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Intellectual Property Matters: Patent Infringement

As a technology based company, knowing you have developed state of the art products, you aggressively pursue selling a service contract to that large corporation you know badly needs your services.

Negotiations begin, hurdles are passed, and the relationship looks good. Then, corporate sends their contract: YourCo hereby indemnifies and holds harmless and agrees to defend BigUsCo for all claims, demands, charges, suits, proceedings, damages, direct or consequential..., for any and all injury or damage,... intellectual property infringement, including but not limited to trade mark, copyright, patents, invasion of privacy, plagiarism, unfair competition,..." Required limits of liability usually follow, with specifics of coverage and "Additional Insured" status requirements.

What do you do?

Indemnification is a term associated with a financial guarantee to provide legal defense for a claim. Indemnification should not be undertaken casually, or without attempts to transfer the risk to your insurer. Some interesting statistics are provided by one of the world’s leading patent infringement insurers.

Litigation Costs

• $500,000 pre-trial, $500,000 during trial
• Damages to $1 billion, often $20-$30 million

Limits

• up to $15,000,000 coverage per patent
• minimum retention (deductible) = $50,000

Defense Expenses are covered by policies

• legal fees
• declaratory actions
• injunctions
• appeals

Insurance Coverage Costs

• premiums start at $25,000 per patent for $1,000,000 coverage
• an infringement search and opinion letter is required

A technology insurance risk specialist should be contacted to approach insurers willing to look at your contract obligations. Don’t forget that every web site carries a number of intellectual property exposures which many businesses have not encountered. Web sites are publications by any definition, and, as a publisher, you are exposed to claims of infringement.

Next: Insuring Intellectual Property - How to Protect Yourself