Wednesday, 10 August 2016

Subsidised patent infringement insurance: a good idea -- or a lazy substitute for one?

Picking up on a recent Katpost by Ellie Wilson, IP Finance blogger Mike Mireles comments ["Subsidized IP Litigation Insurance in Japan and Increased Enforcement in China", here] on an intriguing development in the Asia-Pacific.  The big news is that
" ... the Japanese Patent Office (JPO) has announced a program whereby half of the premiums for IP infringement insurance will be covered. The program is a partnership between the JPO, the Japan Chamber of Commerce and Industry, The National Federation of Small Business Associations, and three insurance companies [presumably the interests of Japan's mega-companies either do not require their involvement or are being looked after by the JPO]. Specifically, the subsidy is directed at making affordable IP infringement litigation insurance for SMEs that are operating in countries outside of Japan [that's a lot of countries: the World Intellectual Property Organization has 188 member states, all of which have patent protection of one sort or another -- and Japanese businesses have extensive foreign trading relations]. The announcement appears to cover both the need for the SMEs to fund IP infringement litigation against alleged infringers and to defend litigation [this makes sense, but no explicit mention is made of revocation proceedings and patent litigation on antitrust and competition law themes, which can also affect SMEs]. Notably, the announcement explicitly mentions China as a market of concern; although my guess is that a concern with so-called patent trolls in the United States is also an issue [the first half of 2016 has seen both a decline in the volume of US patent litigation and the quantity of troll-based literature, but the underlying risk of abusive patent litigation is still worth insuring against]. ...

Given the importance of SMEs to economic growth and job creation as well as the general high cost of litigation, it will be interesting to see if more countries move to subsidize IP litigation insurance [there may be problems in introducing subsidized patent litigation premiums in the European Union, where care must be taken to show that they are not a form of disguised subsidy of national businesses that may have a distorting effect on competition]. ..."
Professor Mireles ends by asking whether there are there any other countries that already subsidize IP litigation insurance. This weblog knows of none and notes that, as of the date of posting this article, no reader has posted information concerning any on to his earlier blogpost.  If you do have any relevant information, please do share it with him.

This weblog comments that the main issue regarding patent litigation insurance is not how much it costs, but rather how much it covers in relation to what it costs.  In the private and unsubsidised sector, take-up for IP insurance over the past three decades has been very slow, and a combination of insurer-protecting exclusions and high pricing, often based on an unscientific calculation of risk that makes no use of IP analytics, may be the main culprit,  IP analytics can do a great deal to frame any patent-related insurance risk within genuine factual terms of probability, and this might bring premiums down to the point at which publicly-funded subsidy is unnecessary.  If this is correct, then the Japanese subsidy is no more than a lazy substitute for the serious data analysis that is crying out to be done.

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