You can get insurance protection available for any amount of calamities - accident, fire, earthquakes, floods and death - even from human harm like theft, riots, arson and terrorist attack. Now, insurance has entered the domain of intellectual property (IP). Of especial interest to Indian companies is patent infringement insurance.

Patent insurance comes as a boon to Indian companies that have been embroiled in patent litigation. The Mumbai-based Sun Pharma was sued in 2004 by the US-based Medimmune Oncology for alleged patent infringement of a generic version of its cancer-related drug, Ethyol. In 2005, Astra Zeneca sued Ranbaxy for 'willful infringement' of its patent for Nexium, a drug that treats acidity and heartburn.

Though it is India's largest domestic pharma company and one of the world's major generic drugs producers, Ranbaxy has had a poor record with patent litigations against MNCs; it hasn't won a major lawsuit since 2002. The company has 47 products in the pipeline, considered to be the best in the industry, but 32 of them are under Para-IV filings, where a generic company seeks to nullify a big pharma company's patent, or to prove that its copy of the original drug does not infringe the patent. Analysts in the pharma industry predict that Ranbaxy's future prospects look bleak, as the cost of fighting litigations in regulated markets has risen sharply. In such a scenario, patent insurance is the right tonic for reinvigorating the health of the Indian pharma industry.

But patent insurance is a bit of a contradiction; for, a patent itself is a kind of insurance, an exclusive right granted by the government to make, use or sell the patented product. No one other than the patent - holder can manufacture or market the patented products. Patent insurance is a protection against infringement of patents and the costs associated with it. There are two types - 'patent liability insurance' and 'patent pursuance insurance'.

Patent liability insurance is a defensive instrument, which helps the insured party to fight an infringement lawsuit filed by a rival company. It is also called 'patent infringement defense insurance,' or 'defense cost reimbursement insurance'. In case there is litigation, the insurance company pays a part of the legal expenses incurred and / or the damages to be paid.

Patent pursuance insurance on the other hand, is an offensive instrument, which aids the insured party to fight against a patent infringing company. This is also called 'patent enforcement insurance' or 'offensive patent insurance'. In this case, the insurer pays a portion of the legal expenses incurred by the insured company.

Though it is neither well known nor widely subscribed, patent insurance has been around for almost a decade overseas. With more and more firms entering knowledge-based businesses, as well as fighting hard to safeguard their interests and achieve their business objectives, insuring one's intellectual assets has now become imperative; it's a vital and strategic business decision.

Most companies, including well-established ones, may not want to fritter away resources to fight IP litigation that may arise during the course of business. In fact, small and medium enterprises, which have comparatively weaker balance sheets, dread the prospects of getting involved in patent litigation.

Effective management of intellectual property involves creating, maintaining, and safeguarding patent portfolios, apart from strategic planning of risk management. This requires constant vigil against infringements by competitors. On the flip side, it also means caution while undertaking research, which could unwittingly infringe on others' patents.

Filing or fighting a legal suit is an extremely expensive affair in the US and Europe, as most of the firms involved in these legal battles have learnt. In October 2004, Sun Microsystems parted with $92 million in an out-of-court settlement, after Kodak filed a patent infringement lawsuit.

Other examples of penalties are:

• 1991: Kodak paid Polaroid $873 million
  
• 1991: Johnson & Johnson paid 3M $107 million
  
• 2000: Boston Scientific paid Cordis $324 million

According to the American Intellectual Property Law Association, the cost of a patent litigation can range from $500,000 to $5 million for each of the warring firms, depending on the infringement. The costs often can and do exceed $500 million.

For small and medium enterprises as well as firms entering a new business, this could be a question of life and death as a single infringement case can impair their entire portfolio of products and services. Besides, additional invisible costs include stress on the employees involved and loss of man-hours, as top personnel need to be involved in fighting such potentially costly cases.

When an infringement case is filed, the company's shares may tumble and its image and business prospects may be called in question as the confidence of customers and investors is shaken. Obtaining patent insurance ensures the long-term survival of the company and builds investor confidence.

Yet, only a handful of insurance companies in the world, and none in India, offer either patent liability insurance (defensive insurance) or patent enforcement insurance (offensive insurance) or both, that could provide global protection or at least protection across national boundaries. Those that do are: