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Understanding IP Risk Mitigation Services to Combat Threats Posed by NPEs

Many people have asked me how to best mitigate IP risks associated with legal entities that assert patents of dubious quality for nuisance value (e.g., cost-of-litigation) settlement purposes – these are the proverbial “patent trolls” or more politely called non-practicing entities (NPEs). My answer unfortunately starts with a stereotypical lawyer-like answer, “it depends”.

What I mean by this is that the issue is a complicated and multi-faceted one with associated solutions that are similarly nuanced depending on such factors as a company’s resources, level of sophistication, and tolerance for risk. Rather than leaving everyone to merely ponder where they fit on this spectrum, I thought it better to steer this discussion towards the types of third-party services that exist to help companies mitigate these IP risks.

The services that are available to mitigate risks are provided by some of the best and brightest in the IP community. They range in cost and may include contractual IP licensing commitments. The companies providing these services vary not only in their underlying philosophies, but also in their approaches to mitigating IP risks resulting in there not being a one size fits all solution. That said, there typically are four different types of services available today.

Patent Acquirers
A number of services proactively acquire patents for their clients to mitigate potential future risks. Such services may either acquire patent assets for specific companies or organize large company consortiums to acquire large portfolios. Often the approach is to merely take such assets off the market.

Patent Licensors
Some services focus on amassing large portfolios in specific technology areas. Companies, which pay a membership fee to subscribe to these services, then receive a license to those acquired assets. Another variation of this service is where such acquired assets are offered in a private auction-type exchange and only those companies interested in taking a license bid on what such a license is worth to them. Lastly, there are services that offer a contractual construct where each member agrees to license other members to their patent assets if they are either sold to NPEs or cover certain specific subject matter areas.

Patent Litigation Insurance
Another service offered is IP litigation insurance, This type of insurance can cover the costs of both litigation expenses, as well as any damages owed should the policyholder lose the suit. Typically these services vary significantly in coverage and cost.

Patent Invalidators
Lastly, certain services take the approach that no money should ever be given to an NPE because it only further encourages the bad behavior. These services focus on specific subject matter areas (often called zones) that its members have signed-up for and the service independently decides when to initiate administrative proceedings, which in the US are called Inter Partes Reviews (IPRs), to invalidate dubious patents owned by NPEs.

So there you have it - some of the services provided to combat the IP risks posed by NPEs. If you’d like to get my perspective on each of these services or have additional services that you think are effective, we’d love to hear from you.

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