Strategic Insurance as an Effective Deterrent to Patent & IP InfringementNovember 7, 2014
2014 is a year in which capital markets were aggressively looking for new investments as sovereign bond yields around the world continued to remain at the lower end. Private equity had the best story to tell after realising an almost 13 percent increase in capital invested according to Pitchbook (PitchBook “2014 Annual U.S. Private Equity Breakdown Report,”). Here in Australia against the backdrop of R&D Tax incentives, the marked positive changes to Employee Share Option Plans (“ESOP”) as well as the Federal Governments announcement to commit $20 billion to a Medical Research Fund we have an environment that is the “perfect storm” for an unprecedented uplift in Bio-tech, Medical and related Scientific innovation from this region. Arguably, Australian companies at all levels that are servicing this industry sector (like Modern Risk Solutions) have to prepare to enhance their product suite and services to meet the expectant demands. It is highly likely given the favourable operating environment that Australia will draw many inward-Global companies from pharma, biotech and the medical sectors to establish their centres of excellence for R&D in this country.
Strategic Insurance as an Effective Deterrent to Patent & IP Infringement
With innovative discoveries, emerging technologies and new medical developments – the need to protect IP and Patents and more importantly deter their infringement from global opportunists has never been more imperative. This is of particular importance in public policy to the wider community of Australia as public funds are being utilised for the Medical Research Fund – thus, the interest to protect the outcomes and opportunities generated from the use of public funds is of national importance.
Welcome Patent & IP Enforcement Insurance!
Patent & IP Enforcement Insurance is a relative new entrant to the professional risks arena for the Insurance Industry. Certainly no Insurer in Australia presently offers the policy – and Modern Risk Solutions has sought this cover from innovative overseas Insurers like Lloyd’s for our clients. Essentially the policy stands to cover infringement proceedings (litigant legal costs) in all foreign jurisdictions as well as Australia. It is felt Patent & IP Enforcement Insurance is one product that can support the overall global patent system by supporting a framework that allows all Patent and IP holders regardless of their unique and varied financial positions the capacity to enforce their rights and interests.
Strategic Advantages to Biotech, Scientific and Medical Companies Investing in Patent & IP Enforcement Insurance:
- Access the ability to enforce your Patent and IP rights and litigate larger organisations in any Jurisdiction (including the USA) without the need to settle, license and compromise your position to avoid escalating legal costs;
- Strengthen the position of your Company in any bargaining on a settlement or a license agreement;
- Publication and disclosure of the fact that your Company has this Insurance may potentially act as a deterrent to any Patent or IP infringement – see here;
Wish to learn more? Contact Modern Risk Solutions
Blog Post by Geoff Stooke who is the Managing Director of Modern Risk Solutions which is an Insurance Broking business to many of Australia’s innovative, fast moving and technologically orientated businesses. Modern Risk Solutions: Insurance broking. Risk consulting. ACN: 160 649 785 ABN: 72 610 844 822 AR: 431431 of PSC Connect Pty Ltd AFSL: 344648 (Financial Services Guide)
Insurance and the Sharing Economy (and how History repeats)August 7, 2014
Collaborative Consumption – The Sharing Economy – or whatever other phrase we wish to stick to it… there is an emerging plethora of tech start ups reinventing through technology how we all “share” disrupting convention and challenging how we are expected to consume, leaving some established companies in various industry verticals scratching their heads.
This is not a new concept or attached to any over arching sense of idealism around the idea of community – this is about cost, time, efficiency and convenience. We have allowed technology to reduce the barriers to sharing, the intent has always been there since the beginning of time. Just like I borrow my Neighbours saw or tree lopper rather than go out and buy a brand new one for just one small job – this sharing is common place in the absence of technology (for now). There is still a cost attached and consideration for my Neighbour in this transaction. I expect my tools to be requested at some future point or, the socially accepted “beer” economy will settle this debt.
Not since the ‘West was won’ have we seen such a stampede of adventuring entrepreneurs putting a stake in their patch of the sharing world. Sharing with technology as the enabler is everywhere! Space, Pets, Time, Homes, Desks, Services, Boats and Cars – it’s all shared. AirBnB and Uber “X” need little introduction and are now dominant mainstay companies operating on a Global scale. I was in San Francisco in February of this year and saw a glimpse into our sharing future where another tech fuelled ride-share business is being passionately embraced, the company was Lyft (it’s kinda like a lift home from a best friend you never knew you had or needed – and very cool). In Australia, not to be without our own sharing groundbreakers – Airtasker and PetHomeStay are two of the local batch of bold new market leading companies taking this new economy to the people.
Those who know the history of Insurance, know that our industry was invented at the cross roads of sharing and modern progress. When the Guild of the Middle Ages was founded (arguably a pre cursor to modern insurance) – it was founded on the premise of sharing resources so tradespeople could leave the farms behind. If a Guild member were suddenly disabled or killed, the Guild would support him or his widow and family. This safety net encouraged more and more people to leave farming and take up all types of trades. As a result, the amount of goods available for trade increased, as did the range of goods, convenience, cost and general services available for everyone.
