Wednesday, July 29, 2009

Formidable Corporations Join Exclusive Patent-Infringement-Defense Clubs

Patent aggregators have been around for several decades now. Many aggregators have joined the new IP licensing model to collect patents and assert them against companies who manufacture goods. If they don't pay a royalty, the aggregator sues them for patent infringement. This licensing model gained great popularity amongst non-practicing entities – so called 'patent trolls' – whose only purpose is to monetize the value of the intellectual property. Funny though, many manufacturing entities wanted a piece of the IP-licensing revenue pie, and started their own non-practicing entities – a revenue generating arm or subsidiary – whose sole mission was to generate revenue from unused or undervalued patents. I raise this, because people seem to think non-practicing entities or patent trolls are only the greedy solo inventor, or the company whose sole business activity is licensing patents and doesn't make anything – that is patently false! These to patent-revenue-generating entities include some of the largest companies in the telecommunications and high technology industries in the world.

With the rise of patent infringement assertion of revenue generating patent portfolios against small and large companies alike, new models are evolving to try to reduce the volume of the patents available for purchase by patent-revenue-generating entities, and provide some form of leverage against the patent-revenue-generating entities when they do assert.

Earlier this decade, we saw the rise of patent aggregators like Intellectual Ventures and Thinkfire. These companies removed the patents from their manufacturing owners to shield them from counter-patent-infringement assertions, and have as their mission, the monetization of the intellectual property for their and their investors benefit. Unfortunately, these companies walk-the-fine-line of being patent trolls themselves, and many companies did not want to be a part of their oft-perceived immoral, yet lucrative, endeavors.

The newest crop of aggregators are defensive in nature (so far). A defensive patent aggregator purchases patents to take them off the market and keep them from being asserted against their club members. Here are a few:

Allied Security Trust. This club was formed in 2001 and includes in its membership Sun Microsystems, Motorola, Hewlett-Packard, Verizon, Cisco , Google and Ericsson. The members contribute to the operating expense of the trust, and the trust hold funds in escrow for the purchase of patents. Each member's escrow funds are used for the purchase of only those patents that it is interested in. The members who contribute to the specific purchase then receive a license to those particular patents. After a certain period of time, the patents are sold or donated. The Allied Security Trust does not litigate its patents.

RPX Corporation. Similar to the Allied Security Trust, but operating as an entirely independent business (funded by elite venture capitalists), RPX Corporation gives all of its members licenses to the all patents it purchases (with some deference for years of membership). The service is structured on an annual membership and payment of dues, and includes amongst its members: Cisco, IBM, Panasonic, Philips, LG Electronics, Samsung, TiVo, Hewlett Packard, Nokia, Sony and Epson. RPX does not rely on its members to recommend or approve the purchase of patents (although they are solicited for input as to a patent's potential interest and value). Again, its mission is to take patents off of the market – away from potential patent troll buyers – and license them to its then-current members. Down the line, the encumbered patents may be sold – even at a loss. RPX does not litigate its patents.

Open Invention Network. Perhaps, the most unique defensive patent aggregator is the Open Invention Network. The Network is a club of companies that have established a patent-sharing plan to help protect the Linux (open source) software ecosystem from hostile patent infringement litigation. The Open Invention Network was launched in 2005 as a collective effort by IBM, Sony, Philips, Novell, Red Hat, and other major Linux stakeholders in the technology industry. The founding members contributed a collection of extremely broad patents that cover a wide range of technologies. Any company can receive royalty-free licenses for those patents by promising not to not assert its own patents against any technology supporting the Linux software ecosystem used by the other members. Unlike the Allied Security Trust and the RPX Corporation, the Open Invention Network can also wield its patent portfolio for defensive purposes on behalf of its members and will use it to retaliate against litigation that is brought against Linux software by other companies.

The Open Invention Network may get its first test in wielding its patents defensively in the suit recently brought by Microsoft against new member TomTom. In March 2009, Microsoft filed a patent infringement lawsuit against TomTom, alleging that several of the company's handheld navigation products – including a few that are built on the open source Linux operating system – infringe an assortment of Microsoft's patents. Microsoft's infringement claims have raised concerns within the Linux community, although Microsoft has publicly stated that its lawsuit against TomTom is not the beginning of a systematic attack on Linux.

The model for defensive patent aggregators is clearly evolving. It remains to be seen whether they run into legal issues themselves – such as antitrust issues or other issues regarding who can, and how to, become a 'Member of the Club.'

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