses from baseless claims and legal liability due to mistakes, errors and breach of contract. It’s especially helpful for startups and small businesses that do not have the resources or time to defend IP rights infringement cases. As IP disputes become more prevalent, IP liability insurance will rise in importance to protect against “patent trolls”.

Intellectual property insurance is useful for any IP owner, including inventors, artists, authors, creators, designers and corporations with legal rights to intellectual property. Any business that owns and relies on intellectual property will want IP protection to defend their rights and sue infringers.

Businesses of all sizes can benefit from IP coverage, including small businesses and startups without substantial IP holdings, as these plans defend against infringement claims and liabilities. Businesses in the IT and technology industries, startups with proprietary products or software, manufacturers and media companies will find these plans suitable to exercise their rights over their intellectual property.

Also Read: Who Needs PI (Professional Indemnity) Insurance

Here are the types of intellectual property insurance plans based on the type of protection offered and coverage features:

• Infringement Defence Insurance: This type of IP infringement insurance covers only legal defence costs when an individual or business files a lawsuit over intellectual property infringement. Defensive policies only cover the insured person’s liability.

• IP Abatement and Enforcement Insurance: Enforcement insurance plans support businesses seeking enforcement of IP rights against theft and infringement. Abatement plans do not cover full-scale litigation but only non-litigation measures like mediation and negotiation.

• Commercial General Liability Insurance: These general-purpose commercial insurance plans in India offer very limited IP coverage under advertising harm and personal injury. It only covers IP right infringement if it happens in a competitor’s advertising material.

• Media Liability Insurance: These commercial liability plans cover the unique risks faced by media and entertainment companies. They cover non-patentable types of intellectual property and liabilities arising from copyright infringement, plagiarism and unlawful use of trademarks.

For comprehensive protection of your business, pair intellectual property insurance with a robust professional indemnity (PI insurance) plan. With IP indemnity and business indemnity insurance, your enterprise is secured against the widest range of legal liabilities.

Also Read: Difference Between General Liability Insurance and PI Insurance

Depending on the type of intellectual property insurance, the plan may cover liabilities from copyright infringement or legal actions taken to defend the insured’s IP rights. Here is what’s commonly covered:

• Intellectual Property Right Infringement: Covers legal fees and settlements for violating a third party’s IP rights.

• All Types of IP Rights: IP infringement insurance plans cover violations of patents, trademarks, copyrights, trade secrets, and geographical indications (GI).

• Legal Defence Costs: Pays for lawyers, court fees, legal expenses, settlements and court judgments.

• Challenges to IP Rights: The policy allows the insured to defend challenges to their IP ownership and validity from third parties.

• Breach of Contract: Covers legal defence and settlements for breach of contract and confidentiality issues.

• IP Rights Enforcement: Some plans pay legal expenses to pursue the infringement of IP rights.

• Business Interruption: Covers financial losses and lost royalties during the litigation period.

Intellectual property indemnity insurance does not typically cover the following expenses:

• Common or Public Property: Intellectual property insurance plans do not cover common knowledge, general ideas or public property.

• Existing Disputes: Claims related to existing disputes and litigation are not covered.

• Contractual Liability: Many plans do not cover liabilities arising out of private business agreements.

• Certain IP Rights: Some plans exclude certain IP rights, including industrial designs, plant variety rights, etc.

• IP Rights Not Registered Outside India: IP insurance policies may not cover copyrights, patents and trademarks not registered in India.

Consider the following factors to understand what type of coverage you need:

• Understand Your Business Risks: Assess your business’s IP risks by going through the valuation of your IP assets and exposure to IP infringement.

• Make an Estimate of Legal Expenses: Study recent IP cases related to your field to understand the average cost of litigation, including lawyers and court fees.

• Understand the Scope of Coverage: The scope of IP insurance coverage should match your potential risk and expenses. Get a policy covering your estimated liabilities.

• Select the Right Insurance Types: Depending on whether you use a third party’s intellectual property or own your own, pick the right type of insurance plan.

• Estimate the Cost of Insurance: Factors like type of business, revenue and location can impact the premium cost of your insurance. Balance costs against coverage to find the right plan.

For many modern businesses, intellectual property is one of the most valuable assets, driving the need for insurance coverage for IP holders in India. For businesses that use a third party’s IP rights, intellectual property coverage is essential as it defends against legal disputes and infringement claims. This continues to drive the demand for IP protection coverage in the country.

While specialised IP protection insurance is not yet available in India, you can get broad liability coverage through commercial general liability and professional and indemnity insurance plans.

With TATA AIG, legal professionals and firms can get special PI insurance for lawyers to cover indemnity claims from errors, omissions and negligence. We offer dedicated claim support with our PI plans, ensuring timely and extensive support to you, when you need it the most.