Guides
Intellectual property insurance: defense, enforcement and what a CGL misses
IP insurance pays to defend patent, trademark and copyright infringement claims and sometimes to enforce your rights. What it covers and what to check.
Intellectual property (IP) insurance is a specialty liability and litigation-finance product that pays to defend your business against claims that it infringes someone else's patent, trademark, copyright or trade secret and, in some policies, helps pay to enforce your own rights against an infringer. Your general liability, D&O and E&O policies cover little of this: the CGL excludes patent, trademark and trade secret claims, and most other policies carve out IP. Coverage is written on manuscript policies by a small group of specialist markets, so the wording matters more than the product name.
Why the policies you already have do not respond
Under the ISO CGL (CG 00 01), Coverage B (personal and advertising injury coverage) excludes infringement of copyright, patent, trademark and trade secret, with a narrow exception for infringement of copyright, trade dress or slogan in your own advertisement. A competitor's patent suit over your product is outside it, and so is a trademark claim over your company name. CGL exclusions: what a general liability policy does not cover sets out the structure. Media liability policies cover content claims such as copyright and trademark in publications and ads but treat patent as a general exclusion; see media liability insurance: defamation, copyright and content claims. Other liability policies, including D&O and E&O, typically exclude or narrow IP infringement as well, which is the gap the specialty market fills.
The kinds of IP insurance
Haynes Boone's April 2022 guide for buyers, written by an insurance recovery lawyer, describes the main categories. Policies are manuscripted, not written on uniform forms, so terms differ from carrier to carrier.
| Type | What it pays | Who tends to buy |
|---|---|---|
| Defensive (liability) | Defense of infringement suits and, per the policy, settlements or judgments, including inter partes review (IPR) challenges and claims by indemnitees defending your licensed IP | Operating companies with products that could draw patent suits |
| Offensive (enforcement or pursuit) | Costs of pursuing infringers of your own IP | IP-heavy businesses and startups whose value depends on a few patents |
| Contingent | Protection against catastrophic loss in an ongoing IP case, in the way other litigation risk insurance brackets exposure | Parties in or near a large dispute |
| Value or residual value | The value of IP pledged as collateral, or of trade secrets after misappropriation | Lenders and borrowers using IP as security |
Haynes Boone calls defensive coverage by far the most prolific IP insurance product in the market because litigation costs are high. WIPO Magazine's 2011 article by Todd Rowe describes the older basic split the same way: defense-cost-and-damages policies, which are claims-made and usually require an opinion of non-infringement, and abatement policies that fund enforcement.
What patent litigation costs
Insurers sell these policies because defense costs can swallow a business. AIPLA's 2025 Report of the Economic Survey, as summarized in an October 1, 2026 IPWatchdog article, puts median patent litigation costs at about $600,000 through claim construction and $1 million through trial, post-trial and appeal for cases with $1 million to $10 million at risk, and about $1.5 million and $3 million for cases with $10 million to $25 million at risk. Those are medians from a survey of attorneys. Individual cases cost more, and a case with an adverse verdict adds damages to the defense bill. The sources reached did not give figures for cases with less than $1 million or more than $25 million at risk.
Who writes it
Marsh's Edison IP facility, open to Marsh clients where Lloyd's is licensed, offers a single layer of defense capacity of up to USD 75 million, subject to underwriting, with defense and pursuit combined limited to USD 40 million and pursuit cover up to USD 10 million. It covers patents, copyright, trademarks, trade secrets and design rights for medium to large organizations, excludes patent assertion entities and some industries, and has limited appetite for some jurisdictions. Aon markets IP liability insurance that covers claims from competitors and non-practicing entities, appeals and counterclaims, contractual indemnity and defense of indemnified parties, and gives the client choice of counsel. These are broker products, so verify limits, eligibility and wording with the placing broker. Smaller companies may find narrower programs, and sample wording is worth requesting early.
Terms to compare
Haynes Boone's seven tips are a useful checklist for any defensive policy.
- Trigger and notice. Some policies respond to a "claim" or "demand" made in the policy period. Others also respond to a licensing request or circumstance likely to lead to a suit. A broader trigger lets you retain counsel earlier, but you must then give timely notice of circumstances.
- Related claims. All claims arising from the same facts are treated as one claim first made when the earliest was made. The clause should aggregate only claims alleging infringement of third-party IP, so an unrelated bodily injury suit about the same product does not undermine your IP claim in a later year.
- Defense costs and IPR. Confirm that the cost of challenging the claimant's patent in an IPR proceeding, counterclaims and third-party actions count as covered defense and are not excluded as affirmative actions.
- Withdrawal expenses. If you lose, pulling the product from the market has costs for transport, storage, labor and public relations. Check whether the policy covers them.
- Fee awards. Some IP claims let the winner collect attorney's fees. Confirm the policy pays an adversary's fee award.
- Contractual liability exclusion. A blanket exclusion for any breach of a contract or license can eliminate cover for indemnity promises you made to customers and licensees.
- Bad conduct exclusions. Infringement claims inherently allege unauthorized acts. Insist on exceptions for defense and a requirement of final adjudication before dishonesty exclusions bite.
Also look at the limit and whether defense costs inside vs outside policy limits: why it matters is the arrangement, the retention, whether counsel is your choice or panel counsel, and the treatment of known claims. Defensive policies are generally claims-made, so the retroactive or prior-acts date and any continuity condition (see prior acts coverage) decide whether an old product is covered. Underwriters often ask for a written non-infringement or freedom-to-operate view on key products.
Underwriting and exclusions
Expect questions about the products and processes to be insured, revenue, patent portfolio, prior cease-and-desist letters, existing claims, and your IP clearance process. Exclusions typically include known claims and circumstances and willful infringement. Misstatements on the application can lead to rescission, so be complete. WIPO's article makes the same point about disclosure.
Worked example (hypothetical)
Say a Colorado maker of smart thermostats with $40 million in revenue buys a $5 million defensive IP policy with a $250,000 retention, claims-made, with a trigger that includes demands and licensing requests. A non-practicing entity sends a demand letter alleging that a product feature infringes a patent. The company notifies the insurer within the policy period. Counsel files an IPR petition against the patent, and the policy covers it because the wording treats IPR as defense. The case settles after $1.4 million in defense costs and a $600,000 payment. The insurer pays $1.75 million of the $2 million total after the $250,000 retention. Had the policy excluded IPR as an affirmative action, or the demand arrived before the retroactive date, the result would differ. The figures are invented.
Practical steps
- Map your exposure: the IP behind your products, the claims you have received, the indemnities you give customers and the IP you license in.
- Check what the CGL, Technology E&O insurance for software, SaaS and IT firms, cyber and D&O policies exclude. See Cyber insurance vs tech E&O: which policy pays when for the overlap.
- Work with a broker with IP experience, and put clearance and prior-claims files in order before the submission.
- If you are a smaller business, ask your broker whether trademark clearance searches, caps on the IP indemnities you give customers and a media policy for content claims address most of your exposure.
- Do not drop a defensive policy at renewal without considering the effect on continuity and claims-made dates.
Key takeaways
- The CGL excludes patent, trademark and trade secret infringement, and covers only copyright, trade dress and slogan infringement in your own advertisement.
- IP insurance comes in defensive, offensive, contingent and value forms. Defensive cover is the most common and is manuscripted.
- AIPLA's 2025 survey, as reported in October 2026, shows median costs of $1 million through trial for $1 million to $10 million cases, which is why defense funding is the main attraction.
- Read the trigger, related-claims, IPR, contractual liability and conduct exclusions before the limit.