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The 3 most important facts about IP insurance for startups


Key Takeaways

Matt McKenna Scale Underwriting
Matt McKenna

Underwriting Manager

Too many companies ignore one of the most common legal risks out there: intellectual property (IP) infringement. In past posts, we’ve talked about the high frequency of IP litigation as well as the dangers posed by patent trolls. But let’s keep it simple — what do you need to know?

There are a few important points about IP insurance that not every business knows about:

  1. It doesn’t matter whether or not you have patents
  2. If you do have patents, insurance can help you enforce them
  3. Companies relying on other policies with inadequate coverage risk going out of business
  4. Insurance for startups doesn’t matter whether or not you have patents


It doesn’t matter whether or not you have patents

IP insurance defends companies against claims from third parties alleging the company infringed on their IP rights. This is called “defense” coverage. It doesn’t matter whether or not you as the company holds any patents. It matters that someone else holds the patents.

Some carriers will have experts conduct due diligence as part of their underwriting. They want to gauge the IP risk landscape in your particular industry. It happens before you even get a quote, too. So by the time you are ready to make a decision about insurance, you know what risks exist in the outside world from both competitors and non-practicing entities (NPE’s) like patent trolls.

If one of these third parties sues you for infringement of their patent, trademark, copyright, trade dress or a litany of other IP violations, the IP insurance policy is designed to respond and help you defend yourself.


If you do have patents, insurance can help you enforce them

IP insurance also helps companies protect their own IP rights. This part of the policy is called “abatement” or “enforcement” coverage. If you find someone infringing on your patent, IP insurance provides experienced IP attorneys who can step in.

Often the offending party will turn around and countersue, challenging your patent’s validity. The policy would also pay the costs to defend this part of the suit. If you and the carrier prevail and receive a favorable judgment or settlement, the carrier will recoup any money they spent on paying the limits of your policy and then the remainder goes to you.


Companies relying on other policies with inadequate coverage risk going out of business

Other insurance policies have forms of IP coverage. General liability insurance covers copyright infringement claims in connection with your advertising. Cyber liability insurance will include some light IP coverage in connection with your online content. But no other policy offers IP coverage as broadly as does a dedicated IP insurance policy. And no other policy covers patent infringement claims.

Patent infringement litigation is particularly nuanced and expensive, hence why insurance carriers want to keep the risk isolated to a standalone policy. Fortunately, the median cost of patent litigation decreased in 2017, but the difference isn’t enough for many. With a midrange total cost of $950,000 to $3,100,000, one lawsuit still has the potential to cripple a company.

IP insurance reduces this risk by giving you a partner who literally does IP litigation for a living. Not to mention the financial safety net it provides, protecting your company’s bottom line.


Bonus fact: What is patent insurance?

Is it different from IP insurance? Nope! Patent insurance is just one form of intellectual property coverage. An IP insurance policy can cover for patents, copyrights and other IP. The phrases “Intellectual Property insurance” and “Patent insurance” are sometimes used interchangeably, but not all IP insurance policies cover patents.


Want to know more?

You can contact us at info@foundershield.com or create an account here in order to get a quote for intellectual property insurance and patent insurance.

Want to read more on the subject?  Check out our other blog posts on IP insurance.


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