A new non-practicing entity patent insurance policy that is designed to manage and mitigate the growing issue of “patent trolls” — firms that are created for the sole purpose of suing companies over their patents — will offer up to $2.5 million in coverage, Aon Risk Solutions said Tuesday.
The policy is underwritten by RPX Insurance Services Inc., a unit of San Francisco-based RPX Corp., a patent consulting firm, which developed the product with Aon Risk Solutions, a unit of London-based Aon P.L.C. Aon Risk Solutions will exclusively distribute the insurance, which is designed for firms with $1 billion or less in revenue, said Shawn Ram, San Jose, Calif.-based managing director and technology practice leader for Aon Risk Solutions.
Non-practicing entities are considered a problem in the patent arena. According to RPX, the number of patent infringement lawsuits filed by non-practicing entities nearly tripled in size to more than 1,300 in 2011 from about 500 in 2005.
The total cost for NPE litigation in 2011 was $29 billion, reflecting a more than 400% increase from 2005, according to a study by James Bessen and Michael J. Meurer of the Boston University School of Law, which is cited in Aon's announcement about the product.
The study said 82% of the defendants sued by non-practicing entities had less than $100 million in revenues. “Much of the litigation appears to consist of nuisance suits that settle for a few hundred thousand dollars. But some (non-practicing entities) are 'big game hunters' who seek and get settlements in the tens or hundreds of millions of dollars,” said the study, which was released in June.
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Mr. Ram said that until now, insurers “have struggled to develop a viable product around patent trolls.” RPX, however, has a “tremendous amount of data” that has been leveraged “to build a product that is viable and actually makes sense.”
Mr. Ram said deductibles will vary and, while $2.5 million in coverage is available initially, there are “clearly opportunities to increase limits.”
RPX CEO John A. Amster said in a statement, “Our ability to collect, aggregate and analyze large amounts of often-proprietary patent market data, coupled with our core defensive patent acquisition service, allows us to provide a comprehensive risk reduction offering that meets the needs of smaller companies.”
“There's tremendous interest. We're not having problems getting meetings,” Mr. Ram said. “This is a risk area that is rampant, and is causing a lot of problems for companies, and so people are looking for solutions around this risk.”