Matthew Hogg LL.B (Hons), LL.M., ACII,R J Kiln & Co. Ltd.Marsh Technology Conference 2005Zurich, Switzerland.

Intellectual PropertyA key asset as well as risk for technology firms – the challenge and the solution

May 26 & 27

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Intellectual PropertyAgenda

Relevance of IP rights

Risks to IP rights and the business model

Risk management

Insurance

Claims Example

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Intellectual PropertyRelevance of IP Rights

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Intellectual PropertyRelevance of IP Rights

Intangible Assets represent about ¾ of market value of medium-sized US companies

IP assets estimated to represent 22% of market value

Corporate Governance – Sarbanes-Oxley, Turnbull Report

Accounting Standards – IFRS, FASB, US GAAP

Increase in IP applications/litigation/awards & settlements

Top 5 risk to Risk Management community

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Intellectual PropertyRelevance of IP Rights

Patents – how things work Registered

Trade marks – how things are

recognised – branding Mostly Registered

Designs – what things look like A mixture of registered and unregistered

Copyright – protectable original

expressions Unregistered

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Intellectual PropertyRelevance of IP Rights

The Importance of IP assets

– Hewlett Packard

– IBM

– Lucent

– Texas Instruments

– National Semiconductor

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Intellectual PropertyRisks to IP Rights - Uncertainty from the start

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Intellectual PropertyUncertainty from the start

Intellectual Property

– It has vague boundaries which appear on paper and are prescribed by language/words

– The boundaries are frequently only made clear by a legal challenge of some sort

– A challenge can involve complete/partial destruction of the right

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Intellectual PropertyUncertainty from the start

Additional Confusions

– Poor quality patents (examination procedures)

– National Rights – diverse laws

– Only an asset if protected and enforced

– IP rights selection – finding the appropriate medium

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Intellectual PropertyRisks

Perils to IP

Enforcement

Infringement = Liability

Cost of Defence

Loss of Position

Warranty -To -Title

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Intellectual PropertyRisk Management

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Intellectual PropertyRisk Management

Considerable upside and downside risk that needs to be considered

Estimated £8 billion (€11.7 billion) of income lost annually in Europe alone from failing to maximise IP value

Only 5% of companies believe they have robust system to measure and track IP

Shared task? Importance of board/lawyers/accountants/risk managers

Readdressing cost centre mentality

Application of traditional risk management skills

Identify

Assess

Control

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Intellectual PropertyInsurance

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Intellectual PropertyInsurance

Legal Expense Insurance

– Legal Costs & Expenses (Pursuit or Defence Cover)

– Legal Liability

– Contractual Liability

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Intellectual PropertyInsurance

Loss of IP Value Insurance

– Legal Challenges – invalidity, infringement, employees

– Government Action – renders IP null & void, restricts exploitation

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Intellectual PropertyInsurance

What can be insured?

IP-Rich Products’ future revenue streams

Licensing Revenue

Royalty Receipts

IP “value” – accounting principles

R&D Expenditure

Financial Investment

Loan arrangement

Transaction involving IP rights

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Intellectual PropertyConclusions

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Intellectual PropertyConclusions

First party has been deemed the “holy grail” by some in insurance market and industry

Extremely flexible, tailor-made policy if necessary to deal with client concerns

Still a role for IP Legal Costs Insurance – particularly for SMEs

Intangible Assets only recently being taken seriously within a company’s strategy