PROTECTING IP IN UNDERWRITING MODELS,

MANAGEMENT INFORMATION AND KNOW-HOW

20th January 2016

By David Wilkinson and Donald McCombie

1 50030894.1

• Introduction – David Wilkinson

• What are the IP rights and who owns them? – Donald McCombie

• Enforcement and practical steps to avoid problems arising – David

Wilkinson

• Questions

OVERVIEW

2 50030894.1

HOW MGA’S FIT INTO THE OVERALL

STRUCTURE OF THE INSURANCE INDUSTRY

Insurer

MGA

Policyholders

Policyholders

Brokers

MGA Agreement

Centre of the Market

TOBA

3 50030894.1

• Underwriting models

• Management Information

• Know-How

• Customer connections

WHERE DOES IP RESIDE?

4 50030894.1

• MGAs do not provide the capital

• MGAs do not necessarily own the client if introduced by the broker

• But MGAs have:

– Considerable underwriting and market knowhow

– Considerable amounts of data

WHY SHOULD IP MATTER TO MGA’S

5 50030894.1

The key IP rights:

Rights in confidential information

– Contractual versus equitable/implied obligations of confidence

– Employee duties and restrictive covenants

Database rights

– Copyright in databases

– Standalone database right

Copyright

– Rights in software and limits of copyright protection

– Rights in content

Trade marks, passing off and patent rights

WHAT ARE THE IP RIGHTS AND WHO OWNS

THEM?

6 50030894.1

May be protected using legal or practical means

Practical measures often cheapest and most effective

– Must strike a balance between strong protection versus ease of

commercial exploitation

Legal rights often expensive to enforce, and difficult to police

– Breaches of confidence often go undiscovered

Legal protection is via action for breach of confidence in UK

– Information must:

1. have the ‘necessary quality of confidence’

2. be subject to an obligation of confidence

3. Have been ‘misused’ by recipient

– Rights only enforceable against person owing obligation of confidence

• Once disclosed to the world, can’t put genie back in bottle

Rights in Confidential Information

7 50030894.1

‘Necessary quality of confidence’

Must be able to define information said to be confidential

Information must be genuinely confidential

– If already in public domain, cannot be confidential

– BUT collections and analysis of public information can be confidential

English law recognises different types of confidential information

– Trade secrets

• Business plans and methods

• Financial and statistical information

• Customers lists and databases

• Computer source code and algorithms embodied in code

– Employees’ skill and knowledge

Rights in Confidential Information

8 50030894.1

Obligations of confidence may be contractual or equitable/implied

Contractual

– Express contractual provisions, written or otherwise

– Provides greatest certainty about existence of obligation

• Should also define the information itself and what constitutes ‘misuse’

Equitable

– May be implied from the circumstances of disclosure of information

• Not mutually exclusive to existence of contractual obligation

– Will arise automatically from certain relationships

• lawyer/client

• employer/employee

• fiduciary duties – directors and executives

Rights in Confidential Information

9 50030894.1

Misuse of information

Contracts should define permitted uses

– Permitted use often purpose-bound

Even if no contract, misuse often easy to characterise

PROOF of misuse often most difficult aspect of breach of confidence claim

– Practical safeguards may be implemented before breach arises

– Post-breach evidence-gathering methods often expensive

– Covered later in presentation

Rights in Confidential Information

10 50030894.1

Databases are protected by copyright and by standalone right

– Standalone right most relevant to insurance industry

Database rights can be very valuable, but often overlooked

– If breach of confidence fails, database right may come to the rescue

Protection arises automatically

– Requires ‘substantial investment in obtaining, verifying or presenting’

information

Standalone database right prohibits extraction or ‘re-utilisation’ of

whole or ‘substantial part’ of contents of database

– Repeated and systematic extraction of ‘insubstantial part’ of database

also prohibited

Owned by person who ‘takes the initiative’ or ‘assumes the risk of

investing’ in making the database

– If made by employee, employer owns the database right

Database Rights

11 50030894.1

Copyright covers many types of content

– Literary, dramatic, musical and artistic works, sound recordings, films

Copyright protects form not function

– Underlying meaning is not protected

Software code is protected as a literary work

– Verbatim copying of code is infringement of copyright

– Re-writing code to perform the exact same function generally not an

infringement

– Algorithms and mathematical models implemented in code generally not

themselves protected

Confidentiality of source code therefore important

Copyright owned by author of code

– Belongs to employer if written by employee in course of employment

– Copyright belongs to contractor/contractor unless assigned in writing

Copyright

12 50030894.1

Trade marks

– Registered rights that protect brand names, logos

Passing off

– Unregistered right that protects trading ‘goodwill’ in a name or business

– If name of start-up business confusingly similar to previous employer’s

business, may be liability for trade mark infringement or passing off

– Should avoid making ‘trade mark use’ of name of previous employer in

promotional materials

Patents

– Registered rights that protect ‘inventions’

– In Europe, business methods, software, mathematical methods excluded

‘as such’

– In US, fewer exclusions from patentability

• ‘non-practising entities’

Other IP Rights

13 50030894.1

• Causes of action

• Remedies

• Practical precautions

ENFORCEMENT OF IP RIGHTS

14 50030894.1

• Breach of employment contracts

• Breach of restrictive covenants

• Breach of confidence

• Database right infringement

• Other causes of action: e.g. inducing a breach of contract; copyright

infringement; trade mark infringement/passing off.

CAUSES OF ACTION

15 50030894.1

• Injunctions:

o Interim

o Springboard

o Final

• Search and seizure orders

• Delivery up

• Damages or account of profits

REMEDIES

16 50030894.1

• Forensic IT investigations

• Document management systems

• Seeded databases

• Software tools

PROVING INFRINGEMENT

17 50030894.1

• Clauses in employment contracts/commercial agreements

• Raise awareness of confidentiality

• Restrict access to confidential information

• Keep records of time and resources spent creating databases

• Secure ownership of copyright works

• Be aware of warning signs

• Take action promptly

PRACTICAL PRECAUTIONS

360+ 1800+ 3000+ 45Partners Legal professionals

worldwide

Total Staff Offices across 6

continents

Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored

in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. © Clyde & Co LLP 2016

ANY QUESTIONS?