Increased demand for intellectual property protection

Aon Switzerland is seeing increased demand for services around intellectual property. Risk management specialists support and advise clients interested in Intellectual Property Liability Insurance (IP) and Intellectual Property – Backed Lending solutions. Both concepts are becoming increasingly important worldwide, particularly in Europe and Switzerland. Intangible assets such as intellectual property account for an ever – increasing proportion of a company’s value.

thebroker talks to Kushtrim Aziri (kushtrim.aziri@aon.com), Cyber Speciality Broker at Aon Switzerland, who specializes in protecting companies’ intellectual property.

Why is there a growing interest in intellectual property protection issues in Switzerland and Europe?

The growing interest in intellectual property protection in Switzerland and Europe is driven by the increasing reliance on intangible assets in today’s economy. As businesses invest more in IP, it is becoming an increasingly crucial factor in the growth and success of scale-ups. A strong IP portfolio helps to unlock potential upside in M&A and capital markets. In sum, intellectual property represents a significant portion of their overall value. Intangible assets now comprise 85% of the value of the S&P 500, up from 17% in 1975. Combined with the rise of digital technologies and global competition, this change has heightened the need for companies to safeguard their IP against infringement and legal disputes. Furthermore, regulatory developments and the globalization of commercial activities have highlighted the importance of securing IP rights to maintain a competitive advantage.

What role does intellectual property liability insurance play for companies and what risks does it cover?

Intellectual property insurance plays a critical role in protecting companies from the financial and legal risks associated with the misuse or infringement of intellectual property. The insurance covers a wide range of risks, including the costs of defending against infringement claims, damages awarded in litigation, and potential losses arising from accidental infringement of a third party’s intellectual property. It also helps mitigate the risk of reputational damage and business interruptions that could result from potential prolonged legal disputes. By providing financial security and reducing the potential impact of IP-related claims, companies can focus on innovation and growth while safeguarding their assets.

How do you rate the importance of IP insurance for the growing biotech and pharmaceutical industries?

Intellectual property insurance offers significant benefits for the biotech and pharmaceutical industries, where innovation and intellectual property are essential for the business success. These industries are heavily reliant on patents, trademarks, and own technologies, making them particularly exposed to IP disputes. Given the long development cycles and high regulatory standards, an IP-related legal battle could severely disrupt operations and delay product launches, and/or even threaten the survival of a company. IP insurance provides financial protection against such risks, enabling biotech and pharmaceutical companies to safeguard their innovations and focus on bringing new products to market without the potential threat of costly litigations.

What factors contribute to the increasing number of patent applications in Switzerland?

Several factors contribute to the increasing number of patent applications in Switzerland. First, Switzerland is a global hub for innovation, particularly in industries such as biotech, pharmaceuticals, and technology, which are heavily dependent on intellectual property protection. The country’s robust research and development environment, supported by world-class universities and strong collaboration between academia and industry, provides a nurturing environment for innovation. Additionally, Switzerland offers a stable political and economic landscape, along with favorable tax incentives for research-intensive companies, making it an attractive destination for innovation-driven businesses.

Can you explain the role of IP insurance in dealing with patent trolls?

Intellectual property insurance can become an integral part of a company’s defense against patent trolls, which are entities that acquire patents solely for the purpose of enforcing them through litigation without actually producing any goods or services. Patent trolls often target companies with costly lawsuits over alleged patent infringements, seeking settlements that can financially burden the accused companies. IP insurance provides coverage for the legal defense costs associated with such claims, which can be substantial. Additionally, it can cover damages or settlements that may arise from these lawsuits. By providing financial protection and enabling companies to establish a robust legal defense, IP insurance mitigates the leverage typically exercised by patent trolls, allowing businesses to concentrate on their operations rather than engaging in legal disputes.

What do you understand by ‘IP backed lending’ and how do companies benefit from this lending method?

IP-backed lending is a financing method where a company uses its intellectual property, such as patents, trademarks, or copyrights, as collateral to secure potential loans. This approach allows companies to unlock liquidity from their IP portfolios, which might otherwise be underutilized in traditional lending scenarios. By leveraging their intellectual property, companies can access capital for growth and research without diluting ownership or relying solely on physical assets. This form of lending is especially beneficial for innovation-driven businesses, as it enables them to raise funds based on the value of their intellectual property.

How does Aon support companies in utilizing intangible assets to raise capital?

Aon supports companies in utilizing intangible assets, such as IP, to raise capital through IP-backed lending solutions. Aon does so by providing comprehensive IP valuation and risk assessment enabling businesses to unlock non-dilutive capital, meaning companies can raise funds without giving up equity, preserving ownership for founders and potential investors. Aon also collaborates with lenders and insurance markets to create bespoke insurance policies that protect the value of the IP used as collateral. This combination of valuation expertise and risk management helps businesses access new forms of growth capital that are typically underutilized in traditional finance models​.

How do you assess the discrepancy between the hedging of tangible and intangible assets according to the Aon ‘2024 Intangible versus Tangible Risks Comparison Report’?

