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It seems as though virtually anything created can be patented, copyrighted, trademarked or otherwise protected. Oddly enough, even with patent protection there is danger. It is easy to believe that if you hold a patent, copyright or trademark you cannot possibly infringe on someone else’s intellectual property — but that’s not true. George Harrison certainly had a copyright on his song “My Sweet Lord” but that didn’t prevent highly publicized and successful litigation against him due to its similarity to the old Shirelle’s hit “He’s So Fine” in the 1970s.

With an average cost of $1.2 million to litigate, patent infringement trials weigh in as one of the most expensive types of litigation in the US today. What was once the realm of the individual like Ben Franklin or Thomas Edison, or the very nearly individual (think Wright Brothers), has now become big business. IBM, which annually tops the list of companies applying for and receiving patents, has received more than 22,000 patents from 1993 to 2002, with patents accounting for about $10 billion in royalties during that 10-year period according to the company’s Web site. Complicating matters is the relatively recent innovation in its own right of the “Business Method Patent.” Examples of these controversial patents are Amazon’s Internet shopping cart, or the “reverse auction” process that Priceline created and patented.

Contrary to popular belief, however, intellectual property is not the patent or copyright that one applies for, but rather the idea behind it. The registration process, be it copyright, patent, or other method, is merely a form of evidence or proof of the origin of the idea, and its timeline. The piece of paper that one might receive acknowledging a copyright is merely a statement that the Office of Copyrights has not received anything else prior to the submission of the material that resembles it enough to call into question the authenticity of the work. Conceivably, one may apply for and receive a copyright or patent for a piece of work and yet be sued. But where’s the coverage you say? Good question. The answer is, it depends.

Take the Recording Industry Association of America’s litigation against numerous individuals in the summer of 2003. Would your Homeowners policy apply if you were sued for negligent supervision of your teenager leading to the illegal uploading of music to the Internet? The answer is probably “no” because there is no bodily injury or property damage (theft of intellectual property is unlikely to be perceived as a form of property damage), and the policy is not designed to respond to pure financial loss claims. So in a personal sense, you are probably out of luck.

For businesses the news is not as grim. In a business scenario, the CGL has often been called upon for coverage in patent, copyright and trademark infringement cases. If there is coverage to be found, it is the Advertising Injury portion of the policy but the catch is that the offense must then occur in the course of advertising one’s product, and not, for example, in the delivery of the product. So although a computer-consulting firm might infringe on another firm’s copyright or patent (source code is patentable), it is probably not covered under the CGL because the offense did not occur while advertising the firm’s services.

The good news is that there are an increasing number of products that are available for intellectual property coverage in the course of business operations. Patent Infringement Liability insurance is available from a select few niche insurance markets, though premiums are usually high, and coinsurance and retentions can be steep too. Professional Liability for technology consultants and other companies with an intellectual property exposure can often be endorsed to cover copyright or trademark infringement, though usually not patents. Advertising agencies or media businesses might find Intellectual Property coverage available for their operations as well.

If you’re concerned about your intellectual property exposure, talk to us to see what coverages are available. Another good idea would be to speak to a lawyer who is well-versed in intellectual property law to learn what steps you should be taking to protect your intellectual property and minimize the risk of infringement.

“Managing Diversity” is a critical human resources function for organizations large and small. All too often, executives and managers lose sight of what diversity means from a legal and moral perspective, and the message then gets lost in the translation when it comes to the rank and file employee.

In 1997 the Department of the Interior identified diversity for its workforce as a crucial issue and provided the following definition of diversity for its own management purposes:

“The term ‘diversity’ is used broadly to refer to many demographic variables, including, but not limited to, racial, religious, color, gender, national origin, disability, sexual orientation, age, education, geographic origin, and skill characteristics … Managing diversity is a comprehensive process for developing a workplace environment that is productive for all employees… The term ‘diversity’ is also used narrowly in employment recruiting and retention efforts to refer to race/national origin, gender, or disability … ”

The EEOC (US Equal Employment Opportunity Commission) is the federal watchdog that oversees compliance for legislation such as Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, religion, sex and national origin. Discrimination complaints filed with the EEOC have been on the upswing during the past several years, going from 77,444 in 1999 up to 84,442 complaints in 2002. Small businesses with as few as 15 employees are subject to Title VII, but determining who qualifies as an employee for the purposes of Title VII and other federal legislation is a tricky proposition and should be determined through consultation with an attorney or by researching the legislation directly.

