Patent trolls threaten innovation
Over the past few years, the challenge of protecting Intellectual Property (IP) at developing technology companies has reached a point of crisis. The problem stems from Non-Practicing Entities lodging unwarranted litigation. They are known as NPEs or sometimes referred to as the illustrative description of patent trolls. Last year, it was reported that the patent trolls problem cost American companies close to $13 billion in litigation settlements and attorney’s fees. The business of shaking down technology companies has become a $3.2 trillion industry globally, with over 11,000 companies having been accused of patent infringement at least once in the past decade. This is an astounding amount of capital that should otherwise be spent on driving innovation and economic growth.
And there’s a reason why you don’t you hear more about it. Many companies that have been victims of a patent troll scenario rarely go public out of fear of future attacks. There are some high profile cases like radio personality Adam Carolla taking on podcasting patent troll Personal Audio (it should be noted that he ultimately settled) or Apple’s fight with Samsung a couple years ago claiming they copied critical features of the iPad and ended up costing the Korean company $1.05 billion in damages. But unfortunately it is no longer just these tech giants being hit by this type of litigation. The patent troll problem now plagues any businesses with any product related to technology.
Money hungry NPEs are now preying on many small and middle market technology companies, from those who develop components in a consumer electronic device; to networking software developers. A study last year from the National Venture Capital Association indicated that one in three start-ups face infringement accusations from patent trolls. And litigating patent cases are extraordinarily expensive. When threatened with litigation from an NPE, and facing costly attorney’s fees, plus the time and energy of the general counsel or legal departments, the easiest way for these emerging companies to get back to business is to agree to pay even a sometimes winnable suit.
Technology entrepreneurs are the future of innovation, and sadly these NPEs have no intention of ever developing the technology or any intention of realizing their potential.
WGA recently teamed up with a consortium operation based in California called RPX to help offer clients in the middle market space a way of combating the patent troll problem. Their model is based on risk management philosophy – avoiding risk by measuring and planning for it. Membership to RPX, coupled with an insurance product, gives management teams at tech companies a fighting chance against this needless litigation. And it works; they have successfully assisted clients in achieving over 800 dismissals and more than $1.5B in NPE related costs.
For more information about protecting intellectual property and taking a proactive approach to combat patent trolls, please contact our team.
About the Author
Susan Forbes is the Chief Innovation Officer for WGA and has over 25 years of experience in the commercial insurance industry. She is responsible for the leadership of WGA’s innovation initiatives, focused in three areas: new client products and services, client-facing technology services, and company operating efficiency.