[phil]

There are still problems.

For example, if USV is typical and 1/3 of venture-backed companies are being attacked by patent trolls, then the premiums for this insurance would have to be extremely high -- enough to cover a third of the cost of defending a typical case.

[amalcon]

There are a couple of other angles you could work here. In some jurisdictions, it's possible to seek damages for the cost of defending a failed lawsuit. I don't know if any of these jurisdictions extend this to patent litigation, or what tax and other implications might be of incorporating there (so that one might legitimately change venue to such a location). The two typical problems with this approach are getting into the right jurisdiction and being able to front the money for the defense in the first place.

Also, if the patent troll is suing a bunch of companies you're insuring based on the same patent, you could attempt to combine the cases, thus consolidating the defense costs. This works because patent trolls work by firing off lots of very similar lawsuits, each for a small enough amount that it's economical to settle. That's what keeps their costs down; such an insurance policy would let the defense leverage the same economy of scale.

[Retric]

The assumption is if you have few assets and the insurance then there would be little reason to litigate. Which would drive down the cost of the insurance.

[joe_the_user]

Actually,

Here is where insurance can actually increase litigation: a person without assets often isn't worth suing but a person with the deep pockets of an insurance company can become worth suing.

I still think it's good idea to create an anti-patent legal pool but it's important to understand all the angles...

[Retric]

The pool would only cover the cost of litigation not the cost of the settlement. So there is nothing additional to gain gain from suing. (Other than an attempt to put the legal pool out of buissness but that could be extremely cost prohibitive.)

The problem would be maintaining a reputation as someone willing to pay for long legal battles.

[joe_the_user]

In some jurisdictions, especially TEXAS, a person appealing a verdict once had to post a bond equivalent to the settlement. Thus being able to fight and being able to settle were linked. I don't know if Texas still has this stricture in place, however. It seems really dodgey but it is perhaps one of many reasons the state is a favorite of patent trolls.

[Retric]

I think patents are tried in federal court so state regulations don't apply but if it did that could be a major problem.