Does your Comprehensive General Liability policy cover you for IP claims?

Intellectual property – be it your branding (trademark) or your technology (patents and trade secrets) – are your biggest competitive advantage. IP is a huge corporate asset, but is it covered under your business’s Comprehensive General Liability insurance policy? (Hint: the answer is no.)

CGL Policies Cover “Advertising Injury”

Comprehensive General Liability policies typically include coverage for “advertising injury.” Advertising injury is where your advertisement injures someone else. For example, if you happen to used another company’s copyright in your slogan in your advertisement, you would infringe someone else’s rights.

The CGL policy covers you in this case.

Many insureds were getting sued for infringing someone else’s patent or other intellectual property, and the cost of defending these lawsuits was mounting during the 1990’s. The insured companies started looking to their insurance companies to defend them under the “advertising injury” clause of their CGL policies.

Most insurers use standard forms from the Insurance Services Office, Inc (“ISO”). 20+ years ago, the ISO form put in a strong exclusion. They no longer would defend a company arising out of “copyright, patent, trademark, trade secret, or other intellectual property rights” *except for* the narrow “infringement, in your ‘advertisement,’ of copyright, trade dress or slogan.”

In other words, the standard forms for the last 20 years specifically *excluded* protection of patent infringement.

Patent infringement defense is very expensive, often between $700K-$4M.

Intellectual Property Defense Claims under the Comprehensive General Liability Insurance Policies

The only way to get coverage under a CGL policy for IP-related claims is to try to shoehorn it under the “advertising injury” coverage.

In most cases, the link between “advertising injury” and being sued for patent infringement is sketchy at best. Some companies have been successful at suing their insurance company and forcing them to pay for patent-related infringement defenses, but that is a hard battle.

In general, insurance companies are going to deny IP-related claims under a CGL policy. This means that they will not step in to help you with your patent, trademark, or copyright-related lawsuits under your CGL. You are left to pay for the lawsuits out of pocket.

To win under a CGL policy, you have to finance the total cost of the patent-related lawsuit yourself, then you have to sue the insurer when your claim is denied. This takes a lot of determination and a lot of money.

Separate Intellectual Property Insurance

Defensive intellectual property insurance typically covers patent, trademark, or copyright lawsuits.

IP-related insurance is typically provided by specialized carriers who know the IP landscape very well. This means two things: One, they have the knowledge to understand the risks appropriately, but Two, they have teams that can mitigate the risks.

Some IP insurance companies have very sophisticated databases of IP lawsuits, and they can give you statistics and data to know how a lawsuit would play out. Further, they might work with patent brokers to purchase the patents being asserted (or get a low cost license to the patents). Because these insurance companies have such a deep knowledge base in patent-specific litigation, they know all the players (typically the patent trolls) and can minimize the cost of IP lawsuits.

Compare this to hiring your law firm to defend you in a patent infringement lawsuit. Most litigators do not have the patent-specific experience, so you need to find the specialist in patent litigation. These specialists are often much more expensive than conventional litigators.

Experienced patent litigators might see a case or two every few years. These lawsuits are complex, lengthy, and take a lot of focus. A very experienced litigator might see a dozen cases every decade.

Compare this with a highly focused IP insurance company that has hundreds or thousands of policies. They have insights into hundreds of litigations – data which even the most experienced attorney at a big law firm will never see.

These data are part of the expertise and value that an IP-focused insurance company can bring to you.

Not only are you minimizing the risk of IP-related lawsuits, with an IP-focused insurance company at your side, the matter can be dealt with faster, better, and cheaper than if you went for it alone.