Given this parallel history and industry DNA to the idea of “sharing” to support progress, it strikes me as strange that some Insurers find the collaborative consumption model too complex, allegedly can’t be priced and dare-I-say uninsurable in some instances. Granted, the need to determine who has the insurable interest poses a challenge – but the industry will find a way. It has and it always will. Insurance is the backbone of progress and innovation. Nothing great was achieved without risk and the currency of confidence and security to overcome against the odds. Academic Mr. Robin Pearson contends in his 2004 Book “Insuring the Industrial Revolution” that it was affordable fire and property insurance that propelled the industrial revolution by institutionally incentivising the middle classes to the accumulation of material items and wealth by removing the risks associated with aggressive economic development. Once again in 2014 the Insurance industry is removing the risks associated with aggressive new economic growth, increasing the currency of trust and incentivising the mainstream world to share.
Modern Risk Solutions is an Insurance Broking firm at the forefront of solving the complex risks and Insurance needs of the sharing economy.
Contact us today to learn more.
Modern Risk Solutions: Insurance broking. Risk consulting. ACN: 160 649 785 ABN: 72 610 844 822 AR: 431431 of PSC Connect Pty Ltd AFSL: 344648
Written by Geoff Stooke
A Deal Strategic Insurance Product Every VC or Private Equity Firm Should Know AboutAugust 3, 2014
Enhance the deal and protect the exit with…
WARRANTIES & INDEMNITIES (“W&I”) INSURANCE
Are you a VC or a Private Equity firm divesting a portfolio company business in an exit? Or, perhaps you’re acquiring a competitor? If you want a clean break to move onto the next deal without a liability tail – W&I is an Insurance product you should definitely be talking to us about.
What is it?
In its basic form it is commercial risk transfer for the liabilities associated with the warranties and indemnities in a sale purchase agreement (‘SPA’) – thereby removing the exposures to the financial losses of any breaches of warranties provided. This is particularly relevant to the merger, acquisition or divestiture of a business.
The policies are on a ‘claims-made’ basis and are bespoke for each and every transaction with a usual suite of exclusions that have some commonality with every policy (ranging from known matters, fines and penalties, consequential loss, projections and forward looking warranties and transaction specific issues).
The W&I Policy can be transacted as follows –:
Buyer Side Policy (A First-Party Policy, purchased by the Buyer)
Seller Side Policy (A Third-party Policy, purchased by the Vendor)
This form of Insurance represents a strategic advantage for a deal in various ways as detailed:
Competitive Auctions: A buyer can enhance their bid by requiring a Vendor to have lower levels of warranty cover (this is achieved by the buyer accessing a Buyer-Side Insurance Policy).
Distressed Sale Environment: A seller in a distressed financial situation may attract a faster sale and a better price by offering better security for warranty claims (this is achieved by the vendor accessing a Seller-Side W&I Insurance Policy).
Expedite a Deal: Buyers and Sellers can reduce the risk of losing a critical deal by avoiding long and arduous negotiation over the warranty coverage in the transaction.
Achieve a Higher Price in a Sale: A vendor in a sale environment may be able to attract a broader base of buyers and thus achieve a higher price by offering warranty coverage above what it could ordinarily be willing or able to provide.
Supplements Due Diligence: A buyer entering a new industry or jurisdiction enhances their level of protection and comfort in a transaction by having warranty coverage higher than that provided by the seller in the SPA.
Increased Time Periods: The Insurance can be utilised to bridge / extend time periods for recourse against warranties that a Vendor may be unwilling to provide.
Escrow avoidance: The Seller can utilise the Insurance policy and avoid the need to escrow finance against warranties – thus, utilise funds from a sale straight away to pay down debt or, facilitate other actions such as expansion. Gives certainty and locks in the sale price.
Buyer Concern on Indemnity Difficulties: Removes concerns from the buyer regarding not only the financial position of the seller, but any potential enforcement in various jurisdictions – if the seller is dispersed geographically.
Contact us today to enquire further.
Modern Risk Solutions: Insurance broking. Risk consulting.
ACN: 160 649 785 ABN: 72 610 844 822 AR: 431431 of PSC Connect Pty Ltd AFSL: 344648
3D Printing and the challengers for the Insurance IndustryJuly 14, 2014
3D printing is being touted as the Third Industrial Revolution because technology is converging with software, robots, raw materials and manufacturing to revolutionise the way products will be delivered to the end user.
In the very near future we will see a paradigm shift from mass manufacturing to bespoke orders. In today’s world products are manufactured by assembling parts together. Now you can manufacture those same products in one piece, using a 3D printer. Yes, now! 3D printers are being used to manufacture parts in the aircraft, medical, and other industries.
