Patent trolls

Startups Can Now Buy Insurance to Protect Themselves Against Patent Trolls

Startups Can Now Buy Insurance to Protect Themselves Against Patent Trolls
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Patent trolls are a huge problem in this country. Known officially as Patent Assertion Entities, they don't actually create new products, but instead make money by amassing a collection of patents and suing accused infringers.

Big corporations typically have the resources to fight them off, which explains why most patent infringement lawsuits are filed against small to medium-sized companies. When it comes down to choosing between a lengthy, expensive complicated legal battle with a patent troll and paying a licensing fee, many startups don't have the luxury of selecting the former option. Patent trolls cost small companies about $11 billion in 2011, and despite attempts by lawmakers to reform our broken patent system, the number of lawsuits filed by patent trolls has dramatically increased in recent years.

Related: Looks Like Big Tech Is Winning the Battle With Patent Trolls

But now comes news that has the potential to change the nature of the patent trolling business. RPX -- a company that strategically buys patent licenses to protect its clients from infringement lawsuits – is now offering its services to small and medium-sized businesses.

In other words startups, no matter how small, can now buy protection against patent trolls. Premiums for companies with less than $20 million in revenue range from $7,500 to $10,000; If a covered company gets slapped with a lawsuit from a patent troll, RPX will shoulder legal or settlement costs up to the company's limit (which starts at $1 million but can go up to $10 million), although that's only after it pays a retention, which RPX says starts at $25,000.   

“This is a game changer because it levels the playing field for small companies by transforming a previously uninsurable threat into a manageable business risk,” John Amster, chief executive and co-founder of RPX, said in a press release. “This insurance policy for small companies now enables RPX to offer insurance for any sized company, from the smallest start-up to multi-billion dollar enterprises."

Up until this point, RPX had only offered its "patent risk solutions" to large companies (current clients include Google and Apple).

Related: Yes, Patent Trolls Are Hurting Your Business

While RPX's services for small businesses aren't negligible – it's unfortunate that small enterprises need to worry about this in the first place -- the model is intriguing: Essentially, RPX is offering its expertise in negotiating and litigating patent cases to startups. Under RPX's protection, a small business can't be easily bullied into paying a licensing fee just to avoid a legal mess.

Jamie Balboni, a principal and intellectual-property expert at insurance brokerage Williams Gallagher Associates, told The Wall Street Journal that small tech startups are particularly vulnerable to patent troll lawsuits.

However, in RPX she sees a ray of hope (for the tech sector, at least): If the company is successful, she told the outlet, patent trolls "will just move on to another industry."

Related: Entrepreneurs Want Patent Trolls Gone, But Current Legislation Is Sloppy