If you're a director or officer, here's a statistic that should make you sit up: you have a 9.6% chance of being sued for IP infringement within two years of an M&A. In certain tech sub-sectors, that number hits 30% (according to Aon).
This isn't a legal department problem. It's a D&O problem.
Here's another set of numbers that should worry boards even more: 90% of company value now sits in intangible assets. Yet as IAM notes: "In general, many boards do not see intellectual property as a top risk. Various reports and surveys look at director focus and responsibility, yet most remain silent on IP-specific topics." Anecdotal evidence suggests approximately 75% of directors don't regularly receive IP risk metrics in their board packs.
The result is a massive governance blind spot. And when things go wrong, this becomes a personal problem for directors.
IP litigation can end companies. A NASDAQ-listed biotech was ordered to pay $101m in damages in an IP infringement case and filed for bankruptcy shortly after. For growth-stage and pre-IPO companies, the impact is disproportionate – legal costs and settlements can force insolvency even before the case concludes.
When the company assets aren’t protected, shareholders see it as a breach of fiduciary duty. Failure to manage IP risk becomes failure of board oversight – the Caremark doctrine in action. And critically, directors may be held personally liable for company IP infringement.
The Lifestyle Equities ruling established a watershed moment for director liability in IP, holding that directors can face personal liability for IP infringement. Analysis by Farrer & Co highlighted how directors were suddenly "in the firing line" for company infringements. Charles Russell Speechlys warned the profession: "joint and several liability for IP infringement – directors beware."
Directors cannot hide behind the corporate veil when it comes to IP infringement. If you're involved in decisions that lead to infringement, you're personally exposed.
This isn't theoretical. It's established case law that fundamentally changes how directors should think about IP risk.
Acquisitions dramatically increase IP exposure. The most vulnerable period is the first two to three years post-transaction, when you're integrating IP portfolios, visible to competitors, and potentially triggering change-of-control clauses in licences.
Tech sectors are especially vulnerable – patent trolls and NPEs actively target acquirers, knowing they're likely to settle rather than risk the deal.
Those Aon statistics – 9.6% overall, 30% in tech – aren't abstract. They represent real companies, real boards, and increasingly, real director liability.
No systematic IP risk assessment process or insurance
Inadequate attention to IP in M&A due diligence
Failure to implement reporting systems that surface IP risks
Ignoring "red flags" in the IP landscape
These aren't just poor practice. Under the Caremark doctrine, they may constitute breach of duty of loyalty – making directors personally liable, not merely negligent.
Before your next board meeting, can you answer these?
1. Do we have a comprehensive view of our IP assets and risks? Not just patents. Trade secrets, software, data, brand – everything that creates your competitive advantage.
2. Is our balance sheet protected if an IP claim materialises? 90% of company value is intangible. What percentage of your insurance covers intangibles?
3. Can we demonstrate we took "reasonable steps" to manage this risk? In litigation, proving you did something matters almost as much as actually doing it.
If you can't answer these confidently, you have a governance gap. More importantly, you may have personal exposure.
IP risk is enterprise risk. It's not something you delegate to the legal department and forget about.
Modern directors must reckon with the fact that 80–100% of company value is intangible. Failing to govern this exposure is failing the fiduciary duty of oversight.
And potential personal liability is real.
The disconnect between where value sits (90% intangible) and where governance attention goes (largely silent on IP) cannot continue. Not when directors face personal liability. Not when acquisitions carry 9.6%–30% litigation risk. Not when companies can be bankrupted by a single adverse judgment.
Boards need line of sight into their IP assets and risks. They need reporting systems. They need to be able to demonstrate reasonable steps were taken.
This isn't just good governance. It's self-preservation.