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I'm just starting out working independently as an IT Contractor through a self owned Limited Company (based in the UK).

With respect to insurance requirements, is it usually expected for a contractor to cover intellectual property infringement for any work carried out? E.g. if it later transpires the work infringes on a patent.

This would be in addition to standard professional indemnity insurance, which it appears generally specifically excludes IP infringement cover.

Obviously the terms of the specific contract are relevant here, but looking for insight on the general expectation.

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    As software isnt patentable under UK and EU jurisdictions, what do you expect to be sued for exactly? – Moo Dec 7 '16 at 21:58
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    If a client is specifically asking you to carry insurance for something, they need to pay for it. When I was a contractor in the UK, I carried public liability insurance only. – PeteCon Dec 7 '16 at 23:27
  • This probably won't go down well here, but I'd advise you to read the forums at contractoruk.com and make your decisions after that. It's been a few years since I was contracting, but I ended up getting cover even though I suspected there was no real need, but didn't want to take the risk. – Gwyn Evans Dec 7 '16 at 23:53
  • Software (mostly, there are some highly specific cases) cannot be patented in the UK, though the EPO does sometimes grant patents which can be transferred into the UK through a specific process. However, as a contractor any work you provide to a client generally becomes their intellectual property (as opposed to their being your customer, you're essentially employed by them) so in this case it's up to your employers to ensure they have adequate cover. – iamgory Dec 8 '16 at 14:11
  • I've been a contract developer through my own company for a number of years now in Australia. One client required professional indemnity insurance - it is very expensive and only covers you while you pay. This means as soon as a let it lapse, I was not covered for infractions committed while I was paid up. In theory, you have to keep it going forever. All the contracts I have signed have been "ok" as long as you are not willfully negligent, but I am not a lawyer and don't work in the UK. – dave Dec 8 '16 at 23:59
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This question is related to Law.SE, although for a very short description I'll put it here: software, in general, is not protected by a patent. A Patent forbids individual creation, whereas Copyright just forbids copying. The differences being, a Patent usually protects a very smart but simple idea which is trivial to copy once you've seen it. A Copyright protects works which take effort to produce (hey I spend many hours to create this, you can't just copy it for your own without attributing me).

Now with the laws aside, you have to look at the contracts with your clients. For corporations that are used to contract out IT projects, one of the following is usually written in the contract:

  1. Client will purchase software license from vendor directly. The software will not be modified.
  2. Contractor will purchase software license from vendor on behalf on the client. The software will not be modified.
  3. Contractor delivers customized software to client.

If it is case (3), the contract will usually go on with a clause like this: "the contractor is responsible for obtaining all software licenses and should include the prices in the quotation. The contractor shall ensure that the delivered work does not infringe any copyright". So there goes your liability.

Do you need an insurance for that? I've never heard of anyone doing that, honestly. The license of software or third-party libraries (whether open-source or not) are usually clearly stated. The license agreement would indicate whether it is acceptable to use it for commercial purpose. Many developer tools would also have "Personal" and "Commercial" licenses to choose from, making the choice pretty obvious. So in the event of an infringement, it'd mostly be argued as "intentional breach of software license agreement", which I'm not sure if insurance companies would like to accept for a claim.

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As an independent contractor in the UK, you are extremely unlikely to be sued, especially for something expensive to prove like IP infringement.

Your main line of defence here is your limited company. An employer will know that this is a tax vehicle with negligible assets, so even if your contracting company were to lose a lawsuit like this , you would simply liquidate it. If you're a one person operation, you're too small a fish to be worth chasing.

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  • It's worth noting that many such tax vehicles will often contain significant balances of cash at some points of the year, and once you become aware of a potential claim of this kind then withdrawing that cash from the company (or using it to settle money owed to HMRC) may not be legal. – JosephH Sep 10 '17 at 10:02

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