Patent Risk Digest

The Role of High Legal Costs in Patent Litigation

The price tag on a single patent troll suit—a pricey split between a payment to the troll and legal fees—can be unexpected and steep enough to drive some companies out of business. In most cases, legal costs alone account for more than half of a company’s expenses related to the troll suit.

These companies, often just starting out, are laser-focused on growth, and inexperienced in dealing with patent litigation. They don’t have the tools to efficiently handle this litigation, and wind up overpaying to resolve it.

Troubling Case Studies 

The practical effect of this can be devastating, especially to growing companies. Iron Speed Inc., a $2 million app-software developer with 8,000+ clients, shut down in August 2015—six months after patent troll Advanced Dynamic Interfaces LLC sued the company for infringement. The plaintiff had offered a settlement that Iron Speed could not afford, pressuring the company to defend itself in court. By the time it gave up, Iron Speed had spent tens of thousands of dollars just in its first months of litigation, and faced additional costs expected to reach up to $3 million to go to trial. Another young company, the location data enterprise Factual, spent nearly $1 million, hundreds of executive hours, and more than 28 months to dispose of a single suit.

Putting a Cap on Legal Spend

Today, companies can avoid excessive legal spend by getting insured. RPX patent litigation insurance offers pre-litigation support, patent market intelligence, strategic claims management services, and panel counsel that save companies money.

Recently, an aggressive patent troll campaign targeted several companies, including a promising cloud communications company. Through RPX Insurance Services, the company retained panel counsel and utilized RPX data and analysis to resolve the case. The insured spent less than $15,000 on legal fees while several non-insured peer defendants spent $75,000-$125,000. All companies acquired the same license, but by partnering with RPX, the insured company saved approximately 85% on legal fees. This case study represents just one way insurance can work to cut the costs of dealing with a patent suit.

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For further information on news and data presented in the Patent Risk Digest, or to subscribe now, please contact patentriskdigest@rpxcorp.com. Click here for information on RPX Patent Litigation Insurance.