India: Intellectual Property Insurance: A Future Gamechanger?

An investment in knowledge pays the best interest. – Benjamin Franklin

INTRODUCTION

In the instant generation where every aspiring students aims to setup a million dollar valuation startup to start soaring high from the very next day out of academics, reality may prove to be a bit harsh in the scenario. Developing an industry in form of a startup is no less than an actual rat race, innovative and unique ideas are martyred for drawing attention of investors. Slowly but not steadily have the norms guiding the world changed and this change demands thinking out of the box for protection, from each and everything which the company or any individual of the company may ever interact.

The interest may solely be in generation of profits and pumping up turnover to join the big league of who's who, but what really matters is how secured is the entity from an attempt of breach. Let's assume the startup/company to be a single person, in such scenario the person always will want to have wider client base, uninterrupted global presence, complete rights over the original content, more revenues from all possible sectors of business and the list goes on and becomes endless only with a sole criterion which revolves around the interest of the person in the company to evolve and enrich.

Half of the harm that is done in this world is due to people who want to feel important. They don't mean to do harm. But the harm does not interest them. As dangerous as it is to have half knowledge of a subject, it's even more dangerous to not secure your interests in the business before thinking to elucidate it to the world. Given the screaming demand of intellectual property protection, turning a dead isn't a wise mans way of dealing with it, especially when all you have to lose is 'everything'.

NEED FOR INTELLETUAL PROPERTY

The most underrated element in a company is the intellectual property; however the power it has speaks the contrary. It may be insightful to note that registering for an intellectual property becomes a mandatory obligation right from the very next moment of incorporation of the company / business. Even the smallest of elements like the logo or even the tagline used are matters of intellectual property of the organization, which over the period of time may become a synonym of the commodity.

Though technology has a varied and complex industry base; protection to invention is given in form of patents on the grounds of "first to file", whereas for copyright and trademark the protection is based on grounds of "first to use". It is noteworthy to be emphasized that seeking registration for the desired intellectual property is a time consuming process but the interest and intent of protection can be used as a cumulative tool to judge the value of inclination of the applicant.

Intellectual property gets associated with the commodity right from the moment of inception but it needs to be recognized by the owner in order to embark and encash the value. Potential of the interest is a major element which gives protection to the applicant, it also needs to be understood that the person developing the IP, should apart from registration take counter steps for protection in form of insurance. The interest which the person has in the commodity which drove the process of registration of intellectual property can be assumed to be a refection to safeguard the same interest and act as insurable interest of the applicant. Insurance can be exercised to secure any interest which may be vulnerable to the malafide acts of infringers.

INTELLECTUAL PROPERTY & INSURANCE

Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. IP is protected in law by, for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.1

Insurance can simple be put as an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

The concept of Intellectual Property and Insurance is a relatively new concept which functions in the similar manner as in any other insurance policy, but it comes with its own unique set of terms and conditions. The main coverage provided under the ambit of intellectual property is in relation to the costs of legal proceeding and charges only. Given the volatile nature of intellectual property and the time take for procuring registration leaves the claim to be only about the costs for the legal proceedings. Intellectual property is gaining prevalence and pace in the market and industry and given the growing field like India, the scope of development is very promising.

The major reason for safeguarding the intellectual property is the immense economic benefit which it carries with it, which later turns out to the most valuable asset to the company. It is now a well-accepted business valuation maxim that intangible assets such as brands, copyrights, patents, and trade secrets are often valued greater than tangible assets consisting of buildings, inventory, and equipment. Despite this, a vast majority of businesses fail to carry stand-alone intellectual property insurance coverage. Intellectual Property insurance has always been considered to be an alien concept its ambiguity and uncertainty of admissibility and protection.

Until recently the claims related to Intellectual Property Insurance were cumulatively encompassed under the umbrella of General Liability Insurance; however the rising numbers of instances have made the insurance agencies create a divide as to what shall / shall not be protected under the cover. Given the vide arena of operational branches under the genus of Intellectual Property such as Patent, Copyright, Trademark, Trade Secret, Design and Geographical Indication; it becomes difficult to envisage a single applicable mechanism to ensure protection and deducing a single framework to ensure protection for the same still remains as a challenge.

The present policies offered are strictly limited to the following patterns:

1. BLE – Before Litigation Expenses:

The insurance can cover the applicant with their own legal costs or the costs of the complete legal proceedings in the dispute.

2. LEI – Legal Expenses Insurance:

It will only cover the risk before a claim is made, the applicant can get BLE cover if the (alleged) infringement has not yet occurred.

