专业文章内容
Current situation and trends of IP insurance

Author: Aaron Zhang、Hurry Wu

Intellectual property (IP) insurance is an important financial measure of the State to support the IP strategy. It can guide and support the market players to create and utilize IP rights, reduce the cost of safeguarding their rights and maintain a fair and orderly market competition. The State Intellectual Property Office began to approach major domestic insurance companies since 2011, with the aim to jointly carry out the pilot work of IP insurance; and in 2015, the State Council proposed to accelerate the development of science and technology insurance, and began to promote pilot projects of patent insurance.

Implementation

In recent years, Beijing, Qingdao, Suzhou, Shanghai and other provinces and cities have taken the lead to promote and implement the pilot work of IP insurance. IP insurance still remains in its initial stage of development. Yet there isn’t any IP insurance product that is promoted nationwide by the insurance companies. 

(I) The IP insurance is still in the initial stage of development. In practice, few insurance companies vigorously promote and develop the IP insurance, and even fewer enterprises proactively purchase IP insurance. So far, among the major domestic insurance companies, only PICC Property and Casualty Company Limited ("PICC P&C") and Cathay Insurance Company Limited (“Cathay Insurance”) have attempted to promote the IP insurance.

PICC P&C has launched three patent insurance products in different stages, including patent enforcement insurance, professional liability insurance for patentagentand patent infringement liability insurance.

Cathay Insurance launched the first "general liability IP insurance” of China in Suzhou Industrial Park in 2013. There was no application for claims upon the expiration of the above one-year insurance. The insured renewed the insurance and raised the maximum amount of claims to RMB 100 million.

Furthermore, Cathay Insurance signed a strategic cooperation agreement with Qingdao Sino-German Ecopark. The personalized menu-typed comprehensive policy covers patent right, trademark right, copyrights, new plant rights and other rights, and includes three protection modules: (1) the plaintiff insurance: an enforcement insurance that compensates for the cost of legal proceedings and counter litigation etc. in the process of protecting against infringement; (2) the defendant insurance: an insurance that reimburses the defense and compensation costs in responding to an infringement litigation on IP rights ; and (3) the operational insurance: an insurance that reimburses the litigation costs and compensation expenses in the event of disputes in the licensing and transfer etc. of IP rights.

Shanghai Pudong New District Government issued the first global IP composite insurance of China (Shanghai) Pilot Free-Trade Zone and the first operational IP insurance of China in November 2016. Hereinto, Upper Biotech bought global insurance for itself, which covers its 25 patent right and its trademark of medical testing equipment. And Shanghai National Engineering Research Center of Digital Television Co., Ltd. insured for its license agreement on the operation of patent pool. The insurance policy underwrites the IP risk during the operating of digital televisions’ patent pool. This is the first operational IP insurance of China and also an attempt to breakthrough.

(II) The insurance products need to be refined. The reason why IP insurance "wins applaud but without large audience" is that, on the one hand, the promotion model need to be improved, and on the other hand, the design of insurance products need to be refined. The authors hereby take the insurance policy and insurance terms of Cathay Insurance for example, and analyze the design of existing IP comprehensive insurance products.

Cathay Insurance offers wide insurance coverage to IP, including patent, trademark, utility models and other IP rights (for example, new plant varieties, trade secrets, domain names, etc.);the legal relationship covered by the policy is relatively comprehensive, including the liability for breach of contract of the third party to the insured, the tort liability of the third party to the insured, the liability for breach of contract of the insured to the third party, the tort liability of the insured to the third party, the expenses of IP protection, the cost of legal defense, recovery expenses, investigation fees etc.; it even covers the tort liability of directors and executives of the company. Such policy is able to meet the various demands of the enterprises.

The authors believe that the insurers may offer different insurance coverage at the option of the insured based on the characteristics of IP and demand for IP protection of different enterprises. For example, the insurance policy and premium may be adjusted for enterprises who only need to protect its copyright rather than patent rights. Of course, this is subject to further consultation with the insurance companies or brokerage firms.

Development trend

At present, the promotion of IP insurance in China is led by the government, and supplemented by the market-oriented operation, which is very similar to most of other countries. For example, Japan government led the creation of its insurance system for oversea IP litigation this year. The authors believe that the government-led promotion model may focus on the following aspects:

First of all, the government should further clarify the needs of the enterprises and find appropriate insurance products. The local intellectual property offices shall further negotiate with insurance companies and brokerage firms to find the models supported by the policy. For example, enterprises and institutions located in Shanghai Pudong New District which participate in IP insurance can obtain 50% allowance of the premium. And the upper limit of the allowance is RMB 500,000. Meanwhile, Suzhou Industrial Park adopts the method of reimbursing the premium upon its expiration and paying part of the premium for the insured.

Secondly, the local intellectual property offices may approach the insurance companies in various ways and channels and fully compare their quality and price, with the aim to obtain insurance products of sufficient guarantee and appropriate price.

Finally, the design of insurance products should be improved. Due to the particularity of IP, factors such as the type of patents and the time involved in litigation etc. play a vital role in the risk control of the insurance and payment of premium. We should carry out scientific analysis and research on the existing data to further improve the IP insurance products and other insurance products.