Patent Insurance: Bad for TV Drama—Good for Business

For some companies, the risk of getting sued for patent infringement is still something of an abstraction. It hasn’t happened; ergo, it doesn’t seem real—especially for many startups, mid-sized firms, or any company yet to face their first threat.

Sometimes even describing a company’s actual experience with receiving a patent assertion letter, mounting a response, conducting discovery, fighting the litigation, and negotiating a settlement still isn’t compelling or “real” enough. This isn’t surprising, given that these examples rarely include litigation costs or license terms. Defendants don’t disclose the financial details that depict just how debilitating an infringement fight can be.

But where real life falls short, Hollywood can often provide the drama, and HBO’s Silicon Valley delivered with an episode titled “The Patent Troll” that aired on June 4. It gave a detailed and (darkly) humorous look at a patent troll attack, and even some insight into the best ways to respond—although it did leave out one of the best solutions.

The series’ fictional startup, Pied Piper, receives a letter from a retired lawyer who has built a lucrative second career asserting patents. True to real life, his business is basically a shell company that makes no product, and he is demanding payment for an equivocal, but legally plausible, infringement of a patent that was entirely unknown to Pied Piper. Pied Piper management is astonished, terrified, and furious in equal measure as it plots a counterattack. Hilarity ensues.

Correctly, Pied Piper first does some homework. It finds out about the troll and realizes the suit against Pied Piper is part of a larger campaign. Then the startup attempts to build a defensive network of at-risk companies to share information and resources and plan a mutual response to increase negotiating leverage, thereby keeping costs down for all. Also good. But there’s a bitter lesson here, too, when the troll turns this informal consortium—with its lack of critical, third-party leadership—against Pied Piper.

In classic sitcom formula, Pied Piper finds a far-fetched way out: blackmailing the troll into granting it a perpetual, royalty-free license. The celebration fizzles, though, when the startup gets a legal bill that is higher than the original settlement demand—a bitter and much more probable twist.

In real life, startups like Pied Piper—from Silicon Valley to St. Louis to Boston—can achieve even faster, happier resolutions to patent troll attacks with a simpler, more logical option: patent insurance.

For smaller companies with patent risk, an insurance policy—at least one from RPX—can end the drama. With that, Pied Piper could have simply reported the incident and immediately returned to focusing on its business, with RPX finding the most efficient resolution.

Of course, that would have also ended the episode before the opening credits finished rolling. Not terribly good television. But much better patent risk mitigation.