Patent Risk Digest

For years, the US Patent and Trademark Office’s examiners have been fighting a backlog of thousands of increasingly complex patent applications. And since 1995, the annual influx of applications has grown almost threefold, according to data from the USPTO’s website. This avalanche reflects the acceleration in the mid-1990s of new and converging technological developments.

Unfortunately, the USPTO likely was not equipped to deal with this influx. As a result, many of the 3.5 million patents issued during this same period are ambiguous or overlap one another. Just last year, the agency issued 300,678 new patents—double the number granted in 2005, and triple the number granted in 1995. Patent trolls exploit this issue—acquiring vague patents on old technologies and asserting them against as many potential “infringers” as possible.

The USPTO has been working hard to address the problem with a number of initiatives aimed at improving patent quality. In the meantime, the situation continues to contribute to the ongoing risk of patent infringement suits faced by any company that makes, sells, or uses technology-based products or services.

But smaller companies can get the upper hand. As in one recent example, a young telecom company found itself entangled in an infringement lawsuit putting its flagship product in jeopardy. The company faced a potentially multimillion-dollar legal battle with no sure outcome. Management would have been distracted for months and forced to divert significant capital to the litigation.

Instead, the company, through its relationship with RPX Insurance, got the suit dropped in just weeks—for legal costs 80-90% less than typical in such a matter.

Troll ‘campaigns’: You’re not alone

As is usually the case, the company was just one of many—more than 10—that were sued over the same patent. While the scope of this troll litigation “campaign”—or multiple suits filed by the same plaintiff over the same patents—might appear to make the case more threatening, there’s actually a benefit. With the existence of other defendants and information about their case resolutions, it’s possible to glean insight into the fastest and least expensive path to disposing of the matter.

Speed and power in knowledge

Understanding the plaintiff’s past strategies with other defendants is one powerful negotiating tool. Another is understanding the strength of the patent being asserted. In this case, information on both counts made it clear that the best resolution for this company was to fast-track a licensing deal at minimal legal cost. This empowered the company to drive a resolution in its best interest, achieving the following results:

• License secured and case closed in 120 days
  (typical duration is 12-18 months)
• Legal costs less than $12,000
  (typically $75,000-$125,000)

By participating in the RPX network the company understood that they’re not alone, that most such cases of this kind end in settlement, and that having key data and intelligence can save tens to hundreds of thousands of dollars in costs and avoid company-threatening litigation. The efficient resolution in this case allowed management to remain focused on, and preserve precious resources for, their business.

The legal costs alone of a single infringement litigation can range from six figures to several million dollars. For large companies it is a frustrating problem that can reduce investment and profitability. For smaller companies, a patent troll attack can be fatal. Patent trolls have increasingly targeted companies—both suppliers and users of patented technologies—in a broadening range of business sectors. That means companies can be vulnerable just by running their websites, managing their E-commerce, providing WiFi access, using mobile devices, or deploying enterprise software solutions—all operations that utilize patented technologies.

RPX provides a suite of business solutions to reduce the expense and likelihood of such litigation. One is NPE Patent Litigation Insurance, which combines a traditional claims-paying policy with select, proactive intervention in the patent market. RPX has a uniquely broad and deep store of litigation cost data, and with it has built a highly accurate actuarial model for patent troll risk and cost. Policies are customized to reflect a company’s size and risk profile.