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Ad group to offer patent troll insurance [updated]

While Congress struggles to move legislation to curb abusive patent troll practices, the Association of National Advertisers has taken matters into its own hands, introducing an insurance program to protect its members against the legal expense of fighting patent assertion entities (PAEs), or “patent trolls.”

The insurance will cover costs related to challenging the validity of the patent, or defending against a patent troll in court. On average, fighting a patent troll claim can cost a company upwards of $2 million.

Patent trolls have been an increasing headache to the marketing business by claiming ownership of many common advertising practices, including using QR codes to direct a mobile device user to web content and putting a store locator on a website.

“Patent trolls have been a growing issue for in the advertising industry in recent years, costing advertisers and agencies millions of dollars in fees in order to avoid paying even more to defend themselves in court. In order to offer a level of protection to members, we are introducing ANA Patent Infringement Defense Insurance.” said Bob Liodice, president and CEO of the ANA.

The basic level of coverage provides up to $500,000 per claim per year and a $1,000,000 aggregate of all claims per year. The premium for basic coverage would run between $10,000-$20,000 per year.

“This is a big, big deal,” said Jeff Greenbaum, managing partner of Frankfurt Kurnit Klein & Selz, a New York-based advertising law firm. “Everyone was saying this couldn’t be done.”

Now that the ANA has insurance, it could put pressure on the American Association of Advertising Agencies to come up with a solution. Other industry groups could also replicate the program.

The ANA’s insurance program could change how both advertisers and their agencies think about patent liability in marketing campaigns. Advertisers generally believe the agency should be liable while agencies believe the advertiser should be liable. “Now that advertisers have insurance, agencies will have a stronger argument to say the risk is only insurable by the advertiser,” Greenbaum said.

Patent reform has had a rough time in Congress this year after getting so close to passing a new law the year before. Opposition by universities, trial lawyers and pharmaceutical companies to certain provisions of  the current crop of proposed bills is much more organized and gaining bipartisan support among lawmakers.

As a result, bills that were expected to move quickly through the chambers have stalled. A House bill introduced by House judiciary chairman Bob Goodlatte (R-Va.) that easily passed the House last year, never made it to the floor before this year’s August recess. Over in the Senate, Senators are still grappling with two competing bills.