Of all the risks in the technology risk category, the failure to recognise and protect the value of intellectual property assets such as technological know-how, trade-marks, patents or other intangible assets (IP risk) is ranked the lowest, with a median of just 12% of business leaders rating it their top risk.
But while IP risk may be less concerning to executives than say cyber, for example, we are nevertheless experiencing a significant uptick in enquiries regarding this exposure.
Sector responses are concerning
It is not surprising that hospitality and entertainment business leaders rank IP risk low (8% of business leaders rank IP their top technology risk; only 4% in the US). These sectors rely on creating experiences rather than content or assets. But we are concerned that it is not registering more strongly with manufacturers in our survey. Just 6% of UK business leaders put IP risk first, 8% in the US.
Financial services companies also appear to under-rate this risk, with 10% ranking this top in the UK, falling to 7% in the US. Companies in this sector do at least have much stronger resilience scores, however, suggesting perhaps that effective mitigation has neutralised the threat.
The lower prioritisation of IP risk may reflect a disconnect between business leaders’ IP risk recognition and desire to leverage and monetise their own IP through litigation. While business leaders rank IP risk relatively lower than other technology risks, businesses are enforcing their IP rights, for example through demand letters and the courts.
Kenneth K. SuhFocus Group Leader – Cyber & Technology Claims, Beazley
Our clients operate in a global economy, and we are seeing a rising flow of enquiries on IP risk. Any business in any sector that researches, designs, develops, manufactures, distributes or sells a product or service, faces significant exposure to IP risk, both on a first and third party basis.
Sarah Lamberg Technology & Cyber Liability underwriter, Beazley
Attitudes to resilience are variable
It is heartening to see that those with significant value at stake, for example technology, media and telecoms (TMT) companies feel ‘very prepared’ (38% UK, 44% US) to anticipate and respond to the risk. Financial institutions likewise show strong resilience scores with over half (57%) in the US and well over a third (39%) in the UK feeling confident. Overall, a median of 40% of companies believe they are ‘very prepared’ to ‘anticipate and respond’ to IP risk.
It is notable however, that public sector and educational institutions, which exist to develop and share intellectual property, feel much less resilient, with just 30% of UK business leaders and 44% of US business leaders feeling very prepared. Although they understand the risk, unlike companies in TMT or finance, they often lack the human capital and financial resources to invest in responding to IP risks.
Companies that specialise in content and technology are in a much better position to understand IP risk - it is their core exposure. The bigger the risk, the more targeted the legal advice they receive. The less exposure companies face, like for example those in hospitality or real estate, the less they pay attention, the less resilient they are.
Sarah LambergTechnology & Cyber Liability underwriter, Beazley
IP concern set to stay low
As we look ahead to 2022, IP risk remains the least highly ranked risk in this category. There is a moderate uptick among UK business leaders, however, with 14% ranking this risk top as they look ahead compared to only 11% in 2021.
Growth in recognition of the significance of this risk is timely when we consider that intangible assets account for 75% of business value globally4, and are the predominant source of economic value for many businesses large and small. Although businesses may think that a patent is sufficient protection for intellectual property, the sad reality is that a patent is only effective if a business has the means (often only accessible via an insurance policy) to enforce and defend it in court. In the recession which followed 2008-2009’s financial crisis, there was a boom in patent infringement filings as companies sought to protect value in their business. We may expect the same as economies rebuild post Covid-19.
4 Intangible assets make up 75% business of deal values - Burgis Bullock