Australian SMEs are advised to access insurance for pursuit of intellectual property (IP) infringement after record numbers of patents, trademarks and designs were filed in Australia last year. 

Pursuit insurance provides cover for legal costs associated with enforcing rights and breach of contract. Software businesses, manufacturers, designer companies, tech firms, media companies, and life sciences firms are all potentially exposed to IP infringement, CFC Underwriting Intellectual Property Practice Leader Madeleine Brown says. 

The value of intangible assets now “vastly outstrips” that of tangible assets, Ms Brown tells insuranceNEWS.com.au, and instances of IP conflict are rising as more companies enter a contract “chain” for their services and products. 

“We often see instances where an SME will talk about design concepts or ideas and how their new innovation will be incorporated into the third party’s product – but then the third party essentially copies the design, thus breaching the contract,” she said.  

In one claim managed by CFC, a firm selling energy saving devices was able to negotiate a licence agreement, with compensation and royalty payments on future sales of a competitor’s device, after its patent was infringed. 

“Legal costs ran into six figures which was the least the business would have had to pay had they not had IP insurance,” Ms Brown said. “Our cover helped them meet the bulk of the cost and secure a future revenue stream.”  

London-based Ms Brown says Australia is a “hugely innovative” country and there has been a significant uptick in IP enquiries in recent years from a broad range of businesses, including in manufacturing and construction. The global nature of Australian firms is an additional IP risk. 

“While they might be based in Australia, they’re dealing with business around the world and have particularly strong links with the US and Asian markets. This increases their risk exposure. 

“The risk doesn’t necessarily come from within a business’s home market. If it is selling its product or service internationally – so in the US or Asian markets for example – there is always a risk that a firm in an overseas territory may try and copy the IP. 

"More companies are either becoming more aware of the risks, or having to look at cover as part of any contractual obligation.” 

IP insurance cover can also provide access to a panel of expert IP law firms to inform choices, a benefit Ms Brown says is “lesser known but hugely valuable”. 

"It’s unlikely that an SME would know where to start. They’re not usually well placed to assess whether a lawyer’s hourly rates are reasonable, whether their strategy and expertise is appropriate.” 

In another case, a small design company discovered a large firm and previous contract using its unique bicycle suspension technology designs without paying an agreed royalty – a patent infringement and trade secret misappropriation. It was able to enforce its contract rights and secure compensation. 

In the case of defence policies, insurance can help pay for any settlement ruling against a firm, while enforcement policies allow work with the carrier to enforce patents.  

“Instead of waiting to be asked if insurance cover is available, I would encourage brokers to bring up the subject next time they’re speaking with their clients,” Ms Brown says.