March 13, 2012, 10:39 AM

Patent defense costs increase 22% for the e-commerce industry

RPX forecasts that settlements and legal feels reached $1.9 billion last year.

Thad Rueter

Senior Editor

Lead Photo

The cost of defending against e-commerce-related patent infringement claims increased nearly 22% in 2011, to $1.90 billion from $1.56 billion in 2010, according to an analysis from RPX Corp. The company buys up patents to protect its clients from getting sued by firms called non-practicing entities—usually called “patent trolls” by e-retailers—that seek licensing fees or court settlements for technology patents they generally have bought or inherited from other firms.

The forecasted costs include both legal fees and settlements and awards for claims brought by non-practicing entities, RPX says. Its data show a sharp increase in those expenses since 2005, when e-commerce-related infringement claims stood at some $230 million. One main reason for the increase, officials at RPX say, is that patent holders are simply following the money—the U.S. Commerce Department last month said that online retail sales jumped 16% in 2011, to $194.3 billion.

“There’s a lot of money in e-commerce, and a huge supply of patents out there,” says an RPX spokesman. Additionally, online retailing represents a relatively risk-free industry for new patent-holding companies to target—given how patents can cover such crucial e-commerce technology as site search and browsing—and the large number of companies involved in online retailing.

RPX estimates that more than 500 non-practicing entities operate in the United States.

Read much more about patent infringement and online retailing in the upcoming April issue of Internet Retailer magazine.

Lee Cheng, general counsel, corporate secretary and vice president of human resources for Newegg Inc.,  will speak at the Internet Retailer Conference & Exhibition 2012 on June 6 from 1:45 p.m. to 2:30 p.m. during a session entitled “Fighting back against patent suits: What to do and how to do it.

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