I recall in the mid 90’s a geek friend of mine explaining to me that ‘in the future’, we will be able to purchase things by using our computer. This was something I couldn’t get my head around. Just as the generations before me couldn’t fathom how a man could be put on the moon, or the transition from horse to car.
As difficult as it may be to grasp it is not inconceivable to think that ‘in the near future’ a mechanic in remote Australia requiring a part, instead of waiting days for it to arrive, will be able to print the part required in a lot less time and less cost.
There are many benefits and pitfalls that need to be considered by the insurance industry.
Already a Belgian insurance company, DVV, is embracing the technology to reduce their end cost and to provide excellence in customer service. If you are one of the many who has ever lost your keys, you never have to worry again. Just scan your key and save it in a secure server. When you need a new key, just go to the 3D printer. See the video here
What are some of the risks associated with 3D printing?
- Data Theft
In the case above, what would happen to the insurance company if someone gained access to the secure server which housed the specs for all of their customers keys? It would potentially cost them millions of dollars to rectify the situation. Among other things, they would probably have to change the locks in each and every house. (Being an insurance company, one would assume that there would be adequate insurance in place to protect them from this sort of event)
- Bodily Injury.
Some of the over the counter printers are not enclosed and print at over 200 deg C. These types of printers are relatively cheap and accessible and are used frequently by schools.
Due to the time it takes to print an object, many people will leave their printer unattended. You wouldn’t go to bed and leave the oven on, so the same care needs to be taken.
- Intellectual Property Infringements
As we have seen in the music and movie industries with illegal downloads, the next challenge will be for manufacturers to protect their intellectual property and design.
Other exposures to be considered:
- Design Errors – within the 3D Printing STL Files
- Product Liability and defects with Product Recall expense coverage
We are living in a world and time where technology is moving rapidly, and businesses and industry need to keep up in order to keep abreast with the challenges that will arise. This 3D revolution will impact the manufacturing sector in ways that will be both exciting and very challenging. With any new industry comes new opportunities and threats. To safeguard against these threats, the insurance industry must also be innovative with new products and their understanding of the emerging risk.
Post by Mike Cole who is the Managing Director of Modern Risk Solutions which is an Insurance Broking business to many of Australia’s fast moving digital businesses and tech companies.
The 5 Most Dangerous Words in Business Right NowJuly 7, 2014
The 5 most dangerous words right now for any business owner or Senior Executive is “It won’t happen to us”. For many of us in business we are not built to be pragmatic or think of the worst case scenarios. It’s just not a thought we can reconcile or obsess over. After all, scaling a business in the history of humanity has never been easier than right now. There is also an ever-present sense of optimism in the digital landscape along with the hopes and opportunities this brings all of us in our daily lives.
The speed and growth of data is unprecedented with the World producing 28bn Gigabytes of data p/day. 90% of all data in existence was created only in the last 2 years. Sadly, whilst the speed of data growth has accelerated the data-security is struggling to maintain the same rapid pace. Organisations and individuals are now so dependent on so many sources of data stored in a plethora of locations that it questionable whether any CEO or CTO has given adequate thought to how big of a leveraged impact it would be to their company if that data went away or, worse – was compromised. In 2013 alone we saw a 42% increase in targeted cyber attacks against companies with 122 successful attacks every week. Over 552 million identities were stolen and Ransomware attacks grew by 500%.
A watershed moment occurred in May of this year that attracted little media attention here in Australia. Target Corporation in the US terminated the contract of it’s sitting CEO Mr Gregg Steinhafel after 35 years with the company in the wake of a cyber attack that compromised the personal data of millions of it’s shoppers. This event has reverberated across every Boardroom around the world. Boards are now rightly asking the question of every CEO and CTO “How secure are we?” and now holding management fully accountable to that response.
Locally, there was the Amendment to the Privacy Act 1988 which came into effect in March 2014 in Australia. This has seen increased responsibility on organisations and individuals to disclose their use of all personally identifiable information that they capture, use and store in their operations. Furthermore, enhanced powers have been given to the Privacy Commissioner with respect to issuing maximum Fines and Penalties against companies at $1.7m and individuals at $340k following a data breach event.
The Insurance industry is stepping up to protect businesses of all sizes from the fall out of a data breach event with an affordable solution for peace of mind – welcome Cyber Liability Insurance. It’s a little known bespoke business insurance policy protecting companies from the legal liabilities, fines and reputational costs of a data breach. The policy also stands to cover resultant business interruption and loss of revenues.
(Sources: “In Google We Trust” Four Corners, ABC 9/9/2013; Symantec 2014 Internet Security Threat Report, Volume 19)
Blog Post by Geoff Stooke who is the Managing Director of Modern Risk Solutions which is an Insurance Broking business to many of Australia’s fast moving digital businesses and tech companies.