The Hindu Business Line : Copyright, trademark, patent infringement cover on the rise

Insurance companies are now finding more takers among pharma and IT firms for insuring infringement of copyrights, trademarks and patents. This covers legal expenses and damages awarded in overseas litigation.

Patent insurance is a complex and niche cover but the number of enquiries coming in is on the rise.

"We have received many enquiries from the pharmaceutical, information technology, electronics, bio-technology, automobile and medical equipment sectors. Our company is close to issuing policies in the next two months," said Mr Anup Mathur, Vice-President, Corporate Business Division, Howden Insurance Brokers, one of the leading brokers for liability insurance in the country.

Globally, the number of patent applications has increased from 66,000 in 1980 to 183,000 in 2001 and the number of the patent claims from 750 to 3,000.

According to estimates, there were around 275,000 patent applications last year.

"Pharmaceutical and IT companies are consolidating their operations and making overseas acquisitions and hence are aware of the risks.

Patent claims have doubled in the past five years and it is now not uncommon to hear of patent awards which are above $100 million," said Mr Mathur.

Indian companies are seeking patent insurance with an indemnity limit of around $5-10 million. Such policies carry a co-payment of around 10 per cent of the policy limit.

Almost 99 per cent of the policy is reinsured as Indian companies do not have the capacity to retain it on their books.

Even the product is tailor-made by foreign brokers where the insurer merely signs on the policy. A few years ago, New India Assurance had issued a patent infringement insurance policy to an IT company.

"Patent insurance is less common and more severe when there is an award. Copyright and trademark insurance are more common and less severe in terms of damages," said Mr C. Radhakrishna, Director, Corporate Services, India Insure Risk Management Services.

The foreign customers of IT companies are now contractually making it mandatory to bundle a copyright and trademark insurance policy with an errors and omissions (of employees) liability policy.

An errors and omission policy could range from $2 million for a small company to $25-50 million for a large firm.

"Almost 50 per cent of the contracts of IT companies now opt for adding a copyright and trademark insurance to their policy," said Mr Radhakrishna.

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