I’ve started collecting laws, literature, and controversies surrounding AI ethics and will be updating the page regularly. Linked in the right column on this home page as well.
Patent litigation insurance definitely exists, and every so often a casual observer will be confronted by the enormous cost of litigating a patent case and suggest that maybe you should get insurance. After all, there are a lot of other kinds of insurance for the normal hazards of doing business: product liability, business interruption, even cyber attack. So why not patent litigation insurance?
The problem is that insurance works by grouping a whole bunch of entities together that all have similar risk, and then figuring out how to get them to share that risk while still making some money on the premiums. That doesn’t work for patent litigation because companies have wildly different risk profiles. It is impossible to take a group of companies, somehow average out their risk of patent litigation, and then calculate a premium that both covers that average risk and makes you some (but not too much) money on the side. The companies will either overpay or underpay.
As a result, patent litigation insurers take a look at your individual risk profile, figure they can estimate the risk better than you can, and then charge an individualized premium to make sure they are covered. Public reporting places the annual cost of patent litigation insurance at about 2-5% of the insured amount, with the addition of hard liability caps and co-payments. Most big companies decline those terms and end up self-insuring or mitigating risk through license aggregators like RPX.
But still patent litigation insurance seems to fascinate, especially the academics. In a November 2018 paper titled The Effect of Patent Litigation Insurance, researchers examined the effect of recently introduced insurance on the rate of patent assertions. And they found (headline!) that the availability of defensive insurance was correlated with significantly reduced likelihood that specific patents would be asserted. They conclude:
Whatever the merits of specific judicial and legislative reforms presently under consideration, our study suggests that it is also possible for market-based mechanisms to alter the behavior of patent enforcers. Indeed, it has been argued that one reason legislative and judicial reform is needed is because collective action is unlikely to cure the patent system’s ills because defending against claims of patent infringement generates uncompensated positive externalities. Our study suggests that defensive litigation insurance may be a viable market-based solution to complement, or supplant, other reforms that aim to reduce NPE activity.The Effect of Patent Litigation Insurance at 59-60.
But there is a very important caveat: the insurance company selected in advance every patent they would insure against. IPISC sold two menus of “Troll Defense” insurance: one for insurance against 200 specific patents, and one for insurance against an additional 107 specific patents. Indeed, this is how the researchers were able to assess whether assertions went down. (Other patent litigation insurers use more complex policies that do not identify specific patents.) In addition, IPISC capped the defense insurance limit at $1M, which is well below the cost of litigating your average patent case. This is a very narrow space for patent litigation insurance!
IPISC must have had confidence they could accurately quantify the risk associated with these patents. The insured patents had tended to be asserted before by well-known patent assertion entities. I suspect the prior assertions settled quickly for relatively small amounts because that’s how these entities tend to work. Indeed, that is the whole business model. But throw in the availability of insurance specific to these patents and now you have a signal that many potential defendants will not simply settle and move on. Wrench in the model, assertions go down.
So yes, this narrow type of patent litigation insurance might be useful if you are an entity concerned about harassment by specific patents in low value patent litigation. Interesting study, your mileage may vary.
See Holmes’s post below…
From The Atlantic’s March 2019 issue:
Fish pain is something different from our own pain. In the elaborate mirrored hall that is human consciousness, pain takes on existential dimensions. Because we know that death looms, and grieve for the loss of richly imagined futures, it’s tempting to imagine that our pain is the most profound of all suffering. But we would do well to remember that our perspective can make our pain easier to bear, if only by giving it an expiration date. When we pull a less cognitively blessed fish up from the pressured depths too quickly, and barometric trauma fills its bloodstream with tissue-burning acid, its on-deck thrashing might be a silent scream, born of the fish’s belief that it has entered a permanent state of extreme suffering.Scientists Are Totally Rethinking Animal Cognition
Tyler Cowen in a piece about blackmail on Bloomberg column:
So what are some lessons from the apparent greater prevalence of blackmail risk?
