Sticks and Stones

To paraphrase an old saying, the first casualty in any legislative war is the truth. Case in point: a report* issued recently by the Heritage Foundation that includes several clear inaccuracies about the patent reform debate, in general, and about RPX, in particular.

First, the report’s authors cite the white paper that was published last year by Professors James Bessen and Michael Meurer (“The Direct Costs from NPE Disputes”), writing that Bessen and Meurer’s estimated $29 billion annual cost to operating companies is “ … a statistic that has been largely debunked, in part because it came from a study relying on undisclosed data funded by RPX …”

RPX did provide anonymized aggregate data from our survey to the professors though we had no other involvement with their report, which was funded in part by the Coalition for Patent Fairness. As for the report itself, it is entirely misleading to say its conclusions have been “debunked”. Certainly there are differences of opinion – we calculate a more conservative total cost of $12.8 billion for 2013 – in many quarters, the report is considered well-reasoned and supportable.

Furthermore, the data used by Bessen and Meurer was not “undisclosed”; we published it in RPX’s 2012 NPE Cost Report and we made it widely available to interested parties. It’s also worth noting that RPX’s studies are the only NPE cost analyses built on actual (and anonymized) litigation and settlement data from a broad cross-section of operating companies. More than 130 companies participated in our updated 2013 NPE Cost Report (click here for high-level findings).

There were other inaccuracies in the Heritage report, including a wholly erroneous description of how RPX defines an NPE (we include the definition in our cost studies each year), but perhaps the most egregious and perplexing mistake was the authors’ description of RPX as “a lobbying group that represents patent defendants.”

A little research by the authors – and as a publicly-traded company, it is a simple matter to find detailed information about RPX – would have let them avoid that mistake. Obviously, RPX is nothing like a lobbying group. We buy and clear patents that represent risk to the members of our client network. We will periodically file inter partes reviews (IPRs) or conduct a prior art search to confirm the value of a given patent or portfolio. And we do provide data and analysis to our clients, as well as academics and policymakers when asked. But RPX’s solution is based on efficiently exchanging patent value. We know that market forces can rationalize the patent system and dramatically reduce the billions of dollars in legal and settlements costs companies are paying each year. While we support our clients’ efforts to improve patent quality and reduce NPE risk through legislation, RPX does not engage in lobbying on behalf of our clients or ourselves.

Which the Heritage Foundation authors could easily have ascertained if they had visited our website, read any of our reports, or interviewed anyone at the company. That the authors did not do so is somewhat surprising, given the Heritage Foundation’s traditional support of market-based mechanisms. RPX’s ongoing efforts to eliminate legal waste and rationalize the patent market would seem to be something the Heritage Foundation would embrace. This particular report, however, does not, and as a result, it has only added to the pervasive lack of understanding in the public debate about patent reform.

*John G. Malcolm and Andrew Kloster, January 9, 2014: A Balanced Approach to Patent Reform: Addressing the Patent-Troll Problem Without Stifling Innovation