Turning ‘troll’ litigation into a predictable business cost

In 2014, dealing with ‘patent trolls’ cost operating companies more than $12 billion in legal expenses and settlements, according to RPX research. In addition to the pernicious impact this has on corporate profitability and investment, the deep uncertainty surrounding attacks by trolls is also highly problematic, especially for smaller and mid-sized companies.

As I described in the first two instalments of this series of articles, patent troll attacks have been largely unpredictable and unquantifiable in the past. For smaller and mid-sized companies, that unpredictability makes annual budgeting complex and difficult because a single patent lawsuit can run into the millions of dollars. How can you prepare for a highly variable event that could be deeply damaging or even fatal to your company?

Putting insurance to work for a new form of risk

This challenge is facing a fast-growing number of companies. Patent trolls, also called non-practising entities (NPEs), do not attack only large, well-capitalised firms; they have been casting their nets wider, and they readily target companies with revenues of $50 million or less.

RPX now insures dozens of such companies. Almost all face a similar NPE risk scenario: