PRODUCT: Volatility risk coverage: litigation insurance for companies facing variable frequency and spikes in patent litigation costs
COMPANY: RPX Insurance Services LLC, backed by Lloyd’s of London
BEST RATING: A (Excellent)
AVAILABILITY: Coverage is available through appointed brokers and on a wholesale basis.
FOCUS: In April 1790, President George Washington signed a bill that laid the foundation of the modern American patent system. The law was the first to recognize an inventor’s right to profit from their invention. That same year, Samuel Hopkins of Pittsford, Vermont was granted the first U.S. patent for a better method of making potash—a substance used to make soap and glass.
But chances are good that President Washington never anticipated the rise of the “patent troll.” Patent trolls, also known as non-practicing entities, use patents as legal weapons. Instead of creating new products, trolls are in the business of suing solely for financial gain: They purchase a patent and sue another company by claiming one of its products infringes on the purchased patent.
While patent trolls are not new, these attacks have become a serious financial risk for companies that make, sell or use technology. “The legal costs to resolve this type of suit can range from the low six figures to millions of dollars,” says Paul Scola, senior vice president, RPX Insurance Services. “It is an increasingly common operating risk.”
Patent trolls are to blame for approximately 80% of today’s patent litigation for technology companies. RPX offers protection to companies through a variety of risk management services, including patent insurance. The company’s insurance products mitigate overall risk and cover financial risk by reimbursing defense costs incurred in patent infringement lawsuits in U.S. federal district court.
RPX’s volatility risk coverage provides a true risk transfer option for companies that see occasional spikes in the volume or related costs of non-practicing entity litigation. “This product helps companies that have been frustrated by the inability to plan and budget for patent litigation that varies yearly in frequency and cost,” Scola says. Companies can now transfer patent risk to RPX—saving time, money and effort in the process.
“Using a proprietary database of litigation and settlement costs, we have built an actuarial model that allows us to develop the appropriate coverage and price for each policyholder,” Scola explains. “We can assess and project risk from a quantitative and qualitative basis.”
The benefits of an RPX insurance policy extend beyond typical reimbursements. The company’s involvement in the patent market enables it to provide insureds with additional risk mitigation that can reduce the length of litigation and, in turn, the cost. In certain instances, RPX may even reduce the chances that an insured will be sued in the first place—a very important risk management component. “Companies are able to reduce litigation expenses on patent troll-related cases by as much as 70%,” Scola says.
UNDERWRITING: RPX requires a short application in which the insured must disclose historical risk, including correspondence regarding patent licensing, patent litigation costs and indemnification history, including requests and reimbursements. Covered costs are litigation expenses, including fees for outside counsel and other service providers; approved reexamination, IPR, CBM, counterclaim and declaratory judgment expenses; and settlement payments.
The insured is obligated to report claims, reportable events and resolution events within 30 days and to submit litigation expenses for reimbursement monthly. Litigation management involves pre-litigation support, including patent, case and plaintiff analysis, as well as related pricing data; counsel selection support and litigation budget management; and billing review, management and cost compliance.
RPX provides panel counsel with access to best-in-class defense firms; pre-negotiated, discounted billing rates and fixed fee structures; and coverage of all key roles, including litigation, licensing, local and IPR counsel. A preferred provider program includes e-discovery, prior art, jury consultation, trial graphics, background investigations, computer forensics and more, as well as pre-negotiated rates with leading vendors.
MINIMUM PREMIUM: $100,000.
TARGET: Companies with more than $.5 billion in revenue and annual exposure of more than $1 million.
COVERAGE TERRITORY: All 50 U.S. states.
CONTACT: Paul E. Scola, senior vice president, RPX Insurance Services; RPX Corporation, One Market Plaza, Steuart Tower, Suite 800, San Francisco, CA 94105; 866-779-7641.
Ronimarie Acord is an IA contributor.
