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Insurance Coverage Against Patent Infringement Suits by Non-Practicing Entities

11/26/2012 Articles

Looking for a possible new strategy to protect yourself against patent infringement lawsuits filed by non-practicing entities (NPEs)?  There is an innovative new potential option to evaluate as part of your strategy to manage the threat and expense of NPE litigation.

 

In response to the continued rising tide of patent infringement lawsuits filed by NPEs, RPX Corporation and Aon Risk Solutions have recently announced that they will begin offering small and medium-size companies up to $2.5 million in insurance coverage against NPE lawsuits. The insurance is currently available only to U.S. based companies with $1 billion or less in annual revenue. Although RPX has long offered defensive patent licensing strategies to help companies combat NPEs, this is the first time that it has offered insurance aimed at protecting defendants from NPEs.

 

Numerous academics and legal market observers have noted the sharp rise in NPE lawsuits in recent years. For example, a 2012 study from Boston University School of Law found that NPE lawsuits are “growing rapidly” and that such suits imposed an estimated $29 billion in legal costs in 2011 alone.[1]  The study further found that much of the burden of NPE lawsuits falls on small and medium-size companies: 82% of defendants in NPE cases are companies that generate less than $100 million in annual revenue.[2]

 

Not only are NPEs targeting companies of many different sizes, they are also expanding beyond traditional high-technology companies. For example, a 2012 study by PatentFreedom shows that although NPEs have historically targeted well-known technology companies more than others, NPEs are gradually shifting focus away from those top companies and broadening the range of targets they pursue.[3]

 

NPE lawsuits can pose a significant threat and create great uncertainty for smaller companies. A 2011 PricewaterhouseCoopers study of patent litigation shows that median damages awards in patent litigation have varied between $2 and $10 million in the past six years.
 

It is difficult to assess the value of this new insurance product in light of the lack of publicly available information about the terms of coverage and cost.  Further information can be obtained by contacting RPX.  See:  http://www.rpxcorp.com/index.cfm?pageid=32&itemid=201 and www.aon.com/ip.

 



[1]           James Bessen and Michael J. Meurer, The Direct Costs from NPE Disputes 2 (Boston University School of Law, Working Paper No. 12-34), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2091210.

[2]           Id.

[3]           See PatentFreedom, Exposure by Industry, available at https://www.patentfreedom.com/about-npes/industry/.

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