Title VII is not the only federal law that applies to employment discrimination cases. For example, the Immigration Reform and Control Act of 1986, the law that created the I-9 requirements for employers, also furnishes protection against discrimination because of national origin or U.S. citizenship. It applies to any employer with at least four (4) employees. The Civil Rights Act of 1866 (42 U.S.C. 1981) forbids employment discrimination because of race or color and applies to any employer, even if there is only one employee.

State laws such as the Texas Commission on Human Rights Act of 1983 (Texas Labor Code, Chapter 21) also apply to employment matters, so it is important to be aware of the complex patchwork of laws that may or may not apply to any employment situation.

The national jury-award median for employment-practice liability cases, which includes discrimination and retaliation claims, rose 44% in one year — from $151,000 in 1999 to $218,000 in 2000 — according to Jury Verdict Research’s ® report, Employment Practice Liability: Jury Award Trends and Statistics, 2001 Edition.

Though these facts and statistics point to the growing need for employers of all sizes to carry Employment Practices Liability Insurance (EPLI), the news is not entirely negative. According to Risk and Insurance (online at www.riskandinsurance.com) there are more than 70 insurers providing EPLI coverage and companies with fewer than 50 employees can expect to pay as little as $5,000 to $10,000 annually for the coverage. Also, many EPLI policies come with pre-arranged legal services such as hot lines for attorneys versed in employment practices law, often at no additional charge. Contact us to explore your EPLI options and to find out more about managing diversity in your workplace.

Employing a rigorous and consistent workplace safety program will bring many benefits to your company. Among these is the potential to reduce your company’s experience modifier and, in the process, substantially lowering Workers Compensation premiums. An experience modification (E Mod) rating is a comparative analysis of your company’s claims and loss reserves for Workers Compensation to other businesses within the same class code as your business.

E Mod is like making par in golf. The more birdies and eagles you make, the lower your score. But unlike your golf game, an E Mod rating requires a team effort. Everyone needs to be conscious of workplace safety. And you need to ensure the factors for figuring your E Mod number are accurate and computed correctly.

Developed by the National Council on Compensation Insurance (NCCI), an E Mod gives employers some power over controlling the cost of their Workers Compensation programs. Each year, NCCI, or a separate rating bureau in some states, evaluates your company’s payroll and claims experience for the past three years and calculates your E Mod. The average factor is expressed as 1.00. A firm with a factor below 1.00 will pay lower premiums while a firm with a factor greater than 1.00 will pay more.

Experience modification is not optional. It is applied to all qualified firms, whether privately insured or by companies covered through state insurance pools. Understanding what the E Mod rating is and how it is calculated can be confusing, but mastering the procedure can deliver big premium savings for your company.

Usually, a company warrants an E Mod rating when it has paid at least $5,000 of Workers Compensation premiums in each of the last several years or has paid $10,000 or more in premiums in a single recent year. Typically, payroll and loss data going back four years is used to figure the rating in the first year. The most recent completed policy year is excluded from the computation. For example, an E Mod effective August 1, 2003, would use policy data from the policies in 1999, 2000 and 2001.

IS YOUR E MOD CORRECT?

Once your company receives its E Mod rating, you may question whether it was figured correctly, and what can be done to make it lower? Rating bureaus, including the NCCI, base their calculations for your rating on data that was reported to them by your insurer. If incorrect or incomplete data was reported, your rating will be inaccurate, and might end up costing you more. If possible, you should have the rating bureau explain how it determined your rating to ensure it was done in an accurate manner. If you discover an error, you must convince your insurer to resubmit its data to the rating bureau to correct the problem. In some states, errors can be corrected over multiple-policy years, and if the error generates a premium credit, your revised rating can bring big savings.

An area that is often overlooked by employers that can negatively affect their E Mod rating is open claim reserves. Loss claim reserves are treated the same as paid claims when an E Mod is calculated. A loss reserve that does not realistically reflect the potential claim can create an overcharge to the employer and raise your rating. Correcting this improbable loss reserve is difficult once the insurance company has reported it to the rating bureau. The best advice is to closely monitor each reserve for a Workers Compensation claim. Can appropriate reductions in reserves be negotiated? Can the case be closed? This review of loss reserves is especially imperative toward the end of the policy year.

Although making par for most golfers is an achievement more dreamed of than realized, implementing sound safety programs and closely monitoring the reporting and calculation process used to determine this factor can help obtain a lower E Mod rating. Need help determining your E Mod? Give our office a call; we can help!