The idea is maybe clever, but it has at least 2 major downfalls.
1.
The system is gamable by the trolls. Hurricanes don't care if you're insured, but trolls have an interest in taking troll insurance down. The way insurance works means that if you have a statistically unlikely run of bad luck, you could topple the whole insurance enterprise and leave those who thought they were covered out in the cold.
If I were a troll, I'd get together with other trolls and coordinate enough legal pressure that it was impossible to go to court on all the pending cases at once.
2.
Having insurance like this legitimizes the whole trolling issue, instead of fixing the systemic issues that cause it in the first place. You might think that doesn't matter since we can't really fix the trolling issue, but we can (maybe) create insurance to route around the problem. But here's why it actually does matter: if the troll insurance works and isn't killed by my point #1, then we've actually created a lobbying group with a vested interest in keeping trolling alive. In other words, the organization we created to protect us, if it actually works, will have strong incentive to work against our long term best interests by allying themselves with the trolls they are supposed to be protecting us against.
We'd essentially be creating a protection racket to extort /ourselves/.
then we've actually created a lobbying group with a vested interest in keeping trolling alive
That was my first thought when reading this article. It's a shame that lobby groups can petition for outcomes that are worse for everybody but their broken business model - where profits are the only virtue worth considering.
Lobby groups for keeping marijuana illegal[0] perfectly describe this.
Google, Microsoft, Apple, Samsung, and any other big tech-player need to band together, form a lobby group, and destroy software patents. It should be in their best interests considering all the patent litigation that goes on among them.
Google, Microsoft, Apple, Samsung, and any other big tech-player need to band together...
But they won't - Microsoft and Apple are patent trolls themselves, now, and it won't be long until Google and Samsung join them.
It works like this. Startups have no patents, but as they grow and succeed they accumulate them. Eventually they get lazy and start to rely on their IP for income, rather than continuing to develop valuable new markets.
Microsoft is a great example of this arc, making more money licencing unspeakable patents to Android than they do from Windows Phone. Apple are going that way - their heyday is over and patents are becoming more important to them. Google is currently not over the hump yet, but give them ten years.
Ignoring adverse selection, having insurance means "There is someone with a shitton of money and lawyers ready to go toe to toe". This means there are better targets. Much like a home security system: easy enough to circumvent, but easier to just move to the next house.
Of course, if all of those who sign up are willfully infringing legitimate(ish) patents, the calculus changes a bit. Perhaps the insurance company would insure against particular patents?
I agree with 2, but 1 doesn't make much sense to me. Normally, trolls don't want to go to court. In fact, if they know you're taking it to court (and they believe you), they often drop the case. Just publicly saying that you're 100% committed to fighting any trolls will probably reduce the amount you attract.
Odds are, trolls would only coordinate as a last ditch effort. And if that happens, patent troll insurance would be so popular there would be other services that would offer this, making it harder for them to take it down.
Both of these points are predicated on the patent insurance program becoming successful first. At which point, people will try to stop it or it will become seamingly unstoppable.
I would be okay with those problems compared to my current risks.
I'm not an actuary so I probably can't accurately attest to this, but I would think it would still be a feasible approach. If an insurance agency were to accept the risk, they would have to do their homework and have their lawyers and agents dig through the intellectual property of their clients and do their own determination at the risk of legal troubles and charge the client(s) a fee which yielded profit over a span of time where the mean loss was less than the income.
I'm not an actuary - but I've worked on valuation software for actuaries.
I think one key problem around insuring these risks is that it'd be difficult to price and value. To price/value you need to understand the cashflows for the insurance product in terms of premiums and payouts. Life, Health and General insurance all have analytical methods that rely on historical data to determine the likely-hood of a payout. For this type of insurance there isn't the same level of historical data.
Also, the regulatory regime for insurance companies is moving towards a risk/shock based approach - this is the case in Europe (or will be eventually), with the ROW expected by the industry to follow similar approaches. So for an insurance product such as this, an insurer would probably need to understand what happens if the level of payout incidence is stressed (say doubled) - given that the incidence of payout isn't well understood and the liability when you do payout is likely to be quite high, would result in what the market would probably consider to be an expensive product.
Maybe there is a a way to avoid the protection racket issue by a setting up the insurance organization as a self-governing non-profit. By self-governing I mean anyone who pays into the organization can submit proposals for cases that should receive it's funding and vote proposals up or down. The top X proposals would be funded. Perhaps votes could be weighted in proportion to the amount the member pays into the organization.
