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What if there were a company that insured start-ups against patent trolls? The insurance would be set up in a way that gave the companies a large incentive to pursue the lawsuit fully, and to sue for expenses. For example, the insurance could cover legal costs of the defence suit and expenses lost, and also give a financial incentive to sue the troll for legal expenses (perhaps by matching some percent of any legal fees recovered from the troll).

The idea would be that a company with this insurance would not be a target for trolls, as long as the company made it known they had the insurance policy, because the trolls would realize that the company stands to gain by fighting the troll in court.




The problem is that any time a company trolls, they always have the risk of someone fighting in court. So a company having insurance won't really prevent them from trying.

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The patent trolls know that the rational (in the game-theory sense of the word) decision for the victim company is to settle, because the cost of taking it to court (in both legal fees and lost time) exceed the cost of the settlement.

It's like an asymmetric game of chicken. Both players know that the troll has the advantage of having less to lose in a "collision" (a lawsuit), so the troll can count on the victim to "swerve" (settle). If the victim was able to eliminate the cost of a collision, and the troll knew that the cost of a collision to the victim company was eliminated, it would make more sense for the troll to swerve (drop the claim).

(More chicken strategies here: http://mindyourdecisions.com/blog/2009/01/20/4-tips-for-winn... . This strategy is most similar to #3.)

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