Friday, 18 June 2010

Fighting trolls with fire

Faced with mounting costs and headaches stemming from litigation by NPEs (non-practicing entities, or "patent trolls"), more and more operating companies are resorting to a novel means of addressing the problem. As part of their defensive patent strategy, tech giants (and top troll targets) Microsoft, Sony, and Nokia recently joined with startup company RPX.

In business for a little over a year, RPX ranks among the pioneers in the Defensive Patent Aggregation movement. It was created to offer operating companies a solution to the growing problem of lawsuits from NPEs. Until now, most companies have had to go it alone in mounting costly, risky, and unpredictable legal defenses. RPX criticizes the NPE business model for creating inefficiency via high transactions costs. But unlike Microsoft and others who have lobbied the U.S. Congress in the hopes of securing anti-NPE legislation, RPX insists that "[t]the optimal remedy" for NPE patent assertions is a market solution, or "fight[ing] fire with fire."

To that end, RPX strategically buys up patents, thus limiting the number of patents on the market that can be leveraged against operating companies. Unlike the NPEs, however, RPX does not initiate or directly profit from patent assertions; instead, it offers a form of insurance. All patents that RPX purchases into its Defensive Patent Aggregation are licensed in bulk to its members, in exchange for an annual subscription fee. Early this year, RPX reported that it had so far spent $130 million to acquire more than 1,000 tech patents.

Though perhaps the most popular, RPX is not the only company offering defensive aggregation services. Other networks include Allied Security Trust and the Open Invention Network. With the advent of such entities, the trend in patent litigation circles has changed from getting rid of NPEs altogether to managing the costs of NPE patent litigation -- offering yet another indication that the so-called trolls are here to stay.

1 comment:

Anonymous said...

Sounds a little bit like a protection racket.