The following guest post was written by Steph Kennedy of IP Troll Tracker.
Steph follows the patent industry closely, blogging about the issues surrounding patent litigation and the negative effect it is having on businesses far and wide. In early 2010, she re-started her own software development company (898 Data, LLC) and works from home developing database and web applications. Prior to that, she worked at a major law firm for ten years, and then took consulting assignments in the financial and patent litigation industries.
In the first part of the series, we took a look at Patent Defense Aggregation and Insurance, two of the Patent Risk Management business models current in use. Next up? Collaboration and the Hybrid approach!
Collaboration: We’re All In This Together
At RPX, who owns the service mark for Collaborative Defense, this is lumped in under the insurance umbrella, but I’ve separated it here because the idea itself has merit on its own. In a Collaborative Defense℠ situation, you use economies of scale to lower the price to defend a group of companies against a single asserter. Similar to negotiated prices for insurance, which is why this is lumped in, you set it up so that you have a standard set of firms that you use for the legal work, eDiscovery, claims constructions, a standard set of SME’s, the whole nine yards. All of the necessary groundwork is laid out ahead of time so that when one of your member companies is sued, you can hit the ground running.
More important than simply using economies of scale to reduce costs, this approach also allows for the sharing details of the case and legal strategies among all the defendants, the theory being that this helps build a stronger case. The America Invents Acts prevents trolls from naming a whole slew of defendants in one filing so it’s already more expensive for them to go after lots of different companies individually (though at the payouts they often get it’s not really that much of a deterrent). Imagine the surprise of the trolls when they see that all five companies they’ve sued have retained the exact same counsel? That they are sharing their information and intel with each other in order to promote the common defense?
There are some issues with this “product”, in that you have legal conflicts to clear, with the vetted law firms having to potentially step down if they cross client streams. But overall, it is a great place to leverage all the industry knowledge that you have about patents and how they’re litigated to generate a collective response.
Hybrid Approach: Crossfit for Patent Litigation
Unified Patents is a late entry into the patent risk management field, and by “late” I mean I just read what everyone else did in the WSJ a few weeks ago. It appears that they are using an approach similar to the subscription model employed by RPX, wherein they purchase patents for specific pools of technology manufacturers. Whereas the RPX model gives the entire corpus of subscribers a license, Unified Patents “micro pools” group subscribers, and therefore licensees, by technology. This is a way of focusing purchases more tightly around specific threats, rather than casting a wider net and going after patents that are most at risk for the highest number of your subscribers.
They also make sure that each micro pool has companies representing all stages of growth: startups, mid-cap, and bigger players. The startups serve as their “early warning system” in that they are frequently the first target of patent troll nastygrams. This is what the politicians call a floater: they float an idea to the press, see how the public responds, and then tailor their policy accordingly. Trolls behave similarly (hmmm…I’m sensing a connection there) in that they often send a threatening letter to smaller companies to see how it plays. If they get a bite, they go after the bigger fish. By including the smaller companies, and it looks like subscription fees may be waived for the smallest of the small, Unified Patents can get out ahead of a potentially bigger problem.
One advantage of catering to companies in every stage of the business lifecycle is that Unified is able to better anticipate what new technologies the NPEs may go after. Partnering established companies with newcomers in a particular field can provide a broader picture of what the overall patent landscape will look like for any given micro pool, thus giving Unified Patents the ability to purchase patents before they are even at play. By identifying bridges that are off the beaten path, or even helping build new ones through consulting arrangements (which they also offer), it can be quite the deterrent.
And that’s the whole point, as this hybrid approach to the business model turns on the idea of Collaborative Deterrence. (Which, by the way hasn’t been trademarked that yet. Just pointing that out.) Taken directly from their website, they offer the following for each micro pool:
– Monitoring companies in the protected technology (Micro-Pool) to identify NPE activity
– Competing head-to-head against NPEs to purchase or license patents that are sought by NPEs
– Reexamining patents in the protected technology that are owned by NPEs
– Reducing the number of patents available to NPEs in the protected technology
– Reducing effectiveness of demand letter campaigns against the protected technology
– Incentivizing startup and small company participation such that NPEs have few easy targets in the protected technology
It’s more than just buying patents at play and promoting collaboration. This approach is more broad and seems to address all of the major pain points that come with being the target of a patent troll.
Land of the Free, Home of the Brave
When I was a kid, Puss in Boots was not a Dreamworks Animation movie, it was a book and record set that I ordered from Scholastic Books when I was in the 2nd grade. I don’t even really remember the story, but I have very fond memories of playing that 45 over and over and over again, this song in particular:
I’m a puss in boots and it sure is fun
To help the miller’s youngest son
And it won’t be hard for me – with ingenuity!
I’ll make my fortune soon I know
So here I go
I didn’t completely understand what the word ingenuity meant, though I can say with certainty that I was made to look it up in the dictionary, which is what happens when one’s mother is an English teacher. One thing I did know was that darn cat always got what he needed out of whatever situation he was in. American ingenuity, that inbred desire to solve a problem, is responsible for the rise of a whole new industry called patent risk management. Whatever form it takes, it’s there because of a direct threat to businesses and innovation.
Time will tell which model is the most successful at resolving the problem, but it won’t necessarily matter. Once this problem is solved, another one will take its place.
And so will another solution.
This guest post was written by Steph Kennedy of IP Troll Tracker.
The content of this post does not reflect the opinions of Article One Partners.
To read more of Steph’s posts on patents and intellectual property, visit her blog.