Startups Can Now Buy Insurance to Protect Themselves Against Patent Trolls Which is good, but further proof that our patent system is broken.
By Laura Entis
Opinions expressed by Entrepreneur contributors are their own.
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
