Insuring IP
Greg Lang, founder of the Reinsurance and Insurance Network, looks at the challenges of insuring intellectual property.
Captives have always been used to cover tough-to-quantify exposures. “Tough to quantify” is a good start to defining intellectual property (IP). Oxford Languages, owner of the Oxford Dictionary, defines IP as a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.
Understanding the different types of IP is important if you are trying to put a value on it and ultimately insure it. IP is often an individual’s or company’s most valuable asset. Understanding how IP is created and valued is important to protecting it.
Defining IP
A patent is an exclusive right granted for an invention, providing owners with the right to decide how or if their invention can be used by others. In exchange for that right, patent owners make technical information publicly available. A patent stops others making your invention, with protection lasting 20 years. Using someone’s patent before that would require some type of royalty arrangement.
Copyrights protect creative works such as computer code, photographs, artwork, and text. It protects an expression of an idea, not the idea itself. If I start an IP captive and write about it, copyright does not stop anyone else setting up their own IP captive. It does stop them reproducing my article. Copyright starts with the author. Ownership rights can vary, especially when work is created for others.
Trademarks protect your branding. Wordmarks and logos are the most common. Things such as colour, sound, and shape can also be trademarked. Many of you will be familiar with the Netflix sound when you log into your account. Password-sharing has become a serious business in my house after Netflix started cracking down on account-sharing, but that is Netflix protecting its IP.
“Insurance for IP is an evolving marketplace, similar to that of cyber insurance.”
Fuzzy IP
Patents, copyrights, and trademarks are fairly well understood in the context of IP. It can get more difficult when we start talking about moral rights, geographical appellations, industrial design, and trade secrets. This is a job for captives.
Moral rights relate to copyright. Moral rights protect the relationship between an artist and their work. They protect the artist’s reputation, integrity, and connection to that work. Moral rights include the right to be credited as creator and the right to prevent your work being treated in a way that damages your reputation.
The statue known as Fearless Girl has been mired in controversy since it was erected in New York City in 2017. The advertising agency McCann was interested in commissioning the statue, intending to place Fearless Girl in front of another statue, the Charging Bull, to call attention to “the glass ceiling for women in the Wall Street community”. The two sculptures were created by different artists.
Sculptor Arturo Di Modica, who created Charging Bull, filed a lawsuit against McCann and the Fearless Girl creator claiming that it violated his copyright and distorted the meaning of his work. Di Modica argued that the statue’s placement in front of Charging Bull altered the context of his work. Modica won his case and Fearless Girl was moved.
Geographical indications and appellations of origin are used on goods that have a specific geography and possess qualities attributable to that place of origin. Most common geographical indications include the name of the goods’ place of origin.
For example, champagne originated in the Champagne region of France. Only bubbly made in this region can legally call itself “champagne”. All other products of this type produced outside this region must be called “sparkling wine”.
There is a common misconception that bourbon can be distilled only in Kentucky. Bourbon was recognised in 1964 by the US Congress as a “distinctive product of the United States”. Bourbon sold in the US must be produced within the US from at least 51 percent corn (maize) and stored in a new container of charred oak.
An industrial design constitutes the ornamental or aesthetic aspect of a product. A design may consist of three-dimensional features, such as the shape or surface, or a two-dimensional feature, such as patterns, lines, or colour. The Dutch word “vormgeving” neatly translates into English as “giving form”, which is one of the principles industrial designers strive for. Coca-Cola’s contoured bottle, a Vespa scooter or the Tesla Cyber Truck are good examples of unique industrial designs.
Trade secrets are IP rights on confidential information which may be sold or licensed. The unauthorised acquisition, use, or disclosure of such information contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection. How many confidentiality agreements did you sign this month? Do you have coverage if someone breaches your agreement? What if you breach someone else’s?
The concept of a trade secret is simple. Don’t tell anyone how I made my mom’s homemade mac and cheese. Trade secrets work well if the invention can’t be reverse-engineered. The formula for Coca-Cola is a good example. Trade secrets require keeping information confidential both in practice and in the eyes of the law.
Valuing IP
If you’re going to insure something you need to know its value or how much it’s worth. To you, it might be priceless. Researching for this article I came across a company that has been tracking IP news and licences related to technology (patent, know-how, trade secrets, software, trademarks, trade name, brands or logos, copyright and right of publicity) for 35 years.
Valuations can be complicated. How much is an architectural drawing worth if a structural engineer says you can’t build the building that way? Do you think no-one can value your IP? What is “know-how” worth? A fabrication company uses a toy company’s moulds to make toys. The “know-how” the fabrication company has developed over time making these toys has become valuable IP. What is that “know-how” worth? This is one real example of a value that IP consultants put on IP every day.
Protecting and insuring IP
It is important to consider as early as possible how best to protect your IP. Some issues can be dealt with contractually, such as confidentiality and licensing agreements. Many can be done at any time, but it is easier if they are done early. Trademark applications can be filed at any time, but filing sooner reduces the risk that someone else will file something similar before you do. Patents can’t be filed any later than one year after they become public.
IP rights do not protect anything that falls outside the realm of human creation. This includes facts. Facts cannot be protected as IP. Realities such as “2 + 2 = 4” and “sloths poop only once a week” are simply, well, facts.
How much would you pay to recover or defend your IP? Can you buy IP defence-only cover? Is there an app for that? I don’t know if there’s an app but defence-only cover is available. Insurance for IP is an evolving marketplace, similar to that of cyber insurance. Both products have similar pools of insurers and reinsurers. July’s CrowdStrike global IT outage wreaked havoc this year in the cyber market. The expansion of artificial intelligence is doing the same with IP.
My solution to both is a familiar one: get some smart people together and figure it out. I bet your solution includes a captive.
Greg Lang is founder of the Reinsurance and Insurance Network. He can be contacted at: glang@rainllc.com
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