How to Manage Intellectual Property Infringement Litigation Risk

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Speakers:

• Courtney Dillon, VP Marketing & Business Development, Intellectual Property Insurance Services Corporation

• Bob Fletcher, President & CEO, Intellectual Property Insurance Services Corporation

Learning Objectives

At the end of this session, you will:

• Understand IP litigation statistics and costs associated.

• Find out how to identify and assess IP exposure.

• Learn about IP specific insurance to mitigate cost of IP infringement.

• Gain knowledge about the recent history of legislative and judicial actions important and pending federal legislation.

Intellectual Property Risk Guru

What is Intellectual Property?

• Patents: protect inventions

• Trademarks: identify the source (maker or provider) of products and services

• Copyrights: protect original works of authorship, such as literary works, music, art and software

• Trade Secrets: protect confidential information or secrets

Do You Know The Statistics?

• Average cost of Patent Infringement Litigation

$2.8 million Dollars

• Average length of business disruption due to an IP lawsuit

1 ½ to 3 years

• Growth in patent lawsuits since 2010

71%

• Number of patent infringement lawsuits filed in 2015

5,868

Second Most Filings in History

Patent Litigation

Amount in controversy

< $1 M | $873 K

$1 M - $10 M | $2.2 M

$10 M - $25 M | $3.5 M

Copyright Litigation

Amount in controversy

< $1 M | $325 K

$1 M - $10 M | $663 K

$10 M - $25 M | $1.1 M

Intellectual Property Litigation Costs

Trademark Litigation

Amount in controversy

< $1 M | $354 K

$1 M - $10 M | $670 K

$10 M - $25 M | $1.1 M

*2015 AIPLA Report of the Economic Survey- Litigation Costs reported are average litigation costs through trial, without

assessed damages and/or settlements.

Patent Lawsuits vs.

Stockholder Lawsuits = 22:1

©2016 Intellectual Property Insurance Services Corporation Ver 0216016

Patent Lawsuits trigger IP policies

Stockholder Lawsuits trigger D & O policies

Any Business Holding IP Rights Can Experience Infringement

Who is at Risk?

Case Study: Peticure

All Companies Making, Using or Selling Products and/or Services

Case Study: Octane Fitness

Who is at Risk?

Who is at Risk?Fortune 500 Companies

20151982 1992 2002

62%

38%

62%

87%

38%

13%

Tangible Assets

Intangible Assets

Intangible Assets as a % of S&P 500 Market Capitalization

83%

Source: Brookings Institute and Newlight Capital

17%

What is Intellectual Property?

• Patents: protect inventions

• Trademarks: identify the source (maker or provider) of products and services

• Copyrights: protect original works of authorship, such as literary works, music, art and software

• Trade Secrets: protect confidential information or secrets

What Exactly is Intellectual Property (IP) Anyway?

• It’s Property, just like other legal rights are property –intangible property.

• It’s Products of the mind.

• It’s Exclusive Rights to use and prevent others from using a thing, not unlike owning land.

Intellectual Property (IP)… Products Of The Mind

• Innovation leads to Patents

• Identity Symbols become Trademarks/ Trade Dress

• Literary Ideas are Copyrighted

• Know-how becomes Trade Secrets

• Aesthetics are protected by Design Patents

Innovation

Innovation

Innovation

IP is everywhere…Packaging & Appearance

–

Design Patent / Trade

Dress

Advertisements

& Marketing

–

Copyright ©

Ocean Spray® - Registered Trademark

Recipe

-

Trade Secret or

Utility Patents

Source: 2011 PLUS Conference, “How to Overcome Your Intellectual Property Fear Factor”

The Product Itself:

Production, Container,

Filling, Labels, etc.

–

Utility Patents

Assessing the Risk

IP insurance should be secured to protect strategic business assets. Questions to ask…

• Do you have rights in Patents, Trademarks and Copyrights?

• Are you making, using, selling or importing products or services?

• Do you have sought-after technology enabling products or processes?

• Have you ever done a risk assessment to detect your potential risk and exposure to IP infringement?

• How litigious are competitors in your industry?

• Have you ever been involved in an IP lawsuit?

• Have you budgeted for a $2.8M, worse case scenario, lawsuit?

• Could your company survive even a relatively “inexpensive” lawsuit?

What Are The Real Risks?

