Some of you may know of my enthusiasm for Intellectual Property insurance products, believing that they are a product for our time.
Sadly, they are also challenging as all get out from an underwriting and profitability standpoint, especially when the coverage includes patent infringement.
Here are some snips from the Report summary:
- We pose here the idea that media liability is no longer the concern of just traditional media companies. With the spread of the Web, social networking, and the need to stand out in a crowded and noisy economy, we are all media companies (or, more accurately, engage in activities once thought to be the exclusive presence of the traditional media).
- Insurance against IP loss continues to be important for smaller and midsized companies with a limited ability to sustain loss. Coverage, if offered, is the province of highly specialized sources such as Lloyd’s and Gotham Insurance (owned by NYMAGIC), with two exceptions:
- Chartis provides patent infringement indemnity coverage for insureds domiciled in the U.S. This is the only large carrier that we know of participating broadly in the IP insurance market, and represents a return of a carrier that was a major player in earlier versions of the coverage.
- ThinkRisk (Great American) offers coverage for infringement of design patent for the aesthetic design of products
- Attorney Richard Margiano of Cohen Pontani Liebrman & Pavane, LLP estimates on the Managing IP website that the average patent litigation lasts about two years and costs about $3 million. An appeal can add another year and $2 million to that amount.
- The American Intellectual Property Law Association in Arlington, VA produces a valuable report on the estimated total cost of patent infringement litigation. This total includes the estimate of the litigation costs (i.e., attorneys, defense-related expenses, analytical testing) in three different bands of potential damages (i.e., the claimed loss from the past infringement combined with the projected loss should the infringement continue).
- This report does not indicate how much of the cost was incurred by the defendant, but it does give us a sense of the magnitude of the issues involved.
- The AIPLA Report of the Economic Survey 2009 reported that patent litigation:
- For cases with estimated damages of less than $1 million, the median cost of litigation was $650,000
- For cases with estimated damages between $1 million and $25 million, $2.5 million
- For cases with estimated damages above $25 million, $5.5. million
- ThinkRisk’s new Converging Risk Liability product is a melding of IP coverage and media liability protection, offering a modular form, with coverage for media and advertising content, tech and miscellaneous E&O, and network security and privacy (first and third party). The content module covers IP claims, such as copyright and trademark infringement and misappropriation of ideas, but excludes infringement of utility patent. Infringement of design patent is available for the aesthetic design of products. Software is treated as media content.
- Bob Parisi (of Marsh), speaking about IP, said “Whoever figures out how to sell truly broad patent liability coverage at a reasonable price will have more business than they know what to do with.”
IP insurance will continue to be hard to find for all except the small organization, but we’ll continue to follow it with interest.
Finally, we are pretty convinced that the next stage in media liability insurance will be selling it to organizations that don’t fit the traditional media mold, but that have a lot of activity in social media (twitting, Facebook, and the like). It might make a good fit for a management liability policy.
Your thoughts are welcomed.