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Part 4: Copyright and Intellectual Property Concerns

While matters of IP theft may make big headlines (Apple v. Samsung, anyone?), they are a less frequent concern for small IT businesses than the matters we’ve already discussed. However, what they lack in frequency, they make up for in cost: in 2011, the average IP case that involved less than $1 million in assets cost $350,000 in legal bills alone – a figure that doesn’t include settlement or judgment costs. Considering these expenses and the fact that copyright lawsuits were filed at a rate of more than eight per day in 2012, we decided to address IP liability management in this guide.

The small IT businesses applying for coverage through TechInsurance implement a variety of measures to ensure they don’t violate copyright laws (see graph):

  • 57 percent obtain written releases for creative material or talent from employees, models, freelancers, photographers, writers, and others they use to create content for their business.
  • 46 percent have written procedures in place for preventing copyright infringement by someone in their company. In other words, more than half of businesses don’t have any formal plans for ensuring that they’re not breaking copyright law.
  • 57 percent require clients to sign off on marketing and advertising campaigns. This is only slightly more than half, meaning that a significant portion of IT businesses aren’t getting written client approval for certain projects.
  • 60 percent have a formal process in place for educating new employees about copyright law with clear restrictions on using material developed for previous employers.

Andrew Basile, Jr. said that the fact that fewer than half of small tech companies have procedures in place for preventing copyright infringement “is a problem.” He added that “companies get tagged all the time for misusing pictures on the web.” As of late 2013, a single misuse of a copyrighted image resulted in a demand for $8,000 in damages (though the company was later able to settle for a “mere” $3,000 – ouch!).

But Basile also pointed out that a much more serious concern for most IT firms is the misuse of third-party code in products, which can have a larger potential impact (and larger associated damages) than the misuse of images. And keep in mind that having a preventative policy in place is really your best protection against incidents. After all, Professional Liability Insurance sold to tech firms often has a specific exclusion for software copyright infringement.

70% of businesses raise prices or cut hiring when sued