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Are patent disputes insurable? What types of insurance are available?
A new study by the European Patent Office (EPO ) and the European Union Intellectual PropertyOffice (EUIPO) shows that start-ups with patent and trademark rights in the founding or early growth phase are 10.2 times more likely to receive funding. Biotechs dominate the use of patents, with almost every second company having intellectual property (IP) protected.
Novel drugs and therapeutic approaches are based on years of research through expensive studies. The same applies to the approval of a medical product. It is a good right to have the know-how and investment built up protected by patents.
But how do you protect yourself from the risk of other biotech, pharmaceutical or medical technology companies infringing your own patents and only finding out who originally created the IP and who is entitled to commercialize it in an expensive legal dispute? The increasing number of lawsuits in the field of intellectual property, combined with risks from information security breaches, pose a particular threat to young biotechs, whose company value is often based on patents and the associated marketing potential.
The good news is that there are special patent insurance policies for IP disputes to protect companies from the financial risks. Insurance cover is generally available worldwide or, if desired, only for selected regions, e.g. where patents are marketed. What does Intellectual Property Insurance (IP insurance) cover?
As one of the leading specialist brokers for the life sciences industry, we have special concepts to protect you from patent disputes (patent liability insurance, patent legal protection insurance, etc.) In our experience, it is an indispensable part of the IP strategy to ensure that you are able to enforce your rights and defend yourself in court if necessary. Intellectual property such as patents, copyrights and other IP rights are of little use if the owner lacks the financial means to take action against infringers. Furthermore, not being able to defend oneself against third-party claims can threaten one's existence.
In addition to the German insurance market, Risk Partners works with the Lloyd's of London insurance market, which specializes in IP risk insurance. Here you benefit from more than 30 years of experience in all areas of IP insurance and can insure your risks with up to EUR 50 million.
In order to keep costs calculable and maintain the comparatively low premium level, certain legal disputes, particularly in the USA, are currently not insurable. However, the word "jurisdiction" is decisive here. So what does that mean?
In principle, all patents, e.g. from our biotech clients, including those in the USA, are automatically covered worldwide. However, the actual insurance cover in a legal dispute depends largely on the place of jurisdiction of the lawsuit, both in active and passive cases. For the place of jurisdiction, the entire geographical Europe is insured, which also includes the United Kingdom, Switzerland, and even areas as far as Moscow and the western Bosporus side of Turkey.
On the other hand, if, for example, your U.S. patent is infringed in the U.S. and you sue that person person in the USA this is not insured. In this case, the place of jurisdiction would be the USA and the exclusion would apply. However, if you sue the European (sales) company or license partner of this person in a European court, this is certainly insured. Conversely, it is also unlikely that you will be sued in a US court for an alleged patent infringement without having your own offices in the US. Normally, your registered office or another European court would be the place of jurisdiction, which would then also be insured.
Will this situation remain like this forever? No, of course we are in contact with the insurance markets in the interests of our customers in order to find solutions for the USA or China, for example. In principle, legal systems with many established disputes and corresponding data are easy to insure. In the US jurisdiction, however, the costs of such cases are many times higher, meaning that the insurer would have to collect significantly higher premiums for a resilient collective (number of contracts). A market would therefore have to form for this to happen. However, in view of the increased risk awareness in recent years regarding patent disputes, new product solutions appear to be within reach. We will keep you up to date on this.
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