Start-ups, small tech firms now can buy insurance against patent trolls

By Jessica M. Karmasek | Nov 20, 2014

SAN FRANCISCO (Legal Newsline) - A San Francisco-based provider of patent risk management services is now offering what it describes as “cost-effective” patent insurance for small and emerging growth companies.

RPX Corporation announced last week that small companies and tech start-ups will be able to purchase the new insurance.


The insurance, the company said, is designed to reduce the risks and costs created by patent infringement lawsuits filed by non-practicing entities.


Generally speaking, a non-practicing entity, patent assertion entity or patent monetization entity purchases groups of patents without an intent to market or develop a product.


In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought. Often, these are referred to as “patent trolls.”


“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,” said John A. Amster, chief executive and co-founder of RPX.


He added, “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.”


RPX’s own research shows that more than 60 percent of companies involved in NPE patent infringement lawsuits in 2013 had revenues less than $100 million.


The company said the insurance will allow those small and early-stage companies to focus their finite resources on building their businesses, “unfettered by the costly diversions” posed by NPE litigation.


RPX, founded in 2008, offers defensive buying, acquisition syndication, patent intelligence and advisory services -- a self-described “rational alternative” to litigation.


“By acquiring patents that pose potential problems and providing intelligence, RPX seeks to reduce patent assertions directed at its clients,” according to its website.


Pointing to a 2013 study by the National Venture Capital Association, RPX said small companies have been hit especially hard.


The study found that 75 percent of respondents and 60 percent of CEOs reported that patent demands had either a “highly” or “moderately significant” impact on their companies.


RPX said legal expenses alone are disproportionately damaging to a start-up.


“Small companies are the lifeblood of innovation, and the increasing threat from trolls threatens their creativity and growth,” said Randy Komisar, a general partner at Silicon Valley capital venture firm Kleiner Perkins Caufield & Byers and an RPX director.


“Even a baseless claim can undermine legitimate invention because of the costs involved in responding and defending.”


Premiums start at $7,500 for $1 million of coverage, which is issued by an A-rated Lloyd’s of London underwriting syndicate.


From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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