How to Think About Your Clients’ Patent Litigation Risk
- Patent litigation is more common than suits triggering D&O claims—but most companies don’t realize it.
- In 2015, more than 2600 companies were sued by patent trolls alone costing unsuspecting companies millions of dollars in defense and settlement costs
- Patent risk is excluded from most insurance policies because it is not understood by most insurers
- Patent risk management is all RPX does. Insurance coverage for patent litigation risk is available and can be customized by RPX according to a company’s specific risk profile
Helping Companies Identify and Understand Their Vulnerability
For any company that makes, sells, or simply uses technology, patent litigation is a risk that can cost tens of thousands to millions of dollars for just a single incident. But few companies know how much risk they face. Here’s how to think about your clients’ patent litigation risk, and to begin discussing their need for protection.
1. Setting the baseline
More than 11,000 companies have been attacked by patent trolls—sometimes called non-practicing entities or NPEs—since 2010, costing companies of all types and sizes billions of dollars a year. But all patent risk is not created equal. A company’s sector, revenue, and growth rate are primary indicators of its likelihood of being sued—and of the severity of its exposure.
2. Getting specific
Drilling down, a more customized assessment of a company’s risk can be inferred based in part on its own history. Once a company is sued even once for infringement, it’s likely to be sued again. Therefore, the first thing to know is whether a company has ever been sued for patent infringement, and, if so, how much the company spent defending and/or settling the case. Some 1,500 companies were named in patent cases for the first time in 2015, making them ripe for a second incident.
In addition to a company’s sector, size matters. The majority of companies named in patent suits make less than $100 million in annual revenue. And it doesn’t matter whether a company actually makes the technology in an asserted patent, or simply uses it as part of its operations; both are equally at risk of patent infringement suits. Suits against a company’s competitors, suppliers, or customers also increase the likelihood of an attack.
3. What to do
Complete our simple application. RPX can build a detailed risk profile for a company based on the above information, and provide a strategy for how to manage and protect against that risk. With premiums starting at just $1,500, RPX provides unique protection that goes well beyond a traditional claims-paying policy. Our active claims management allows companies to cap exposure to patent litigation costs – both legal and settlement; to reduce per-case costs through claims support by ~60%; and to simplify case management through our litigation expertise. Patent risk is what we do.
Question of the Month
Have previous patent reform efforts and court decisions eliminated my clients’ patent litigation risk?
No. Recent changes like the Supreme Court’s 2014 “Alice“ decision and IPRs (or “inter partes review”, a procedure used to invalidate certain types of patents) help address low-quality patents—but this affects only a small percentage of overall litigation. The risk of being sued in a less costly campaign may be somewhat reduced, but the risk of being sued is still very real, and those incidents could have costs exceeding $1 million for a single case.
So the impact of patent reform is real, but limited. Trolls are still spending hundreds of millions of dollars buying good patents, and they are going to keep asserting them. In 2015 alone, 2,500 companies were sued at least once by trolls. And, every year, the overall cost for companies – in legal expenses and litigation settlements – is in the billions.
RPX is the only insurer that is mitigating the impact of the troll model by preemptively clearing those patents out of the pre-litigation market and/or active litigations. And we are the only company that can clearly quantify – and cost-effectively insure against – the risk those higher-quality patents represent.