First: Be good! Minimize the chance that someone can blackmail you.
Yearbooks as horror shows:
Although they may appear to be innocuous collections of school memories, yearbooks have fueled major political controversies in recent months. Whether it be the racist photograph of a student in blackface and another in a Ku Klux Klan costume on Virginia Gov. Ralph Northam’s medical school yearbook page or Supreme Court Justice Brett M. Kavanaugh’s high school yearbook jokes about drinking and sex, decades-old school publications have returned to public scrutiny for politicians, and it’s guaranteed that Northam’s will not be the last.Why it’s shocking to look back at med school yearbooks from decades ago
If 50 year-old yearbook pages are horrifying now, will 50 year-old Facebook posts be equally horrifying to our children? My guess is probably not, but it is incredible to see what was normal 50 years ago, and remarkable how much has changed.
Great book. But I haven’t a different question. Why did not one of the in-house counsel who worked there do a noisy exit? Just FYI, my belief is that in-house lawyers serve as the moral compass for their companies. Yes, this can sound overly optimistic and conceited – but who else is better placed?
Yesterday I amplified Juan Pablo Villarino’s comments on the importance of being able to demonstrate your value to your community.
Also yesterday, David Brooks wrote these words about the philosophy of Josiah Royce, a late 19th century American historian / philosopher:
Royce argued that meaningful lives are marked, above all, by loyalty. Out on the frontier, he had seen the chaos and anarchy that ensues when it’s every man for himself, when society is just a bunch of individuals searching for gain. He concluded that people make themselves miserable when they pursue nothing more than their “fleeting, capricious and insatiable” desires.
So for him the good human life meant loyalty, “the willing and practical and thoroughgoing devotion of a person to a cause.”
A person doesn’t have to invent a cause, or find it deep within herself. You are born into a world of causes, which existed before you were born and will be there after you die. You just have to become gripped by one, to give yourself away to it realizing that the cause is more important than your individual pleasure or pain.
. . . . .
Royce’s philosophy is helpful with the problem we have today. How does the individual fit into the community and how does each community fit into the whole? He offered a shift in perspective. When evaluating your life, don’t ask, “How happy am I?” Ask, “How loyal am I, and to what?”Your Loyalties Are Your Life
No one knows. But lots of folks are asking.
These rules have a lot of overlap, but also a lot of noise. Of course systems should be safe and reliable and just and secure. This is marketing noise and no one disagrees. We need to figure out the hard rules. How transparent should we require AI systems to be? How explainable? This could be hard.
In any case, this year seems the one for forming advisory boards to figure out what rules we should have around (1) letting AI’s defend / kill us; (2) letting AI’s treat us; and (3) maintaining US dominance in AI.
Transaction costs seem to be poorly understood by the general public. For example, it costs money to buy a house. It costs money to sell a house. People often don’t take these costs into consideration when they imagine their house investment. If you buy/sell a house every few years, that’s a major hit to your bottom line. It might even destroy your investment. (Houses should not be investments, but that’s a rant for another time.)
The common 1% financial advisor fee is another example. It is deceptively large and in general you should avoid it.
Big, sophisticated companies should know all about transaction fees. Maybe?
The Japanese tech conglomerate, run by billionaire Masayoshi Son, spent a staggering $894 million on investment-banking fees in 2018, according to financial-data company Refinitiv, securing financial advice on deals and procuring an array of bonds, loans, and equity investments.
That’s not the highest total for any company just last year but the highest in at least the past decade.
The next highest fee payer in 2018, German pharmaceutical giant Bayer, is leagues behind at $384 million — 57% less than SoftBankSoftBank spent $900 million on investment-banking fees in 2018
You have to make a lot of money on your investments to make up for a one-year $894M investment fee. That’s not just $894M now. That’s more than $1B in three years at 3% returns. That’s well over $2B in 10 years at 10% returns. Take whatever you were going to make on those investments and lop off a few billion immediately.
Maybe Softbank knows what it’s doing? Maybe?