IP Risk Management System Using Fair Royalty Calculations
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Solution Overview
Problem
Businesses face significant risks and costs due to the misappropriation or misuse of intellectual property, with existing risk management methods, such as cross-licensing and insurance, being insufficient or expensive, and struggling with the complexity of assessing and managing liabilities from intellectual property infringement claims.
Innovation Solution
A system and method for assessing and managing intellectual property risks through pre-emptive analyses, insurance policies, and captive insurance structures, which include calculating fair royalties, managing exposure to damages, and transferring liabilities, utilizing a combination of patent searches, economic analyses, and reinsurance to mitigate potential losses.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional risk management methods (cross-licensing, countersuits) are used, then businesses can manage some IP risks, but they are insufficient against individual inventors and PLECs, and cannot protect against royalty stacking
Solution Approach 1:
The patent segments IP risk management into multiple specialized components: patent search and analysis to identify relevant patents, calculation of willing fair royalties for each patent, aggregation of total fair royalty, and separate insurance coverage for different risk categories (known patents, unknown patents, royalty stacking). This segmentation allows each component to address specific aspects of IP risk effectively.
Solution Approach 2:
The patent introduces an intermediary service provider that acts as a mediator between the business and multiple IP claimants. This intermediary performs patent searches, calculates fair royalties, and facilitates licensing agreements, thereby resolving the adaptability problem of dealing with diverse IP claimants including individual inventors and PLECs.
2Reliability
If businesses pay royalties to multiple patent holders to avoid infringement claims, then infringement risks are reduced, but the overall costs increase due to royalty stacking
Solution Approach 1:
The patent applies preliminary action by conducting patent searches and calculating the total fair royalty BEFORE product launch. This allows the business to know in advance the total licensing costs required to clear all patent rights, enabling better financial planning and avoiding unexpected costs from royalty stacking.
Solution Approach 2:
The patent implements feedback through the calculation and communication of total fair royalty to the business. This feedback mechanism provides transparency into the cumulative licensing costs, allowing the business to make informed decisions about product development, pricing, and risk management strategies.
3Reliability
If businesses obtain insurance coverage for IP infringement risks, then financial exposure is reduced, but insurance premiums are expensive and coverage limits may be insufficient
Solution Approach 1:
The patent changes the parameter of risk assessment by using calculated willing fair royalties as the basis for insurance premiums and coverage limits. This parameter change allows insurance coverage to be more accurately tailored to the actual IP risks and potential liabilities, improving the adequacy of coverage relative to cost.
4Adaptability or versatility
If insurers underwrite IP infringement policies, then risk transfer is enabled, but insurers experience difficulty in efficiently pricing, resulting in high premiums or losses
Solution Approach 1:
The patent applies preliminary action by requiring patent searches and fair royalty calculations to be completed before insurance underwriting. This provides insurers with precise, pre-determined data about the actual IP risks and potential liabilities, enabling accurate risk pricing and reducing underwriting losses.
Data Source
AI summary
Presented herein are methods and systems for managing an entity's risks of patent coverage. More specifically, the present invention is directed to methods and system for insuring an entity against damage awards in patent litigation. The presented methods and systems allow a manufacturer to minimize their exposure to damage awards in patent litigation by conducting pre-emptive analyses and properly allocating funds for royalty payments and/or damage awards. An insurance captive is also established as a risk management tool to insure the manufacturer against excessive damage awards.