Multinational companies are failing to adequately manage the financial impact of their intellectual property risks, according to a report by Willis Towers Watson P.L.C.

Intellectual property litigation is rising both in frequency and severity because of factors including a global spike in the granting of intellectual property rights, the growing use of trade secrets to protect innovation, an increase in technology-related mergers and acquisitions, greater mobility of intellectual property and the evolution of traditional sectors into hybrid technology sectors such as health tech and fintech, according to Willis Towers Watson’s Intellectual Property Litigation Risk Report, released Wednesday.

The top three countries for intellectual property litigation are China, the United States and Germany, with China’s frequency steadily increasing as the number of intellectual property cases filed doubled between 2013 and 2017.

While 55% respondents to the survey underlying the IP report were most concerned about being sued in the United States for intellectual property infringement, more than 40% do business in China where the number of intellectual property cases eclipses that of the United States, according to the report.

Patent infringement tops the list of intellectual property litigation in the United States at 5,200 cases annually, followed by trademark infringement at 3,900 cases per year and copyright infringement at 2,200 cases annually, according to the report.

U.S. intellectual property litigation remains the most expensive both in terms of litigation expenses and damages or settlement. For example, average damage awards in the U.S. can reach the eight-figure range, while the highest damage awards in Germany are in the seven figures, and one of the busiest intellectual property courts in China has reported average damage awards in the six figures.

More than 50% of survey respondents agreed that intellectual property litigation costs could have a material impact on their businesses, yet only 7% purchase IP insurance coverage, according to the report. However, 34% of participants would consider purchasing stand-alone IP insurance.

Several providers offer stand-alone IP insurance specifically developed to cover these exposures, but the market has been slow to develop, according to the report.

“Initially, a lack of available data made it difficult to underwrite IP risk,” the report stated. “Today, underwriting models are better developed but underwriters struggle with what is fortuitous versus business IP risk.”

As a result, IP insurance providers have varying appetites for the exposure, according to the report.

“In reviewing the findings, it’s clear that, while many companies appreciate IP’s value, they have not yet extended the IP management function to include IP risk management and, as such, have not quantified their own IP risk,” Kim Cauthorn, IP leader for Willis Towers Watson based in Austin, Texas, said Wednesday in a statement accompanying the report.

“Additionally, we see various stakeholders including risk management, legal, finance and human resources all touching IP in varying capacities, yet we are not seeing a coordinated, comprehensive approach to fully managing IP risk itself. Instead, managing this risk tends to be siloed in legal and research and development departments,” she added. “As a result, the full context and benchmarking data are evading companies, preventing them from determining how much they truly spend managing various IP risks. This is a costly approach that leaves organizations vulnerable.”

The report is based on three data sets: an intellectual property litigation cost survey conducted from Nov. 6 to Dec. 31, 2017, to which 30 participants responded, globally sourced litigation data and globally sourced intellectual property insurance market information, according to a spokeswoman.

More than 70% of survey respondents are at companies generating between $100 million and $10 billion in annual revenue. The information technology and telecom sectors were responsible for the most survey respondents at 26%, followed by 13% in manufacturing and 10% in health care and general services, respectively.