Protection to cyber attack and cyber liability is given but presently when the concept of Intellectual Property insurance is going through its period of waxing and waning, concept of cyber liability seems far ahead of times, however the imminent threat may never be neglected. Loss of revenue, indemnity of damages which have been ordered after the suit can never be contended under the umbrella of claim of insurance policy.

Though having its relative amount of anchors the advantages of having an IP Insurance are:

1. It acts as a safeguard to protect the cash flow:

Irrespective of the challenges faced or the threats posed the industry involved in the commodity manufacture can work in an uninterrupted manner as it has an added leverage of monetary security in form on compensation from insurance policy which shall ensure uninterrupted cash flow to the possible engagements.

2. It acts as a deterrent to others before filling for a suit:

IP Insurance acts a safeguard from petty suits of infringement or baseless claims as irrespective of the claims the proprietor of the mark shall not be under any kind of financial burden in light of the insurance, on the contrary it might act as a relief and beneficial mechanism if the damages are allotted for suffering from intangible losses due to such baseless claims.

3.

4. It improves the position while negotiating any deal or licensing or tech transfer:

IP Insurance acts as complete safeguard in terms to the financial sector of the company being involved in tech transfer. It acts in increasing the reliability score of the parties involved in the process by acting as an escrow to the transaction.

5. It facilitates for the IP to be used as collateral:

Insurance facilitates and improves the value of mortgaging or seeking loan against the same property as guarantee. Being considered as collateral enhances the significance of the company and speaks about the credibility of the organization.

All set and done the most important element of consideration for eligibility for insurance of IP is the "reasonable prospect of success test", whereby; any party to the suit whether insured or not shall have to completely understand the compliance of the dispute and has to assess before going to the court from a qualified expert in the field as to the prospects of having a favorable decision, if the chances are above 50%, it is only then that the same may be allowed for a legal suit. This rule was devised to curb intentional trademark infringement which may prove a viable threat to the entire prospective setup of insurance. So in order to keep a check over the misuse of insurance policy, the major cover provided is only in forms of:

1. Opinion Costs:

The costs incurred while seeking opinion from a legal establishment regarding the alleged claim.

2. Enforcements and Defense:

Protection can be given to the costs arising from the opposite party strictly and solely in relation to the orders which are passed by the competent authority limited to the applicant.

As has been seen in several instances that the intellectual property claims have mostly been sheltered under the cover of General Liability Insurance, without any success other than a few exceptions; this clearly signifies that the impact of intellectual property claims is to be well bound about and planned rather than just to be swept under the existing blanket.

CONCLUSION

The past decade has witnessed a steep rise in the growth and formation of what is known as the next-gen entrepreneurships called as the start-ups. Given the nature and challenges these companies face right from the moment of incorporation it should be worth emphasizing that given the nature of businesses which find similarities with established business houses vulnerability plays a crucial role. In the Indian scenario, intellectual property is somewhat still in a nascent stage which needs active reforms. A major bulk of the filings in Trademark, Copyright and Patents are of foreign entities who wish to seek protection for their rights in India. Despite having given many informative schedules and policies to seek protection and also been lucrative tax exemptions to garner demand, the lukewarm approach shown towards intellectual property registrations raises serious concerns regarding the stability and overall sustainability of the goods and services provided under the brand name.

The important element which the companies fail to appreciate and harness is the fact that creating a power results is being accountable for a greater responsibility and without proper safeguard it all leads to being valued for nothing. General liability insurance may protect the company from risks and perils against tangible elements but fails to safeguard against the superior intangible elements which carry greater liability.

Having given due emphasis and importance to the value of insurance and protection of intellectual property it also has to be understood that the aforesaid can only be put into enactment based on the accuracy and performance of the IP enforcement agencies. In the present scenario given the limited scope and awareness amongst people regarding intellectual property itself, the concept of intellectual property insurance seems completely alien.

However, nevertheless it surely can be seen as the future and the next big step in the era of intellectual property. Facilitation of development shall always be a keen aspect of the development given the changing times.

Thought the startup and established industries need to understand the value of Intellectual property and its insurance they very well also should understand the vulnerability of the situation due to lack of prescribed forums and practices when it comes to disputes regarding the same; also the notion of having favorable pronouncements in interest of the big companies, there is still a lot of trekking to be done to reach the summit of reasonable solution and until then in light of the challenges and adversities in process it should be understood that intellectual property is a volatile asset and protection and maintenance demands paramount attention.

Footnote

1 http://www.wipo.int/about-ip/en/

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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