Your small business clients may be full of bright ideas – but are those brainstorms properly insured? The intellectual property SMEs develop such as patents, trademarks and copyrights can leave them legally vulnerable – but many may not realize they need coverage at all for their fledgling concepts.
“The economy has changed so much, most small businesses now have moved away from operating on a tangible basis and a lot of that would be intellectual property - and they’re not necessarily aware of that” says Erik Alsegard, intellectual property practice leader at
CFC Underwriting. “Of course, they don’t think they can buy insurance for it.”
Patent infringement is an especially risky area for SMEs; according to the Canadian Intellectual Property Office, 22,495 patents were granted in Canada between April 2015 and May 2016. While business owners are wise to do an existing patent search before launch, it’s impossible to completely clear their products of potential infringement, leaving them open to potential suits and delays.
Alsegard points out that those leveraged in debt to fund the research and development stages of their product can be at the highest risk as they may discover another company has infringed on their patent – or they may have unknowingly copied an existing idea. Legally, it’s a grey area that can take a financial and timely toll on both parties, whether or not the copy is intentional.
He points to IP insurance as an effective business enabler, giving the SMEs the leverage they need should they find themselves in a litigious situation. Coverage, which has an average premium of about $20,000 for a $1-million policy, ensures costs associated with any defence claims, litigation and potential loss are covered, in or out of court.
“You do face the risk that people use IP litigations as a means to disrupt a business,” he says. “If you come across an infringer of your own IP, they know that if you’re a weak company financially, they can perhaps treat the litigation or dispute differently if you can demonstrate that you can afford to take the necessary steps.”
