Intellectual property insurance

Intellectual property coverage provides essential protection for IP infringement claims. If a company is sued for an infringement, IP insurance protects it by covering the legal fees, court costs, settlements, and a potential judgment from the IP litigation.

Even if the claim is found to be baseless, the legal defense costs could be significant, which could impact the business's operations without coverage.

Or, if a business discovers its IP rights are being infringed by an individual or company, an IP insurance policy would help pay for attorney fees, court costs, expert witness fees, and other litigation costs.

Disputes involving intellectual property are not covered by business personal property insurance, which is why IP insurance is important. Business personal property insurance typically covers physical items owned by a business, like computers, furniture, and inventory.

IP insurance fills a critical coverage gap by protecting a business's intangible assets, which may be more valuable than its physical assets.

IP insurance covers four different types of intellectual properties — patents, copyrights, trademarks, and trade secrets. Companies often use these assets to maintain their competitive edge.

A patent is legal protection that gives an individual or business exclusive rights to an invention for a specific period of time. Patents can cover several types of things, including products, production processes, and improvements to existing designs. If an individual or business holds a patent on something, no one else can make or sell it without the patent holder's permission.

For example, a software development company might patent a new software program that is more efficient than what’s currently on the market. The patent prevents competitors from making and selling the same software until the patent expires. This allows the company to recoup its research and development costs and earn a profit, which may encourage it to develop even more innovative products. 

A patent infringement could result in a competitor making and selling a similar product, which could decrease the patent holder’s market share. The owner of the IP assets could then take legal action and use its enforcement coverage to sue for using the company’s intellectual property.

A copyright is legal protection for the creation of an original work, like a book, movie, artwork, software, and more. Copyrights are typically used to prevent unauthorized copying, distribution, and public performances.

For example, an author who holds the copyright to a book has the exclusive right to profit from sales of the book, a movie adaptation, or licensing agreements. The author can even sell the rights to the book.

The primary risk with copyright infringement is lost sales. Many creative works are easy to duplicate, and unauthorized reproduction and distribution in the digital age is common.

A trademark is legal protection for certain elements that distinguish a company or its products or services from its competitors, like company names, logos, and slogans.

For example, a digital marketing agency might trademark its logo and a catchy slogan to help customers recognize its products or services when shopping. Unlike patents or copyrights, which are for a specific period of time, trademarks can be renewed indefinitely as long as they are actively used.

The intellectual property risk with trademark infringement involves the possibility that consumers could become confused. If consumers are unable to quickly tell the difference between brands when shopping, they may mistakenly purchase a product or service from the infringing party, believing it to be from the original trademark holder.

A trade secret is confidential information that gives a business an advantage in the marketplace. A trade secret may be a formula, manufacturing process, design, or something else that helps it stand out from the competition.

For example, a soft drink company might have a secret beverage recipe that competitors can't replicate. Trade secret misappropriation could harm the business because competitors might use the information to replicate its production process, which would flood the market with similar products and cause its product sales to decrease.

IP insurance is essential for any business that relies on its intellectual property, including:

• Website designers
• Software developers
• SaaS companies
• Application service providers (ASPs)
• Any individual or business that designs or develops products
• Media and advertising businesses
• Consultants

Businesses of all sizes can benefit from IP insurance. Many small businesses or startups need it because they often lack the financial resources to handle costly legal disputes.

Some things fall outside the scope of IP protection, like general ideas and concepts, which can't be protected unless they are developed in a specific way. For example, a technology company can't protect the idea of an application that connects people. However, the specific code that is used in the application qualifies for protection.

Similarly, methods of doing business or abstract concepts are not eligible for protection. Facts and discoveries are also considered public domain.

It's easy to get E&O or professional liability insurance with Insureon. Just fill out our online application to receive free quotes from trusted providers. Our expert insurance agents can help you choose appropriate coverage limits, add endorsements, and make sure your policy matches your business needs.

Most small business owners can get same-day coverage and easily download a certificate of liability insurance as soon as they purchase their policy.