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Delta warns on rising intellectual property risk

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New Zealand liability specialist Delta Insurance says companies should not ignore intellectual property (IP) when drawing up risk management strategies, with litigation related to intangible assets increasing globally.

Senior Underwriter Avani Vyas says New Zealand companies invested about $NZ1.6 billion ($1.5 billion) in research and development and registered about 7000 trademarks and 300 patents in 2016, but were potentially exposed to costs from malicious IP attacks or legitimate corporate challenges.

“Our innovative businesses haven’t always been meticulous in shoring up their IP and, even when they have, they often aren’t prepared for the significant costs that can arise from IP challenges,” she said.

Ms Vyas conducted a year-long review of the IP landscape titled Protecting Your Competitive Advantage, which examines the local situation and trends in China and the US, both major export destinations.

Delta launched IP expense insurance in New Zealand earlier this year.

Product counterfeiting has long been an issue in China, while in the US “patent trolls” use litigation to extort businesses, the review says.

Challenges can also come from legitimate organisations seeking to protect their interests.

“Unfortunately, even with strong IP protection, businesses can still fall prey to costly litigation, which is why we felt this new insurance product was needed,” Delta GM Craig Kirk said.

“We can see nothing on the horizon to suggest that threat will reduce any time soon.”

High-profile IP cases in New Zealand have included a successful action by amphibious vehicle company Sealegs against a rival over the use of technology.

A Wellington cafe had to change its name after receiving a legal threat from Coca-Cola, which said its title infringed on a drink trademark.

IP registrations are surging globally, with intangible assets now comprising almost 90% of the businesses’ asset value, Delta says. Patents, copyrights, registered designs and trademarks make up a big proportion of that.

About 31,000 patent infringements went to court in the US between 2012 and last year, while in China the number of IP cases doubled between 2013 and last year to 213,000, Delta says.