• You are sued in an attempt to put you out of business (Defense Policy)

• A larger competitor completely ignores your IP (Enforcement Policy)

• You haven’t the funds to recover from either of the above even if you win the IP suit (Multi-Peril Policy)

• You are sued by a Non-Producing Entity – NPE (Troll Defense Policy)

• An employee “jumps ship” and takes secrets (Unauthorized Disclosure Policy)

• A third party challenges your patent in an IPR (Post-Grant Proceeding Policy)

• You need more development money but don’t want to give up control and can’t get a loan (Collateral Protection Policy)

Cyber

Cyber does not cover products and services

limited to trademarks and

copyrights, at best

Coverage Gaps for

IP Infringement

Media

No patent coverage

Trademarks and copyrights have limited coverage

Professional Liability

Professional advice must be a direct cause of the infringement

allegations

CGL

Advertising Injury-Narrowly, limited

patent coverage, if any

Patent must “claim” the actual way the

product or service is advertised

Trademarks and copyrights only as

exclusively used in advertising

D&O

No intellectual property

infringement litigation expenses

or damages covered

More Coverage Gaps for

IP Infringement

E&O

No patent coverage

Trademarks and copyrights, may

have some coverage older

policy forms

Stand Alone IP Policies

• IP Enforcement Insurance• A unique, plaintiff’s policy to help your customers pay the cost to enforce IP

rights

• IP Defense Insurance • The solution to the gap left in conventional policies for IP risks to help your

customers pay the cost to defend charges of IP infringement

Additional Stand Alone Policies• Multi-Peril IP Insurance

• A first-party coverage, business interruption policy due to the loss of the insured IP litigation.

• Unauthorized Disclosure Insurance• Coverage for the unintentional exposure of a 3rd party’s entrusted confidential

information.

• InventPro® Enforcement Insurance• A starter enforcement policy for inventors, start-ups, and small companies

with limited IP.

• Troll Defense Insurance• Specifically covers infringement charges brought by pre-identified patent trolls

and/or patent troll-related patents.

• Post Grant Defense Insurance• Provides coverage for inventors by paying the legal costs of responding to AIA

(American Invents Act) actions and maintaining the validity of the patent in question.

• Collateral Protection Insurance• Policy allows using patents as collateral for a loan, with collateral default

covered by the insurance.

Other IP Risk Mitigation Techniques

• Patent Pools (Patent Aggregators)

• Association memberships

• Customized Low Limit Policies

• Contingent Fee Arrangements

• IP Glossary Protection Policies

Identifying & Assessing IP Exposure

• Industry considerations• Main factors are size of industry and rates of litigation (i.e. how much money

is there to win from lawsuits?)

• Competitive Landscape• What is the size distribution of competitors and how active are the bigger

players in obtaining patents?

• Technology Inventory• What is your company’s technology strengths, which are being patented, and

which overlap with your competitors’ patented technology?

• Innovation Updates and Advantages• Which competitors are most often applying for patents on their innovations in

areas that overlap your innovations?

Real Life Industry ExamplesE

nfo

rcem

ent

IndustryPolicy

LimitsSIR Premium

Top 6 Most Litigated

Industries

Management Consulting

Services$3M/$3M $60,000 $23,000

± Business/Consumer

Services

Waste Water Treatment Industry $1M/$1M $20,000 $15,000 ± Industrial/Construction

Compliance Technology Tools

and Services$1M/$1M $60,000 $14,000 ± Computer Hardware

Software Technology $2M/$2M $60,000 $16,000 ± Software

Defe

nse

Manufacturing Technology $2M/$2M $40,000 $39,000 ± Industrial/Construction

Wireless Communications $5M/$5M $100,000 $53,000 ± Telecommunications

Software $2M/$2M $40,000 $88,000 ± Software

Medical/Surgical Devices $2M/$2M $250,000 $29,000 ± Medical Devices

Recent HistoryLegislative and Judicial Actions*

• U.S. Supreme Court Decision: Octane Fitness vs. ICON Health & Fitness

• Congressional Remedies• America Invents Act

• Innovation Act

• Federal Court Decisions• Alice Corp. v. C.L.S. Bank Int’l

• Mayo v. Prometheus

• State Actions• TX, FL, CO et al prohibit bad faith assertion of patents

*See “Patent Trolling in the Wake of the Octane Fitness Case”

New Matter, volume 40, number 3, page 24

Thank You