Monday, October 31, 2011

Insurance for Patent Enforcement?

Dear Rich: I am patent pending and am worried about what will happen if my patent is granted and a big company rips me off. I can't afford to sue a big company. Will lawyers take my case for a cut of the profits? What do the little guys do? Getting into a lawsuit sounds pretty scary, probably a lot scarier than our neighbor's excellent Franken-pumpkin which appeared yesterday afternoon. It's a beautiful job and when we asked him whether he bought that shaped pumpkin because it looked like Frankenstein, he replied that no, when he got it home and looked at it for a while, the pumpkin said "Frankenstein" to him. Now that's how creative people channel inspiration. It's a little bit like the sculptor who, when asked how to scultpt an elephant, said, "Take a big block of marble and chip away everything that doesn’t look like an elephant."
Right, you had a question. Yes, an independent inventor with limited funds is in a bind when it comes to patent enforcement. Even if the funds can be found to fight a big company, the battle can drag on for years and cause much personal turmoil. Like patent expert David Pressman puts it, the utility patent is basically a hunting license. Obtaining the license without the necessary funds to use it against others makes it a useless piece of paper. There are three common solutions for this issue:

  • align yourself with a big company. A big company usually will -- as part of your licensing agreement --  chase down (or possibly scare off) thieves and competitors. The downside is that you may end up earning less from your invention if someone licenses it (versus the profit margin if you manufacture it). On the other hand, often it's just the opposite and the right licensee can earn you substantial profits and save you a lot of hassle.
  • consider offensive insurance. Yes, there is such a thing as offensive patent insurance and you can read more about its pros and cons.
  • find a contingency litigator. Some patent attorneys take cases on contingency. This is often difficult and can be expensive (giving up a third or more of the recovery). Learn more here.