Oops！Hope this vessel has insurance coverage as IP does in China

[Suez Canal Authority]

Have you got covered?

Weeks ago, the world was anxiously staring at a vessel of 200,000 tons blocking the Suez Canal, the throat of the global economy.  Such incidence involves a low probability but high stakes.  Attention soon shifted insurance coverage for such an unprecedented loss in the global shipping history.

Insurance may cover a vessel against risk of low probability but huge losses. Likewise, insurance may also cover IP for unexpected infringement disputes in its global operation.  Especially when the US-China trade war continues, IP dispute is becoming an imminent risk that could block an industry's regular operation in one night.

However, rare people know that China is rapidly building up its IP insurance market.

Current status of IP insurance in China

In 2020, the insured amount of intellectual property insurance had exceeded 20 billion yuan (about 3.1 billion dollars). This growing market benefits 4,295 enterprises, as shown in the China National Intellectual Property Administration (CNIPA) first-quarter press conference of 2021 in Beijing. [1]

The significant volume reflects the rapid growth of the IP insurance market.  It also signals China's innovation ecosystem is becoming more favorable toward the commercialization of IP, the fruits of innovation activities.  

Innovation Crouching Tiger elaborates such a subtle but essential connection happening in China.

The function of IP insurance 

IP is a kind of intangible property, which does not have the precise boundaries of real property. Its scope and validity are subject to interpretation and challenges. Various commercial factors affect the monetary value it can eventually generate.

Furthermore, in extreme cases, legal issues can eliminate the IP underlying a transaction. As such, transactional parties have reason to worry about the legal defects of the IP. 

Patent insurance cannot eliminate these uncertainties. But it does provide some comfort to lubricate patent-related transactions. It could also mitigate the risks on two aspects:

First, an insurance policy's existence assures the transactional party that a professional has looked at the IP before underwriting it. Second, having insurance means that the costs of defending the rights may be covered to some extent, if not wholly. 

In other words, mitigation measures do not commercialize IP, but they lubricate the transaction by decreasing the risk. 

This benefit is obvious in China.  China's IP regime is still evolving. The scope and validity of a granted IP are subject to the threat of various unpredictable influences. 

Further, while IP commercialization is becoming a popular idea in China, the IP system itself is still strange to many parties who may want to transact.  In this environment, insurance provides participants with some indication of legitimacy.

Tips for using IP insurance as a risk mitigator in China

IP insurance is a mature practice in developed markets. Well-established insurance carriers, such as IPISC or Willis, provide the policies below: 

• Abatement insurance

• Defense insurance

• Multi-peril intellectual property

• Unauthorized disclosure insurance

• Litigation management 

A foreign party who either collaborates or competes in the Chinese market may wish to acquire such IP insurance.  But Chinese insurance carriers have not attended to this group of customers.  One may consider leveraging such policies provided by foreign insurance carriers for an IP in China. 

This option is feasible because IP, especially patents, trademarks, and copyrights, is a jurisdiction-based right. That means, for instance, a Chinese company may apply for a patent with the Chinese patent office to protect its invention. Still, if the company wants to protect its IP rights in the US, it must apply for the patent with the US Patent and Trademark Office (USPTO). 

Although a Chinese company owns the US patent, the USPTO grants the US patent according to US patent law and practice. Therefore, a US IP insurance carrier should feel comfortable underwriting such a patent regardless of its value realized through business activities in China.

More about IP risk mitigation in China?

Interested? Read more about China's IP ecosystem's developments by visiting our blog at ICTiger2020.com or Facebook at ICTiger2020 for related news updates.  Contact author at Jili_ICT@springip.com.

[1]https://www.cnipa.gov.cn/col/col2521/index.html

Source：iprdaily.com

Author：Jili Chung, Josie Chen, Jonas Hou

Editor：IPRdaily-Vapor