Intellectual Property Ontario (IPON) Launches New Subsidized IP Insurance Program

A thoughtful and effective intellectual property (IP) strategy is key to protecting businesses and their innovations. IP insurance can be an effective component of that strategy to help manage risk associated with IP innovation.

IP insurance has been available for some time through private insurers. The increasing popularity of IP insurance is evidenced by the fact that it is now being offered to Ontario businesses by Intellectual Property Ontario (IPON). IPON is a provincial agency that acts as a support hub for Ontario-based innovators with the goal of strengthening Ontario's research and commercialization outcomes. This new IP insurance offering will assist Ontario businesses provide comfort to their prospective investors and downstream technology licensees, joint venture partners and endline users.

IPON's IP insurance program protects businesses from disputes over patent, trademark, and copyright infringement. It covers defence costs, settlements, and damages.

This program subsidizes a base coverage of $1 million in defensive coverage and applies to infringement, contract indemnification, contract breach, and IP rights challenges. Additionally, the program subsidizes $1 million in offensive coverage for IP enforcement.

Certain claims are excluded from the insurance policy, including claims where the insured has prejudiced the insurer's position by acting without the insurer's prior consent or approval, proceedings involving bodily injury or property damage, specific types of contractual disputes and enforcement, criminal proceedings, and wrongful acts.

This insurance program ought to benefit the following Ontario businesses:

• Businesses built on unique technology, processes or designs;
• Businesses that plan to raise capital and license technology, or work with large investors and enterprise partners;
• Businesses that operate in a competitive space that is especially vulnerable to IP disputes;
• Businesses where IP is of central importance; and
• Businesses that will be materially and adversely affected by an IP dispute.

Eligibility Requirements

Existing Tier 1 IPON clients eligible for funding and Tier 2 IPON clients may be eligible to access subsidized IP insurance, given they are in good standing with IPON, have completed the program's prerequisites, and have available funding cap space. The insurer may have other eligibility criteria as well.

Applicants who are not already IPON clients must apply and demonstrate that they meet the following eligibility requirements to access the IPON subsidized insurance program:

• They must be an Ontario-based small-and-medium sized enterprise managed by a team that includes one or more Canadians (Permanent Residents or Citizens of Canada), with fewer than 500 full-time equivalent employees or contractors globally, and have a physical address in Ontario for substantive operations;
• They must be owners of IP or IP rights, or exclusive licensees of IP, for the purpose of commercializing or monetizing the IP in a manner that benefits Ontario;
• They must operate in one of the following sectors; namely: artificial intelligence and data drive technologies, vehicle technology, health technology, life science technology, mining technology, agriculture and food technology, and clean economy technology;
• They must intend to grow their business and maintain substantial long-term operations in Ontario;
• They must ensure that their IP and IP rights remain under Canadian ownership or control;
• They must demonstrate the potential to realize societal or economic benefit to Ontario;
• They must demonstrate their own financial capacity to advance the protection and commercialization of any IP and IP rights that may be supported by IPON services; and
• They must have an immediate IP need suited for IPON services and IP funding.

What Will It Cost

IP insurance premiums will vary depending on the type of IP to be protected, the relevant industry and competitive landscape, the business' revenue and size, the deductible, the excluded risks, and the limits and coverage chosen.

Of particular note, unlike private sector IP insurance, if eligible for IPON's subsidy, IPON will cover 60% of base costs up to $8,000 per client per year. Applicants would be required to pay 40% of eligible costs plus all applicable taxes, and the premium cost of any additional coverage selected.

IPON's IP insurance subsidy counts towards the applicant's lifetime IPON finance cap. However, the insured has the right to refuse the insurance premium subsidy and pay the premium cost on its own account. In that case, the insured's IPON funding cap is not affected by the IP insurance premium cost.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.