Matthew Hogg LL.B (Hons), LL.M., ACII, R J Kiln & Co. Ltd. Marsh Technology Conference 2005 Zurich, Switzerland. Intellectual Property A key asset as well as risk for technology firms – the challenge and the solution May 26 & 27

2 Intellectual Property Agenda Relevance of IP rights Risks to IP rights and the business model Risk management Insurance Claims Example

3 Intellectual Property Relevance of IP Rights

4 Intangible Assets represent about ¾ of market value of medium-sized US companies IP assets estimated to represent 22% of market value Corporate Governance – Sarbanes-Oxley, Turnbull Report Accounting Standards – IFRS, FASB, US GAAP Increase in IP applications/litigation/awards & settlements Top 5 risk to Risk Management community

5 Intellectual Property Relevance of IP Rights Patents – how things workRegistered Trade marks – how things are recognised – brandingMostly Registered Designs – what things look likeA mixture of registered and unregistered Copyright – protectable original expressionsUnregistered

6 Intellectual Property Relevance of IP Rights The Importance of IP assets – Hewlett Packard – IBM – Lucent – Texas Instruments – National Semiconductor

7 Intellectual Property Risks to IP Rights - Uncertainty from the start

8 Intellectual Property Uncertainty from the start Intellectual Property – It has vague boundaries which appear on paper and are prescribed by language/words – The boundaries are frequently only made clear by a legal challenge of some sort – A challenge can involve complete/partial destruction of the right

9 Intellectual Property Uncertainty from the start Additional Confusions – Poor quality patents (examination procedures) – National Rights – diverse laws – Only an asset if protected and enforced – IP rights selection – finding the appropriate medium

10 Intellectual Property Risks Perils to IP Enforcement Infringement = Liability Cost of Defence Loss of Position Warranty -To -Title

11 Intellectual Property Risk Management

12 Intellectual Property Risk Management Considerable upside and downside risk that needs to be considered Estimated £8 billion (€11.7 billion) of income lost annually in Europe alone from failing to maximise IP value Only 5% of companies believe they have robust system to measure and track IP Shared task? Importance of board/lawyers/accountants/risk managers Readdressing cost centre mentality Application of traditional risk management skills ­Identify ­Assess ­Control

13 Intellectual Property Insurance

14 Intellectual Property Insurance Legal Expense Insurance – Legal Costs & Expenses (Pursuit or Defence Cover) – Legal Liability – Contractual Liability

15 Intellectual Property Insurance Loss of IP Value Insurance – Legal Challenges – invalidity, infringement, employees – Government Action – renders IP null & void, restricts exploitation

16 Intellectual Property Insurance What can be insured? IP-Rich Products’ future revenue streams Licensing Revenue Royalty Receipts IP “value” – accounting principles R&D Expenditure Financial Investment Loan arrangement Transaction involving IP rights

17 Intellectual Property Conclusions

18 Intellectual Property Conclusions First party has been deemed the “holy grail” by some in insurance market and industry Extremely flexible, tailor-made policy if necessary to deal with client concerns Still a role for IP Legal Costs Insurance – particularly for SMEs Intangible Assets only recently being taken seriously within a company’s strategy