Comments
The idea is maybe clever, but it has at least 2 major downfalls.
1.
The system is gamable by the trolls. Hurricanes don't care if you're insured, but trolls have an interest in taking troll insurance down. The way insurance works means that if you have a statistically unlikely run of bad luck, you could topple the whole insurance enterprise and leave those who thought they were covered out in the cold.
If I were a troll, I'd get together with other trolls and coordinate enough legal pressure that it was impossible to go to court on all the pending cases at once.
2.
Having insurance like this legitimizes the whole trolling issue, instead of fixing the systemic issues that cause it in the first place. You might think that doesn't matter since we can't really fix the trolling issue, but we can (maybe) create insurance to route around the problem. But here's why it actually does matter: if the troll insurance works and isn't killed by my point #1, then we've actually created a lobbying group with a vested interest in keeping trolling alive. In other words, the organization we created to protect us, if it actually works, will have strong incentive to work against our long term best interests by allying themselves with the trolls they are supposed to be protecting us against.
We'd essentially be creating a protection racket to extort /ourselves/.
Can't see this working.
That was my first thought when reading this article. It's a shame that lobby groups can petition for outcomes that are worse for everybody but their broken business model - where profits are the only virtue worth considering.
Lobby groups for keeping marijuana illegal[0] perfectly describe this.
Google, Microsoft, Apple, Samsung, and any other big tech-player need to band together, form a lobby group, and destroy software patents. It should be in their best interests considering all the patent litigation that goes on among them.
[0] http://www.republicreport.org/2012/marijuana-lobby-illegal/
But they won't - Microsoft and Apple are patent trolls themselves, now, and it won't be long until Google and Samsung join them.
It works like this. Startups have no patents, but as they grow and succeed they accumulate them. Eventually they get lazy and start to rely on their IP for income, rather than continuing to develop valuable new markets.
Microsoft is a great example of this arc, making more money licencing unspeakable patents to Android than they do from Windows Phone. Apple are going that way - their heyday is over and patents are becoming more important to them. Google is currently not over the hump yet, but give them ten years.
Ignoring adverse selection, having insurance means "There is someone with a shitton of money and lawyers ready to go toe to toe". This means there are better targets. Much like a home security system: easy enough to circumvent, but easier to just move to the next house.
Of course, if all of those who sign up are willfully infringing legitimate(ish) patents, the calculus changes a bit. Perhaps the insurance company would insure against particular patents?
I agree with 2, but 1 doesn't make much sense to me. Normally, trolls don't want to go to court. In fact, if they know you're taking it to court (and they believe you), they often drop the case. Just publicly saying that you're 100% committed to fighting any trolls will probably reduce the amount you attract.
Odds are, trolls would only coordinate as a last ditch effort. And if that happens, patent troll insurance would be so popular there would be other services that would offer this, making it harder for them to take it down.
Both of these points are predicated on the patent insurance program becoming successful first. At which point, people will try to stop it or it will become seamingly unstoppable.
I would be okay with those problems compared to my current risks.
I'm not an actuary so I probably can't accurately attest to this, but I would think it would still be a feasible approach. If an insurance agency were to accept the risk, they would have to do their homework and have their lawyers and agents dig through the intellectual property of their clients and do their own determination at the risk of legal troubles and charge the client(s) a fee which yielded profit over a span of time where the mean loss was less than the income.
I'm not an actuary - but I've worked on valuation software for actuaries.
I think one key problem around insuring these risks is that it'd be difficult to price and value. To price/value you need to understand the cashflows for the insurance product in terms of premiums and payouts. Life, Health and General insurance all have analytical methods that rely on historical data to determine the likely-hood of a payout. For this type of insurance there isn't the same level of historical data.
Also, the regulatory regime for insurance companies is moving towards a risk/shock based approach - this is the case in Europe (or will be eventually), with the ROW expected by the industry to follow similar approaches. So for an insurance product such as this, an insurer would probably need to understand what happens if the level of payout incidence is stressed (say doubled) - given that the incidence of payout isn't well understood and the liability when you do payout is likely to be quite high, would result in what the market would probably consider to be an expensive product.
Maybe there is a a way to avoid the protection racket issue by a setting up the insurance organization as a self-governing non-profit. By self-governing I mean anyone who pays into the organization can submit proposals for cases that should receive it's funding and vote proposals up or down. The top X proposals would be funded. Perhaps votes could be weighted in proportion to the amount the member pays into the organization.
You can already buy general legal insurance so why would not be sufficient ?