Protecting Businesses from Litigation Threats by Patent Trolls

Small startups have always been the target of patent trolls who take the opportunity extort money or threaten them with patent infringement lawsuits.

Litigation costs can be huge – something the NPE counts on for a settlement

NPEs have made it increasingly difficult for new startups and ventures to remain in business by threatening them with patent infringement. Small companies are well aware of the fact that infringement suits can become very expensive thereby making them resort to payout or simply shut shop. Patent trolls usually have a particular way of functioning. They send a letter to the company informing them that the technology being used infringes a patent owned by another firm and that they need to acquire a license from them.

The NPE then attempts to get a settlement or royalty arrangement where either could mean shelling out a large sum of money without any court involvement. Their other ploy is to buy patents cheap in the market and then sue companies who they allege are infringing on the NPE owned patents. In most cases, smaller companies cannot afford the costs of a patent attorney, and it is a known fact that within a few years of operation, the company will infringe one or more patents and be the target of a lawsuit filed by a patent troll.

RPX Corporation comes to the rescue of small business

RPX Corporation has decided to help smaller companies by providing coverage and underwriting their patent litigation risks. The NPEs may have had their day in court with some of the large companies but small firms cannot afford the litigation costs of defending the technology being used by them.

Patent trolls like Innovatio IP Ventures have boldly asserted patent claims on using Wi-Fi. This was the basis of some suits filed by Innovatio IP Ventures, early this year, when it went after non technology companies like hotel chains and coffee shops. Cisco, Motorola, and Netgear got together to fight these suits.

In 2011, Innovatio filed patent infringement lawsuits on 17 patents owned by it, sending out 8,000 letters and asking for four-figure amounts as license fees. The three giants retaliated via the courts and had these demands thrown out in 2013.

Midlevel business patent trolls and cost of hiring patent attorney

RPX senior VP, Paul Scola states that the number of NPE suits have risen from 640 to over 3,600 cases today. Notably, 60% of these lawsuits are directed at small startups that need protection from these trolls so that they can focus and continue to be in business.

RPX underwrites patent risks for small to midlevel companies by aggregating patent needs across a broad spectrum of companies and purchase them so that NPEs cannot get their hands on them. According to RPX, the price paid is far less than the cost of litigation. They can then offer a varied range of NPE patent litigation coverage of $1 million with premiums starting as low as $7,500 to $10,000 with insurance underwritten by the Lloyds of London.