Intellectual property insurance covers two opposite situations, and businesses asking for it usually mean only one. Enforcement funds you to pursue somebody using your rights. Defence funds you when somebody says you are using theirs.
Enforcement cover, for pursuing an infringer
Enforcement or pursuit cover funds the legal costs of taking action against a third party infringing your patent, trade mark, design or copyright. It exists because the cost of intellectual property litigation is what actually decides whether a small business can defend its position, and a right nobody can afford to enforce has limited commercial value. Insurers assess the strength of the registered rights before offering it, and unregistered rights are much harder to insure.
Defence cover, for being accused
Defence cover funds the response when somebody alleges you infringed their rights, including the costs of investigating the allegation, negotiating and defending proceedings, and sometimes damages and the cost of redesigning or rebranding. This is the half most businesses need and fewest buy, because the accusation arrives without warning and the first response is expensive whether or not the claim has merit.
Timing, and why it has to be bought early
Cover responds to claims and disputes arising after inception and not to circumstances that already existed or were foreseeable. A business that has received a letter, or that knows a competitor is using something similar, is generally outside cover for that matter. Insurers also want to see that rights are properly registered and maintained, which means the housekeeping has to be done before the insurance is useful.
Where it sits beside other policies
Professional indemnity sometimes includes unintentional infringement in delivered work and sometimes excludes intellectual property outright. Media liability covers publication related infringement. Product liability does not touch it. A business relying on a professional indemnity policy to answer an intellectual property claim should confirm which of those three shapes its wording takes, because the difference between inclusion, limited inclusion and outright exclusion is the whole exposure.
Questions people ask about intellectual property insurance
Does intellectual property insurance pay to sue an infringer?
Enforcement cover does. Defence cover answers when you are the one accused. They are different products and many businesses need the second more.
Can I buy it after receiving a letter?
Generally no. Cover responds to matters arising after inception, and a dispute that already exists or was foreseeable is excluded.
Is infringement covered by professional indemnity?
It varies. Some wordings include unintentional infringement in delivered work, some exclude intellectual property entirely, so the wording decides.