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Misconceptions surrounding intellectual property and the role insurance can play could negatively impact SMEs who generally face a greater risk, an expert has said.
Erik Alsegard, IP practice leader at CFC, said that there are several misconceptions surrounding the risks which both brokers and clients have raised in relation to IP infringement defence.
“One is the idea that if a company has an IP right, for example a patent, then they aren’t at risk of infringing on someone else’s IP right or patent,” Alsegard told Insurance Business. “This is simply incorrect.”
Another misconception surrounds the overlap of patents. While it seems that patents would not have any overlap, Alsegard noted that it can be a surprising element of IP rights as “someone may have a patent that overlaps with elements of a product that isn’t patented by the company manufacturing or selling it.”
Alsegard gave the example of a company that has patented their core product, but not certain components that make up the product or the packaging and logistics or manufacturing process.
“These could be patented by someone else, and therefore they’re exposed,” Alesgard said.
With CFC having recently launched IP cover in Australia, Alsegard said that, generally speaking, SMEs face a “disproportionate risk” when it comes to IP because of the costs associated with claims.
“It’s a classic David and Goliath story,” he continued. “For an SME, even if they’re not infringing, they still need to be able to defend an allegation. We’ve seen claims that cost millions of dollars in legal fees just to prove the position of the insured, i.e. that they weren’t infringing.”
Alsegard said that this can lead to a feeling of “pay to play” for SMEs, which is where insurance can step in to “level the playing field.”
“Legal costs can also prevent SMEs from enforcing their own IP, and this risk can also be insured,” he added.
