Multinational companies are falling short in managing the financial impact of their intellectual property (IP) risks as global trends point towards an increase in the frequency and severity of IP litigation, according to a new report by broker Willis Towers Watson (WTW).
WTW attributed the cause of rising IP litigation costs to the growing use of trade secrets to protect innovation, an increase in technology-related mergers and acquisitions (M&A), greater mobility of IP, and the evolution of traditional sectors into hybrid technology sectors (e.g. InsurTech, FinTech).
The report, which was based on a combination of IP litigation cost survey results and globally sourced litigation data, found that IP litigation remained most expensive in the U.S in terms of both litigation expenses and damages/settlement.
For instance, average damage awards in the U.S regularly reach the eight-figure range, while in Germany and China – the next two most expensive countries – highest damage awards are generally in the seven-figure and six-figure range respectively.
IP litigation in the U.S. is mostly driven by patent infringement (5,200 cases annually), trademark infringement (3,900 cases annually) and copyright infringement (2,200 cases annually).
While 50% of respondents were most concerned about being sued for IP infringement in the U.S, over 40% did business in China, where the number of IP cases filed has doubled between 2013 and 2017, now far exceeding the number filed in the U.S.
Additionally, over half of survey respondents agreed the IP litigation costs could have a material impact on their business, yet less than 10% had purchased IP insurance coverage.
IP re/insurance providers surveyed by WTW generally reported steady increases in demand for risk transfer products, with insureds in the retail, technology, and health care sectors in particular driving growth.
WTW also suggested that, while the global IP insurance market has historically suffered for lack of awareness, new entrants combined with more data and capacity have helped support recent trends.
“In reviewing the findings it’s clear that, while many companies appreciate IP’s value, they have not yet extended the IP management function to include IP risk management and, as such, have not quantified their own IP risk,” said Kim Cauthorn, IP Leader at Willis Towers Watson.
“Additionally, we see various stakeholders including risk management, legal, finance and human resources all touching IP in varying capacities, yet we are not seeing a coordinated, comprehensive approach to fully managing IP risk itself,” Cauthorn added.
“Instead, managing this risk tends to be siloed in legal, and research and development departments. As a result, the full context and benchmarking data are evading companies, preventing them from determining how much they truly spend managing various IP risks. This is a costly approach that leaves organizations vulnerable.”
