As discussed in a previous blog IP insurance covers enforcement, defence and invalidity actions relating to both hard IP (patents) and soft IP (trade marks, copyright, trade secrets, designs etc). I am often asked how these policies operate in practice and below is a brief explainer.

Enforcement Actions

If an infringement of its rights is identified, the insured party must obtain an opinion from its solicitor on the likelihood of the claim succeeding. If the advice is that the claim has a reasonable prospect of success then the insurer will fund the action, subject to the terms of the policy. If the claim is lost and the insured party becomes liable for the other side’s costs, these are covered by the policy subject to the amount of cover the insured has purchased.

Invoices rendered by the insured’s solicitor can either be settled by the insured party who is then reimbursed by the insurer, or the insurer can settle invoices directly (less the co-insurance element).

Defensive Actions

If an insured party is sued for infringing a third party’s rights the insured must get an opinion on the likelihood any defence to the claim succeeding. This opinion can be prepared by the insured’s own advisor, the insurer does not have a panel of lawyers that have to be used.

If the advice is that the insured party has a reasonable chance of defending the claim then the insurer will, subject to the terms of the policy fund the defence of the action and if the claim is lost any damages that the court awards against the insured.

If the insured’s solicitors/attorney advise that any defence to the claim the insured party has is likely to fail, then the insurance will pay to extract the insured party from the litigation and pay any damages that are agreed to be paid to settle the action.

As with enforcement claims, invoices will be paid by the insured who is then reimbursed or the insurer directly.

If you’d like any further information on IP insurance and how the policies operate please give us a call on 0203 6330766.

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