Non-practicing entities (NPE), sometimes called “patent trolls,”act very much like their legendary namesakes. Like trolls ofancient Norse legend — and the modern-day Internet variety — theyare “seldom helpful or friendly,” and instead leech off the goodefforts of others.

An NPE holds a patent for a product or process but hasno intentions of developing it. NPEs acquire patents, sometimes inmass quantities, identify companies that could be infringing onthem, and bring legal action to generate a settlement.

Patent trolls aren't just individual patent holders. They canalso be universities or research organizations lacking theresources to further develop something theyoriginally designed or created. The biggestoffenders amass large numbers of patents with the intentto sue companies and individuals they claim haveillegally used some element of something for which they hold thepatent.

NPEs account for the vast majority of patent litigation today.They do not have products of their own, so they are rarelycountersued. According to RPXCorporation research, there are more than 900 active NPEstoday, with an estimated $8 billion in patent buying power.Companies providing technology-based products or services areespecially at risk.

NPEs aren't interested in proving a point — they just wantmoney. According to RPX, more than 95% of all NPE litigation endsup in a settlement.

Garrett Koehn, president, Northwestern U.S. at CRC/Crump Group, sharessome observations about NPEs, their targets, and what agentsand brokers can do to help protect their clients against them.

How prevalent is NPE litigation?

NPE litigation has exploded in recent years. In 2005, 1,181companies were fighting NPE litigation. By 2013, that numberhad grown to 4,237. These companies come from a cross section ofmarkets.

RPX estimates the total NPE costs in 2013 were nearly $13billion, compared with only $1 billion in 2005. Just underhalf that amount went to legal expenses; the rest covered licenseor settlement payments.

Who's at risk?

Any company providing a technology-based product or service isexposed to the growing NPE threat, with new markets and newcompanies at highest risk. Consumer electronics and PCs, mobilecommunications and devices, e-commerce and networking —companies making or using these technologies are targets forNPEs.

Other sectors are also perilous because expanding technologiesescalate the likelihood of litigation — such as mobile bankingapplications, satellite-enabled entertainment, and GPSnavigation systems.

More than 11,000 companies — from Fortune 500s to startups —have been accused of patent infringement at least once by NPEs overthe last decade, according to PatentFreedom. Most of thesebusinesses have annual revenues of less than $100 million,according to Entrepreneur.

What can companies do to protectthemselves?

Businesses have four basic options in the fight against NPElitigation:

• Wait and hope for the best
• Hire outside counsel as needed to prepare a legal response ifsued
• Buy the patents at issue to keep them out of NPE hands, or
• Purchase patent litigation insurance.

RPX and CRC offer independent agents and brokers an NPE patentinfringement coverage liability policy that covers the costsassociated with NPE lawsuits. RPX underwritersusing a massive database of NPE litigationdata translates to a high degree of accuracy inpredicting a business's patent risk, turning NPE riskinto a predictable budget line item.

Pricing is based on revenue size, scope of products,and perceived litigation within each product area. Limits of $1million to $10 million are available, with annual minimum premiumsof $25,000.

RPX reduces risk exposure by acquiring patents before NPEscan assert them against its network of 168 clients. The company hasdeployed more than $100 million annually to acquire patents in eachof the past six years, leading to companies in the RPX networkreceiving more than 430 dismissals from over 60litigations.

For more information on the coverage, contact Garrett Koehn at415-675-2278.