Patent Infringement Liability

Patent infringement lawsuits can make or break a company, especially if it's smaller and going to court against a much larger rival. A classic, although tragic, example can be found in Edwin Howard Armstrong. In 1933, Armstrong invented wideband FM radio, based on his regenerative circuit technology. For the next 20 years, he struggled to patent and protect his innovation, becoming mired in costly litigation, most notably perhaps with the electronics company RCA. Armstrong lacked the resources of a company the size of RCA, and in 1954, worn down by the protracted legal struggle, he took his own life.

Patent law has changed since Armstrong's battles. One big development is the introduction of intellectual property insurance -- coverage that protects companies for copyright, trademark or patent infringement claims arising out of the their operation. A patent holder can apply this type of insurance in two ways. With a defense policy, the patent holder can receive reimbursement for legal costs and financial damages in the event he or she is sued for patent infringement. With an abatement policy, the patent holder can receive reimbursement for costs related to pursuing a case of infringement.

As you can imagine, intellectual property insurance doesn't come cheap. Depending on the industry, the premiums for a defense policy can run between $13,000 and $100,000 a year, according to a sample quote from Intellectual Property Insurance Services. Abatement policies may run between $10,000 and $72,000 a year, writes the company. The peace of mind, however, may be well worth it, especially considering a patent infringement lawsuit can cost a company millions of dollars.

Of course, some people believe that the entire patent process and legal system should be thrown out or, at least, reformed. But not having patent laws would have its own complications. Abraham Lincoln addressed this in a lecture he delivered in 1860:

Before [patent laws] any man [might] instantly use what another man had invented, so that the inventor had no special advantage from his own invention. The patent system changed this, secured to the inventor for a limited time exclusive use of his inventions, and thereby added the fuel of interest to the fire of genius in the discovery and production of new and useful things.

Keep reading for more patented ideas.