Patent Infringement Liability: Why Emerging Tech Companies Can't Afford to Ignore It in 2026

Founders and operators at emerging tech companies tend to assume patent infringement is someone else's problem; a dispute between large incumbents fighting over legacy IP. It isn't. Any company that manufactures, sells, distributes, or markets products; uses proprietary processes; or provides technology-enabled services can be accused of infringing a third party's patent rights. You don't need to own a single patent to be sued for infringing one.

For high-growth companies, the exposure is compounding. Rapid product development, aggressive go-to-market timelines, and AI-enabled features all increase the surface area for claims. And with patent litigation costs averaging $2M per claim even for disputes where value at risk falls between $1M and $10M — before damages or settlement — a single suit can be existential.

Here are five reasons a standalone patent infringement liability policy deserves a place in your coverage program.

1. You don't need to own IP to be sued for infringing it

The most common misconception: patent infringement exposure only affects companies with large IP portfolios. The numbers say otherwise. More than 52% of companies targeted in NPE lawsuits between 2017 and 2022 had annual revenues under $25 million. More than 61% of those targeted companies held no patents at all.

The targets are often new entrants — companies whose products are gaining traction, disrupting incumbents, or moving fast in a contested space. A competitor will frequently use patent litigation as a strategic tool, filing suit to slow a new entrant rather than on the basis of genuine infringement. Non-practicing entities (NPEs), sometimes called patent trolls, run the same playbook: they deliberately set settlement demands below the cost of defense to force a payout. NPEs now account for the majority of U.S. patent litigation filings, and patent filings were on pace to increase roughly 20% in 2025 over the prior year. Allegations don't need to be valid to be damaging. The cost of defense alone is enough to force settlement.

2. Your other policies probably don't cover this

A natural first question from any CFO or general counsel: aren't we already covered under existing policies? For patent infringement, the answer is almost always no.

Cyber policies, media liability policies, and professional liability / E&O policies may include some elements of IP infringement coverage, but they typically carve out patent infringement explicitly. This isn't a gray area. It's a standard, deliberate exclusion across most commercial policy forms.

The result is a coverage gap that most companies don't discover until a claim arrives. By then, defense costs are already accumulating and coverage options have narrowed. For a closer look at what your technology policy does and doesn't cover, see our overview of Cyber / Technology E&O insurance.

3. The litigation cost curve is steep — and it hits before you get to trial

Patent litigation is among the most expensive categories of commercial litigation. According to the AIPLA 2023 Report of the Economic Survey, the average legal costs per patent through trial and mediation, excluding damages and settlement, are:

NPEs know this; the typical playbook is to set the settlement demand below defense cost and let the math do the work. There's also a second-order effect. The public nature of a patent lawsuit can make it harder to raise capital, close enterprise deals, or complete an acquisition. A pending suit doesn't just cost money; it costs optionality.

4. The indemnification risk runs downstream to your customers

The exposure doesn't stop at your front door. If you provide products, services, or licensed IP to customers, your contracts likely include indemnification obligations. If a competitor or NPE alleges that your customer is infringing a patent by using or distributing products built on your technology, and your contract requires you to defend and indemnify them, that exposure affects your balance sheet.

This is what "indemnified party infringement liability" coverage addresses: legal fees, expenses, damages, and settlements incurred by your customer in scenarios where your contractual obligations require you to step in. For SaaS companies, API providers, and technology vendors whose products sit inside customer workflows, this is a first-order exposure that the vendor's Product Liability or cyber/E&O policy almost never addresses.

5. AI and emerging tech are now the fastest-growing patent battlegrounds

The concentration of patent litigation in high-tech is not evenly distributed. For the first half of 2025, 59.3% of all patent cases filed in U.S. district courts involved the high-tech industry. Within that, AI, autonomous systems, and cloud technologies are drawing intensifying attention from both operating competitors and NPEs, as these technologies scale and become commercially significant.

If your company builds with AI, sells AI-enabled features, or operates in any of the active high-tech patent clusters — security, networking, semiconductors, or software — the litigation pressure is higher than average and rising. The optionality to buy clean coverage today, before a specific claim or industry-wide underwriting tightening occurs, is a real and time-sensitive consideration. If AI is core to your product, also review AI Liability insurance and our work with AI & emerging tech companies.

Who should be looking at this coverage?

Any emerging tech company that is shipping product, selling into enterprise accounts with IP indemnification clauses, building in a space with significant existing patent activity, or scaling fast enough to attract competitive attention.

The right time to place this coverage is before the demand letter arrives. By that point, most carriers won't bind, and the claim is yours to fund uninsured.

The bottom line

Patent infringement liability is a mainstream exposure for emerging tech companies, not an edge case reserved for large incumbents. You can be sued without owning a patent, your existing policies almost certainly exclude the risk, defense costs alone can rival the value of your business, and your customer indemnities can pull the exposure onto your balance sheet. A standalone patent infringement liability policy — placed before a claim arrives — closes the gap. Review your coverage program annually; the litigation landscape, especially in AI, is moving fast.

Related reading: Product Liability Insurance · Cyber / Technology E&O Insurance · AI Liability Insurance · Insurance for AI & Emerging Tech

Sources: CRC Group "Patent Infringement Liability Policy — Gold-Level Policy Highlights" (2025); AIPLA 2023 Report of the Economic Survey; HighTech-Solutions NPE Litigation Study (via Legal Dive, 2023); ProMarket / Unified Patents, "Patent Trolls Are Harming Innovation" (2024); Unified Patents Patent Dispute Report: 2025 Mid-Year Report; Maynard Nexsen, "Patent Trolls: Seven Steps to Stop Them" (2025); GreyB Patent Litigation Trends (2024–2025). This article is general information, not legal, financial, or insurance advice.