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Business Risks

Negligence can prove expensive

The term “intellectual property” involves a number of different legal fields. In Germany, literary, scientific and art works are subject to copyright inherent in the work. The work does not have to be registered. For instance, photographs taken by a photographer are deemed artistic works and protected by copyright as soon as they are taken: the photographer does not need to take action. By contrast, in the commercial field, intangible items such as software programs have to be registered before they are legally protected.

06.06.2011

The rights in question are governed, for example, by patent, brand or utility model law. Since the property concerned is always intellectual, and thus intangible, property law principles apply to a limited extent only. Generally, the right to use intellectual property is transferred to others by means of licence agreements. If intellectual property is protected, it may only be used by a licensee provided the copyright owner has issued a specifically granting a right of use.

Intangible items are especially vulnerable

According to Professor Gerald Spindler, it is not uncommon in emerging economies for companies to deliberately breach copyrights and related rights. However, such cases are rare in the industrialised world, where the issues encountered tend to result from negligence or an insufficient knowledge of the legal situation. But a company may face substantial damages claims even if the breach of rights it has committed was not deliberate.

In 2008, the German Bundestag passed the Act for the Improved Enforcement of Intellectual Property Rights, translating the EU’s Enforcement Directive into national law, and making it easier to penalise breaches of intellectual property rights. Under German intellectual property law, a triple method of assessing damages has since applied, i.e. the injured party can calculate the loss in one of three ways. Besides proving it has suffered a loss of profit, the injured party also has the option of imposing a notional licence fee or claiming the profit that results from the defendant’s breach of copyright.

The term “intellectual property” involves a number of different legal fields. In Germany, literary, scientific and art works are subject to copyright inherent in the work. © Shutterstock

Hidden risks

For instance, if it transpires that software is being used without the appropriate licence, it must be summarily deleted. The loss of data and disruption of current business processes can make further holes in a company’s finances. Furthermore, employees who use their workplace computers for illegal online file-sharing purposes also pose a risk to their companies, which may in some cases be held liable for ensuing breaches of copyright.

Trademark infringement risks often arise in areas where they are not immediately apparent. For instance, advertisers using Google’s AdWords program, which causes adverts to appear when users perform keyword searches, may inadvertently select keywords protected by trademark law. “The courts may construe such use of keywords as infringement of a trademark, whether it was intentional or unintentional”, Spindler warns.

Sound know-how offers effective protection

Even apparently unimplicated service providers, such as freight forwarders, may be held liable where, for instance, an item they transport is in breach of patent laws. If there is strong evidence that a patent has been infringed, the carrier has to initiate enquiries to clarify the situation. If it then transpires that there has indeed been a breach of patent rights, the carrier is not allowed to continue its involvement in what is objectively an illegal act committed by another party.

These examples show that intellectual property liability is a relatively complex issue from an insurance perspective, and appropriate liability cover is accordingly expensive. To be able to offer the customer cover on attractive terms and conditions, the insurer must be thoroughly familiar with intellectual property law and its interpretation. The greater the insurer’s expertise, the easier it is for it to offer adequate insurance protection for the policyholder’s individual risk and provide appropriate and effective support even in the event of difficult claims.

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