Countering the Patent Troll

Congress has not yet exterminated the troll through amendments to the Patent Act and courts are of no help because for the most part, the cases settle prior to trial. Nonetheless, there are a few contractual strategies to, if not eliminate the troll, then at least shift the risk of a downstream defendant from having to pay the troll’s patent license. The first is to have an agreement with the producer of any invention that contains an indemnity provision to pay all costs and damages if the buyer ever is sued for patent infringement. Along with this indemnification provision, it also is advisable to have provisions in the agreement with the producer that state in the event of a notice of patent infringement, the producer will either modify theinvention so that it is no longer infringing the patent or pay the patent license fees. Unfortunately, these provisions depend entirely on the creditworthiness of the producer of the invention. If the producer of the invention does not have the money to pay for defending the lawsuit or paying the patent license, then these contract provisions will be of no value.

Alternatively, the producer of the invention and any downstream defendants can buy patent infringement defense insurance, which covers the costs of patent litigation or securing the patent license up to the limit of the policy. At one time patent infringement defense insurance was considered too expensive to be worth it. With the advent of the troll, however, new intellectual property insurance companies have sprung up that offer creative options to try to control the high cost of coverage. MT

Eric J. von Vorys is an intellectual property and corporate law attorney with Shulman, Rogers, Gandal, Pordy & Ecker, P.A.