Crime Insurance

Keeping your trade secrets a secret

Protecting your information and preventing leaks

If your company’s unique formula, recipe, or manufacturing process sets you apart from everyone else on the market, you have a trade secret. Unfortunately, secrets are hard to keep.

We’re not talking intellectual property protected by patents and copyrights. Trade secrets are technical information that gives you an economic edge, or the potential for one, over the competition. These can be techniques, processes or formulas. Most companies take steps to protect themselves from patent and copyright infringement, but many mid-sized firms neglect to take steps to secure confidential and sensitive information, such as trade secrets, business strategies, financial records, customer data, and employee contracts terms.

All of these are valuable assets to your company and need to be safeguarded. There is a colocation here which is a flexible solution giving organizations the space, connectivity and security they need for their servers.

Where leaks occur

Sadly, research shows that employees are the biggest source of confidential information misappropriation. Attorneys at O’Melveny & Myers say 78 percent of cases between 1995 and 2009 involved defendants who were either employees or former employees. Third-party contractors and service providers were involved in 20 percent of thos??e cases.

Ownership of trade secrets aren’t protected by law the same way patents and other intellectual property are. However, individuals and competitors can be sued in civil court under federal laws , such as the Economic Espionage and Computer Fraud and Abuse Acts.

 The rise in trade secret litigation surpassed that of other trademark and other intellectual property infringement cases by double-digits in 2013, according to American Intellectual Property Law Association.

 Taking steps toward protection

Chances of successfully proving legal ownership of confidential information and trade secrets improves drastically if you have taken reasonable steps of protection.

Protection begins at home.  All employee and contractor agreements should include policies on non disclosure clauses for proprietary, secure, sensitive information. The best security is maintaining a strict need-to-know policy, sharing sensitive information only with those who have signed a nondisclosure agreement. All employees should be given intellectual property security training upon hire. It doesn’t hurt to update and review that training annually.

We encourage you to call one of our Sadler insurance experts at 800-622-7370 if you have questions about intellectual property and trade secrets. They’ll be happy to provide answers and discuss the insurance needs of your unique business.

Source: Matt Dunning, “Trade Secrets,” Business Insurance. 16 Mar. 2014

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Categories: Advertising Injury, Breach Of Security, Intellectual Property Infringement, Theft

Social media marketing

Be aware of media-related risks

Social media marketing and posting content online have proved to be effective and cheap advertising tools, particularly for small and mid-sized businesses.  But there are risks in all that posting that could prove quite costly in terms of money and integrity.

Copy_PasteNot all web content is free for the taking

Reposting, copying and pasting, and embedding of video, audio, and digital creations found on the web can result in copyright, trademark and intellectual property infringement claims. Most people think copyright laws and regulations are associated only with the world of publishing and broadcasting. However, any type of business can be exposed to liabilities that most people usually associate with the print media, music, and advertising industries.

“Oftentimes, companies assume that whatever they find on the Internet is free for use, and that’s simply not the case,” said Adam Bialek of the Wilson Elser Moskowitz Edelman & Dicker LLP intellectual property group of New York.

Media-related injury claims

Defamation, invasion of privacy, unfair trade practices and emotional distress are claims that most people associate with the press, too. However, in that regard, web marketing is no different than print advertising. Any kind of company using licensed content can be exposed to media-related claims.

A company licensed to use materials for one purpose might be exceeding the scope of that license if used for another purpose.

Protecting yourself and your business

Most large companies are conscious of media laws, but small and mid-sized organizations need to become more aware of marketing practices that expose them to media liability claims.

Smaller organizations often neglect training their employees in risk management because they lack sufficient income or resources. This can be compounded when the tasks associated with social media are delegated to lower level employees or interns. Many companies don’t even have a formal social media policy.

It’s widely assumed that media-related injury and copyright infringement claims would be covered under a general liability policy. However, the Insurance Services Office, Inc. general liability policy forms have limitations on media and publishing liability coverage, and more exclusions for personal injury and advertising continue to be added.

Any company using social media marketing tools is encouraged to increase coverage by adding separate, stand-alone media liability policies. Cyber risk insurance is the policy of choice for non-media firms with online content exposures. Be sure to check out our cyber risk page to get a quick quote indication by answering just eight questions.



  • Matt Dunning, “Social Media Marketing Efforts,” Business Insurance, 19 Jan., 2014.
  • Matt Dunning, “Non-media Companies Face Arcane Risks,” Business Insurance, 20 Jan 2014
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Categories: Advertising Injury, Cyber Liability, Intellectual Property Infringement

Your Cyber Insurance Policy

What may not be covered

Below are examples of types of risks that are not covered or only partially covered by most Cyber Risk policies:

  • The cost to implement security upgrades after an attack
  • A comprehensive written security program that is typically paired with a regulatory fine or penalty
  • Damage, corruption, or deletion of intellectual property
  • Audits performed periodically that are most likely required for several years after a data breach
  • Restoration of a business’ damaged reputation

For example, coverage under a Cyber Risk policy for the damage, corruption or deletion of intellectual property is typically limited to the cost of restoration or replacement, not taking into consideration its asset value to the company. In addition, most Cyber Risk Policies will not provide coverage for upgrading security after an attack has occurred.

The average cost of a data breach is $200 per record, according to the 2013 Ponemon Institute study. This average cost includes notification, defense, credit monitoring, services of a call center handling client complaints, as well as the cost of hiring a public relations firm. However, because most of these costs are not covered by insurance, this could cause a damaged reputation, including a falling stock price and loss of customers. Therefore, companies should address their potential exposures before a breach occurs by implementing risk management procedures to enhance best practices for network security.

Source: “Cyber insurance not always enough,” Joanne Wojcik; Business Insurance, April 16, 2012

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Categories: Breach Of Security, Cyber Liability, Intellectual Property Infringement, Risk Management, Theft

Trends in Tech Patent Litigation

A study of patent litigation in the high tech arena reveals what types of plaintiffs initiate litigation the most frequent types of lawsuits. This helps to predict the risks of patent infringement and the need for patent infringement insurance. It is important to note that patent infringement is not normally covered under a typical tech Professional Liability endorsement for intellectual property insurance. Therefore, a stand-alone policy must be purchased for patent infringement insurance.

The study was limited to high tech patents, including those in the fields of hardware, software, and financial inventions. The hardware category includes digital chip and memory processing, design and architecture, as well as semiconductor tech. Software includes cryptography, graphics, database design, software development, and user interface. Financial patents include those in the area of business modeling, projections, processes, management, and cost control.

The types of plaintiffs studied include NPE’s, Predation, Sport of Kings, Litigation Avoidance/Patent Detente, and David vs. Goliath. NPE’s are corporate entities that hold patents but don’t actually use them for commercial purposes other than to trip up mature businesses that may have actually used infringing technologies for their own commercial applications. Predation refers to the use of patent litigation strategies by leading companies to wear down their smaller competitors. Sport of Kings refers to patent warfare between large companies. Litigation Avoidance/Patent Detente refers to a strategy of building a portfolio of patents to deter litigation from competitors. David vs Goliath refers to litigation by small individuals against large corporations.

Source: Reshika Dhir (IPilogue Editor) on Colleen V. Chien, Assistant Professor at Santa Clara University School Of Law, “Of Trolls, Davids, Goliaths, and Kings: Narratives And Evidence In The Litigation Of High Tech Patents”

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Categories: Intellectual Property Infringement