The „2024 Intangible versus Tangible Risks Comparison Report“ highlights a significant discrepancy in how organizations hedge against risks associated with tangible and intangible assets. Tangible assets, such as property, plant, and equipment (PP&E), are more widely insured, with approximately 60% of these assets being covered by insurance, compared to only 19% for intangible assets like intellectual property and information assets. This is despite the fact that intangible assets often hold more value and present a higher risk of loss.

One key reason for this discrepancy is the traditional risk management mindset, which has focused on physical assets for centuries. Tangible assets are easier to quantify and to insure, while the valuation and risk management of intangible assets remain less standardized. The report emphasizes the need for businesses to adapt their risk management strategies by considering the evolving nature of intangible risks, particularly those related to AI, cybersecurity, and IP. This shift requires a more proactive approach, including tailored insurance products and better data-driven risk assessments.

What role do cyberattacks play in connection with intangible assets and intellectual property?

Cyberattacks have become a significant threat to intangible assets and IP in the modern economy. IP is therefore vulnerable to cyber incidents. These include data breaches and hacking attempts, aimed at stealing valuable information. These attacks can result in the theft of critical business knowledge and competitive advantages, severely damaging a company’s value and reputation. In the case of intangible assets, cyberattacks often target digital information, such as research data and designs, which are easier to extract in large volumes through cyber exploits. Further information on the casuistic of data breaches in this field is available under ‘2024 Intangible versus Tangible Risks Comparison Report’.

To what extent do generative artificial intelligence and the development of new technologies jeopardize intellectual property?

Generative artificial intelligence (AI) and the rapid development of new technologies pose significant risks to IP by blurring the lines of ownership and increasing the risk of infringement. Generative AI, for instance, can automatically produce content, such as audio, text, images, videos and code, based on existing data, which may include copyrighted material. This raises concerns about unauthorized reproduction and the infringement of IP rights, as AI systems often generate content that closely mimics protected works without the original creators’ consent. One of the primary challenges is that generative AI systems are trained on vast datasets, some of which may include proprietary or copyrighted material, without clear boundaries on how that data can be used. This has led to legal complexities regarding who owns the rights to AI-generated content, and whether the original creators of the source data should be compensated leading to increasing risks for potential IP infringement.

What measures should companies take to better protect their intangible assets?

The protection of intangible assets has become a crucial issue in today’s digital landscape. That said, strengthening cybersecurity is essential, as IP and proprietary data are prime targets for cyberattacks. The implementation of information security measures such as multi-factor authentication (MFA), data encryption, network firewalls, and regular threat assessments, can help prevent data breaches. Additionally, companies should prioritize intellectual property risk management through regular audits and ensuring clear ownership rights. With the advent of artificial intelligence, businesses must be vigilant in ensuring the ethical use of data, adherence to guidelines, and monitoring AI-generated content for potential IP risks. Employee training on data security and collaboration with legal teams to navigate IP regulations are equally important.

How do you think the relevance of intellectual property in the global economy will develop in the coming years?

It is anticipated that the significance of IP in the global economy will increase considerably in the coming years, driven by the growing importance of intangible assets and technological innovation. To illustrate this point further, it is notable that, according to Pitchbook, approximately $3.6 billion is invested across various sectors in Switzerland. In a number of sectors, including biotechnology, pharmaceuticals and technology, as well as in the financial industry, the expansion of investments in IP will become an even more central aspect of value creation and competitive advantage. The rapid pace of digital transformation, including advancements in artificial intelligence and cybersecurity, will further highlight the need for robust IP protection to safeguard innovations. Companies will increasingly rely on their IP portfolios, and the insurance industry is responding to this trend by offering new risk transfer solutions such as IP insurance and IP-backed lending solutions. We therefore recommend incorporating these into the overall risk management approach and strategy of organizations.

DISCLAIMER: Except where explicitly stated, Aon Switzerland Ltd. does not provide legal or tax advice and this publication does not constitute, or is intended to constitute, such advice.

Kushtrim Aziri: Broker Cyber Specialty. Design, implementation, support and management of international insurance programs in the IP, PI, Crime and Cyber sectors. Supervision of framework agreements for special conditions in the corporate customer sector. Employee training in various operational and internal processes with a focus on service optimization. Currently Bachelor of Law, University of Zurich, since 2024 Versicherungsvermittler VBV, Berufsbildungsverband der Versicherungswirtschaft VBV/AFA. Kushtrim speaks Albanian, French, Englisch and German.

Since 1/2023 Broker Cyber Specialty at Aon Schweiz AG, Zürich. From 5/2022 – 12/2022 Junior Underwriter Financial Lines at Liberty Specialty Markets, Zürich. From 5/2021 – 4/2022 Multinational Client Services Technician Financial Lines IIP at Allianz Global Corporate & Specialty (AGCS), Zürich. From 10/2020 – 4/2021 Client Advisor at Allianz Suisse, Zürich. From 1/2019 – 8/2019 Intern Underwriting at Allianz Global Corporate & Specialty (AGCS), Zürich.

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