Can Insurance Coverage Provide Meaningful Protection from Patent Trolls and Other Infringement Claims?

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Notwithstanding two recent Supreme Court decisions making it easier to recover attorney’s fees from non-practicing entities (NPEs), or “patent trolls” as they are commonly known, insurers continue to market policies that provide coverage for lawsuits brought by NPEs or others asserting patent-related claims. The question becomes whether policies that provide coverage for these lawsuits, which previously have been considered niche products, can provide meaningful value or protection to insureds.

In April 2014, the U.S. Supreme Court handed down two unanimous decisions that made it easier for federal courts to impose attorneys’ fees on NPEs that bring meritless patent infringement suits. In Octane Fitness LLC v. Icon Health & Fitness Inc., Case No. 12-1163, the Supreme Court held that attorneys’ fees may be awarded against NPEs in cases that “[stand] out from others,” rejecting a stricter standard requiring lawsuits that were “objectively baseless” and “brought in subjective bad faith” in order to recover fees. In Highmark Inc. v. Allcare Health Management Systems Inc., Case No. 12-1184, the Supreme Court ruled that an appeals court must defer to a lower court’s decision to award attorney’s fees, using an “abuse of discretion” standard, in contrast to the previous practice by appeals courts of reviewing all such awards without such deference.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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