Paying of it

IPR Insurance Scheme (DK)

Title of case

Patent Litigation Insurance Scheme, Denmark

Organisation

Samian Underwriting Agency (UK)

The initiative to establish a patent litigation insurance scheme was taken by the Danish Patent and Trademark Office which has pressed strongly for the setting-up of private insurance scheme. The Danish Patent and Trademark Office has also provided non-financial support to facilitate the establishment of an insurance scheme.

IPR Expert Group Recommendations

Member States should develop a comprehensive strategy to address the problem of funding IP protection and enforcement;

This strategy should include assistance in launching, at least at a national level, insurance schemes that provide cover for enforcement.

Areas that the case illustrates

Funding of IPR Enforcement
Effective intellectual Asset Management

The Patent Litigation Insurance Scheme relates to:

Patents

The insurance product available on the Danish market only covers patent rights. At a European level it would be possible and preferable to establish insurance schemes covering all types of IPR infringement.

Brief description

The patent insurance scheme – PatentEnforcer - was launched in Denmark in December 2007, by a private insurer. The product has been developed specifically for European SME's to finance the costs of enforcing their IP rights, in whichever geographic market these may have been infringed. The Danish Patent and Trademark Office has pressed strongly for the setting-up of private insurance schemes in Denmark and provided non-financial support that was crucial to the launch of the scheme.

Full description

If taken on directly, the costs associated with enforcement are often prohibitive for most SMEs and this adversely affects their ability to exploit their IP assets. How SMEs can fund IPR enforcement is, therefore, a fundamental question that requires a practical response.

There are potentially a number of options including direct support from the state (including voucher schemes which provide SMEs with vouchers which can be exchanged for legal advice including support on IPR protection and enforcement issues), the taking-up of test cases by business associations, anti-counterfeiting and piracy groups, innovation centres or specialist agencies, the shifting of funding towards IPR and its protection within innovation budgets and various forms of IPR insurance. This case focuses on insurance.

>Background & resources

PatentEnforcer is a scheme, launched in Denmark in December 2007, that was designed as a relatively low-cost mechanism for SMEs, enabling them to protect themselves against the legal costs associated with enforcement in the event of an infringement of their patents. The insurance product is operated by the Samian Underwriting Agency, a private company, in the UK. Samian then spreads the risks associated with operating the scheme by working together with large insurance players including Lloyds of London.

The insurance scheme is entirely private and is thus not subsidised by the Danish Patent and Trademark Office (“DKPTO”) or by any other public sector body.

It was the DKPTO, however, that took the initiative to establish a patent litigation insurance scheme on the Danish market and has strongly and continuously encouraged all private insurance providers to offer such insurance. The DKPTO has also made available relevant public information on IPR in Denmark (eg statistics) to all the interested insurance companies and made suggestions on elements that could be considered beneficial for SMEs in a patent insurance product. Later in the process – and as part of the DKPTO’s general obligation to provide information and guidance on IPR issues – the DKPTO has sought to raise awareness among researchers and enterprises about the possibility of taking out patent litigation insurance, for example in its newsletters, on its website and through information meetings.

The background to the DKPTO’s commitment to making patent litigation insurance available to Danish businesses has been strong representations to the DKPTO by its users. The DKPTO’s non-financial support and encouragement has been crucial in facilitating the patent litigation insurance scheme. Support of this kind from national patent offices is especially important during the phase when patent litigation insurance schemes are being developed and first brought to market.

The PatentEnforcer works on a voluntary basis and is an annual renewable scheme designed for small and medium sized companies domiciled in Denmark with a turnover of up to DKK 250m (about € 32.5m). The annual cost of taking out IP insurance varies from about €1,200 to a maximum of around €32,000, depending on the degree of protection needed by the SME, geographic coverage and the sector concerned. The typical insurance cost per SME is towards the lower end of this range. The insurance covers the legal costs incurred when an SME brings an action against a third party that has infringed insured patents. These may include patent attorney fees, lawyer fees, expenses and disbursements. Legal enforcement may result in an SME preventing the sale or use of any product or process which infringes the insured patent, damages claims, and the defence of counter-claims.

Indemnity limits range from DKK 1,000,000 (€ 130,000) to DKK 5,000,000 (€650,000) in aggregate.

SMEs taking out IPR insurance can opt for different levels of protection in terms of geographic coverage, depending on the extent to which they need to protection their IP rights in different key markets. Insurance can cover Denmark only, the European Patent Convention Member States, Europe-wide, Worldwide (excluding the USA or Canada) or Worldwide (including the US/ Canada).

In terms of the excess costs which must be met by the SME, if the Insurers’ approved counsel is used, then firms must pay the first 10% of all costs subject to a minimum of DKK 25,000 (€ 3,250) in Denmark (greater in other jurisdictions).

Coverage

The insurance covers:

Actual or suspected infringement of the Insured Patents as allowable under the patent laws of the country in which the infringement has occurred
Defence of counterclaims brought by the infringer
Accidental infringement of a third party’s IP by an SME

As far as the scope of coverage is concerned, the scheme covers granted patents and applications and patent families (up to 10 patent families can be insured). Different levels of insurance protection can be taken out.

Benefits of IPR insurance

The benefits of IPR insurance include:

Enabling SMEs to enforce their IP rights at an affordable cost – the relatively low cost of taking out insurance is made possible by spreading the risk of litigation with many other SMEs who are insurance policy holders
Serving as a deterrent against IP infringement– SMEs having taken out insurance and making this known to competitors, are arguably less likely to experience infringements and there may be a cost saving attached to avoiding litigation linked to this
Enabling SMEs to fully exploit their IP assets - patents registered by SMEs potentially have greater resale value if protected by appropriate indemnification against accidental IPR infringement of third parties. Some firms operating in the software sector, for example, require indemnification from potential lawsuits as a prerequisite prior to purchasing technology patented by smaller firms.

IP insurance can therefore be seen as an important component as part of a holistic intellectual asset management strategy. By protecting IP rights effectively, an SME can minimise its risk of having to undertake enforcement proceedings. There is therefore both an offensive and defensive aspect to IPR insurance.

Further Development of the Scheme

The possibility of extending insurance services to other markets depends on a number of factors, but the degree of co-operation possible with public agencies with responsibility for promoting the development of intellectual property and innovation can be significant. The size of the market is critical. There are substantial entry costs, there needs to be sufficient take-up to spread risk effectively and there has to be a sufficient basic awareness of the value of IPR and the need for its protection. So, unless a Europe-wide solution can be found, it is likely that insurance companies will concentrate on key EU markets with both a large SME population and a relatively high propensity to register patents. This effect can be modified to the extent that there is good co-operation with the public agencies operating in the IP area.

Transferability & Performance

The scheme was only set up in December 2007 and it is too early to assess its performance.

A number of IPR insurance schemes have been set up in the past, but have failed. The key is achieving the high volumes necessary to make the scheme firstly affordable to SMEs and secondly sufficiently profitable to encourage the private sector investment.

To an important extent, the fact that the scheme was launched in Denmark is due to the effective support of the kind outlined that has been provided by the Danish Patent and Trademark Office.

This is an area where there are significant market failures and a finely balanced judgement is necessary, if measures are to have a realistic chance of success.

Further information

Website:

Contact details:

Ian Lewis

Samian Underwriting Agencies Limited

5 St Helen's Place

London EC3A 6AU

England

Tel: +44 (0)20 7036 0405

ian.lewis@samian-underwriting.com

The Danish Patent and Trademark Office

Helgeshoej Allé 81

2630 Taastrup

Denmark

Tel: +45 43 50 80 00

E-mail: pvs@dkpto.dk