IP Insurance in China

Recently, I had the good fortune to participate in a series of IP and Patent Law lectures in Shenzhen, PRC.  The main topics of discussion were related to the practical application of prosecution strategies and the new changes going into effect because of the AIA. While the audience was very receptive to the practical and philosophical changes coming to American Patent law, a strain of thought kept appearing in the questions presented to the speakers. (Pictures to Follow)  

The Chinese audience seamed, relative to the usual American audience, to place a high premium on risk mitigation.  The questions related to risk were varied, but they all had a component that sought to forestall danger by unloading risk to someone else.  This usually took the form of a question about IP Insurance in the U.S.  For those unaware, IP underwriters (for a fee, natch) will supposedly cover the cost of your outrageously expensive Patent infringement litigation. The Chinese audience wanted to know the extent of IP Insurance policies and how they were implemented.  Beyond the specifics of insurance, additional questions were directed to other forms of risk mitigation and risk allocation as it applies to drafting patents and filing disclosures.  While the mechanisms of action were different, the essential question always boiled down to "How can I eliminate risk to myself, while engaging in a profitable venture?"

The answer is, you can't.  We told them as much.  My colleague explained that those firms that would foresee being sued relentlessly are already capable of handling their litigation costs.  Those who could not, likely can not afford the premium on the policy for an event that may never happen in the life of the company.  Patent litigation, as related to risk mitigation, is too statistically random to allow a proper allocation of risk premiums. Either the insurance company will go out of business due to massive 'bet the company' litigation payouts, or a number of start-ups are going to bleed capital paying premiums to insure an event that never occurs. Either way, your money is better spent elsewhere. (Like getting an opinion on infringement from a competent Patent Attorney) 

What's the takeaway for the Start-Up community.  Patent Law is complex.  Risk management is complex. Anything worth doing, that you can make money at, carries a risk component.  Worrying about the potential of being sued by a competitor is something that is a necessary part of the innovation experience.  Efficient offsetting of the risk would not result in better products and services, it would merely enable people to take financially rewarding risks without consequence to the danger (See: Wall Street, 2008-present ).  Fear of a competitor's patent should never deter your from seeking your own.  The more time and money you spend focusing on risk mitigation, the less time you have to perfect your own idea. If your investors want more assurances, you can always get an opinion from counsel.