10th June 2019
IP, the next cyber
The CFC Summit in Chicago was an all-star affair. When the keynote is Carey Lohrenz, the world’s first female F-14 Tomcat fighter pilot, you know that this was going to be a high-energy affair.
Back on the ground, the event focussed on how the nature of risk has fundamentally changed. While buildings still burn down and cars crash, that’s not what companies see as their greatest risk. With over 85% of enterprise value now being intangible (including data, reputation and intellectual property), it is this asset class that needs to be better understood and protected.
This topic is not new. CFC is one of the world’s leading underwriters of cyber risk, and while it has taken over a decade for the market to mature, insurance for this risk is now readily available. Events that impact us all have driven uptake: 3 billion Yahoo! accounts hacked, Uber reported that 57 million riders and driver information breached and 147.9 million Equifax consumers impacted.
But the story is not the same for intellectual property. While the scare stories are high profile: Apple paid $6bn to settle patent dispute with Qualcomm, Budweiser in long-running trademark battle, Barbie dominates Bratz in copyright dispute and Uber steals Waymo trade secrets, the reaction of the insurance market been muted – too hard to price, too risky to engage with.
All this looks set to change. Aistemos CEO, Nigel Swycher, confidently predicts that there will be rapid growth in the number of companies who purchase IP insurance. The logic is illustrated by focussing on patents. There are 50m SMEs. The low-end estimate of those that face the risk of infringing third-party patents is 5%, so 2.5m companies. There are approximately 6,000 patent litigations in the US, and only a third of these actions are against SMEs (the lion’s share of litigation is against the tech majors). The number of claims is higher, estimated at 40,000. The number of cases that go to trial is much lower.
The point is that with the increased amount of data, it is now possible to make patent insurance a mass-market product. Even if the premiums are initially higher than the relatively mature cyber, the cost is low when faced with the devastation that is caused by patent infringement litigation. These include not only the legal fees (often more than $100k) but also the threat of an injunction, which can damage customer relationships and paralyse fundraising.
We were delighted to participate in CFC’s Summit, and to support CFC with Cipher, our strategic patent intelligence platform, which has been optimised for the underwriting of patent risk.
In his closing remarks Nigel says “where there is a low risk of significant damage, insurance is the perfect solution”. You can download Nigel’s presentation below: