Intellectual Property Management

Ocean Tomo Patent Risk Program

J.S. Held’s Inaugural Global Risk Report Examines Potential Business Risks & Opportunities in 2024

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Ocean Tomo, a part of J.S. Held, has developed the Patent Risk™ Program to identify, quantify, mitigate, manage and transfer liability risk related to potential assertions of patent infringement.

Visit Ocean Tomo for more information about J.S. Held's intellectual property services.

Through various novel mechanisms and insurance, the program aims to sharply reduce the risks faced by operating companies from patent infringement claims and shareholder litigation. The Patent Risk Program provides a comprehensive solution comprised of three portions: Identification & Quantification, Mitigation, and Transfer. Each portion of the overall program has independent value and may be selected in one, two or three portions.

Patent Risk™ Program - Identification & Quantification

In the first phase of the Program, a company or other entity (“Client”) with a product or service (“Product”) engages our team to provide a “Fairness Opinion”. The Fairness Opinion is designed to answer one question: What is the amount of a fair royalty that the Client should set aside to pay all owners of non-licensed patents whose claims cover the Product?

From there, our team calculates the cumulative Fair Maximum Potential Liability (“FMPL”) based on a reliable analytical framework commonly used to establish patent infringement damages under a loss of reasonable royalty theory of damage.

The FMPL is presented in the Fairness Opinion, along with a detailed description of the methodology and underlying assumptions. A general indication of the number of third party, non-licensed patents which may apply to the product can also be provided. The specific patents and patent holders would not be disclosed, although this information, as well as the portion of the FMPL attributable to such patents, is known and documented by Ocean Tomo.

Patent Risk™ Program – Mitigation

The Fairness Opinion identifies and quantifies the patent infringement risk associated with the Product. Based on this information, the Client, with guidance and assistance from Ocean Tomo, establishes and executes a risk mitigation strategy involving the acquisition of potentially relevant patent rights, through licensing or acquisition. This strategy may also involve a public notice of the Client’s desire to acquire such rights and its willingness to evaluate reasonable offers for licenses. The successful acquisition of additional rights would then reduce the FMPL.

Patent Risk™ Program – Transfer

An insurance policy is made available based on the FMPL described in the Fairness Opinion. This policy allows the Client to transfer the risk of future patent infringement liabilities in excess of the FMPL. Any patent right compensation paid by the Client during the life of the policy (license and settlement fees, as well as damage awards) can be claimed against the policy. The policy coverage is often a multiple of the FMPL. As such, in the event cumulative claims are in excess of the FMPL, the loss is that of the insurance provider, not the Client. Upon termination of the policy, all unpaid-out funds, minus fees, are returned to the Client. The policy terminates automatically at the end of the Product’s liability exposure period. The policy can also be terminated at any time by the Client. The magnitude of the fees is related to the amount of coverage the Client pursues.

Benefits for Clients
  • A standard, industry-accepted and third-party administered patent infringement risk management program structure, adding substantial processes and control elements which benefit shareholders
  • Documentation during the underwriting process, reducing the likelihood of an excessive patent infringement damages award
  • Satisfaction of fiduciary duties to shareholders related to IP risk management and potential reduction in D&O policy insurance
  • Improved matching of revenues and costs by recognizing potential liabilities related to patent infringement assertions as they are created
  • Improved accuracy of profitability forecasts for new products and business units, decreasing potential variances between actual and expected performance
  • An alternative to an on-balance sheet reserve for potential patent infringement liabilities
  • A methodology for determining the limit of liabilities related to indemnities granted to customers for patent infringement, thereby limiting exposure for granted indemnities to the fair compensation as objectively calculated using the Patent Risk™ Program framework
  • Transfer of risk of incurring excessive liabilities related to patent infringement assertions
  • Deterrence of P-LECs considering litigation against a number of industry players (P-LECs may be motivated to first litigate against firms without a Patent Risk Program, creating the potential for a verdict of invalidity which will further reduce the client’s exposure)
Benefits for Insurance Providers
  • A competitive advantage over other providers offering an innovative and proprietary product directed towards a recognized but unmet market demand
  • Reduction of client risk profile prior to issuance of policy through mitigation portion of the program
  • Provision of superior knowledge regarding claims exposure through the proprietary review and evaluation process
  • Isolation of risk transfer to the risk of excess loss, leaving the risk of expected, acceptable liabilities with the client
  • Creation of actuarial data table related to patent infringement liabilities (Such does not currently exist and can be leveraged to create additional insurance products)
 
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