Spotlight: Intellectual Property Solutions – Protect and Leverage your Most Valuable Assets
Intellectual Property Risk Increases in Recessionary Environments
As noted in Aon and the Ponemon Institute’s 2022 Intangible Assets Financial Impact Comparison Report, more than 90% of corporate value is derived from intellectual property; however, only 17% of IP is insured. The number of IP Risk lawsuits is at a nearly five-year high, and damages from IP suits over the last 10 years have averaged $48 million with median damages of $2.6 million As we likely enter a recessionary environment, we expect suits to increase and organizations to see increased risk exposure. Aon’s IP Risk Assessment can quantify a client’s retained IP exposure and forecast how that exposure will evolve as they, for example, enter new markets and launch new products. The maturing IP insurance market is seeing growing capacity that can address IP risks for a wide range of companies from Fortune 500s to pre-revenue startups.
IP-Backed Lending Helps Access Non-Dilutive Growth Capital
When raising capital, companies typically have two options – selling equity or borrowing based on the strength of the balance sheet or cash flows. For growing IP-rich companies, incurring debt is not always an option and diluting ownership is often not ideal. Aon has developed a solution that combines propriety IP valuation tools and a collateral protection insurance policy to enable businesses to turn their intellectual property into collateral for asset-based loans, helping IP-rich companies unlock non-dilutive growth capital based on the value of their intellectual property. Demand for IP-Backed Lending has surged over the past year, with Aon helping to facilitate IP-rich organizations in accessing more than $1 billion in capital.
Aon’s Quality of Intellectual Property (QoIP) Helps Unlock Value for IP-Rich Companies in the M&A and Capital Markets
IP has often been a due-diligence item in transactions, with sellers failing to articulate the value of their IP portfolio and buyers and investors struggling to assess a target’s IP quality and risk. But tightening market conditions call for stronger deal preparedness, deeper diligence and more robust data room content. Aon’s QoIP comprehensive report helps address these challenges by enabling the deal team to catalogue IP with greater precision, describe its connection to the enterprise's revenue streams and strategy, and benchmark it against competing IP portfolios. Sell-side clients use QoIP to help maximize their positioning impact and streamline diligence. Buyside clients use QoIP to quickly understand a target’s IP risk profile, portfolio quality and potential growth opportunities.
Case in Point
After a prolonged period of steady decline, the number of patent litigation lawsuits increased dramatically in 2020 and 2021 and has plateaued in 2022 at a five-year high, signaling increased risk exposure and demand for IP solutions. While the number of suits is now stable, the ratio of suits filed by operating companies (OCs) compared to non-practicing entities (NPEs) has decreased. NPEs are companies that acquire patents but have no intention of developing them. Their business model is based on monetizing acquired patents based on licensing or litigation. So far in 2022, 65 percent of patent suits have been filed by NPEs. As NPE’s do not produce products of their own, unlike OCs, NPEs do not have to fear retaliatory patent suits. Since a robust patent portfolio is less effective as a deterrent, IP liability insurance can be a helpful lever in guarding against this type of risk.
For additional information on available intellectual property solutions, contact a member of your Aon Team.
Insurance products and services offered by Aon Risk Insurance Services West, Inc., Aon Risk Services Central, Inc., Aon Risk Services Northeast, Inc., Aon Risk Services Southwest, Inc., and Aon Risk Services, Inc. of Florida and their licensed affiliates. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy. Coverage may not be available in all jurisdictions.
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