Defensive patent aggregation
Defensive Patent Aggregation
Defensive Patent Aggregation (DPA) is the purchasing of patents or patent rights in order to prevent that such patents end up in the hands of entities that would assert them against operating companies.
Operating companies often get patents asserted against them and often end up in court defending themselves against the alleged use of such patents. To prevent such assertions and litigations operating companies sometimes purchase patents so they cannot be asserted or licensed against them. Another motivation for operating companies to acquire patents is the ability to counter-assert such patents in case another operating company files a patent litigation. Operating companies have also pooled their efforts and financial resources to purchase patents. An example of such Defensive Patent Aggregation is AST.
In 2008, a new business model emerged with third-party financing doing Defensive Patent Aggregation whereby a third-party – the aggregator – purchases the patents or patent rights strictly to mitigate the risk and cost of litigation associated with NPEs and provides licenses to members against a fixed annual membership fee. This model was introduced by RPX Corporation, a start-up based in San Francisco. RPX received venture funding from Kleiner Perkins Caufield & Byers (KPCB) and Charles River Ventures (CRV).
Rationale The cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $4 million or more for a complete defense, even if successful. And, when non-litigation licensing and settlements are factored in, the actual costs of fighting patent lawsuits is much higher. Because the costs and risks are high, defendants may settle even non-meritorious suits they consider frivolous for several hundred thousand dollars.1 The uncertainty and unpredictability of the outcome of jury trials also encourages settlement.2
In the first 10 months of 2008, more than 2,300 patent lawsuits were filed the United States3. The majority of these cases are filed by the companies that created the patented invention. But a growing share of the lawsuits4 is coming from non-practicing entities (NPEs) – also called patent trolls – which acquire patents for the sole purpose of licensing and asserting their patent rights. In fact, NPE litigation grew from 2.6 percent of filed cases in 2000 to 16.6 percent of filed cases in 2007. And unlike product companies, known as operating companies in the IP commerce world, NPEs are not susceptible to counter-assertion by their licensing targets because they do not make or sell any products or services.5
The NPE offense includes single inventor assertion firms, patent licensing and enforcement companies, litigation financiers and investors, and patent aggregators, both institutional and strategic. However, NPE offense is ultimately concentrated on asserting patents to the detriment of operating companies. NPE defense methods include defensive patent aggregation from companies including RPX (need to link), cooperative purchasing efforts, such as defensive patent pools and buying consortia, from companies including Allied Security Trust, outright purchasing of patents, settlement and litigation. See also - RPX - Allied Security Trust - Intellectual Ventures - PatentFreedom - patent troll
References
1 Craig Tyler (September 24 2004). Patent Pirates Search For Texas Treasure, [1]. Retrieved on 27 July 2007.
2 Justin Watts (June 2007). "Waiting for Godot", Patent World.
3 Prof. Paul Janicke, University of Houston Law Center.
4 Intellectual Asset Magazine, A New Tool for a New Kind of Patent Adversary, Daniel P McCurdy and Chris Reohr, October/November 2008
5 Federal Trade Commission Report, “To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy,” October 2003. [2] Categories: Business terms | Patent law