Joff Wild

Last week’s story in Wired on Rockstar Consortium, the business established by five of the six companies that successfully bid for the Nortel patents last June, begs a lot of questions. Little of what is covered in the piece will come as much of a surprise to readers of this blog, the majority of whom will already know that the NPE is mostly staffed by former employees of the bankrupt Canadian telecoms company. What’s more, we revealed last month that Rockstar was already actively looking for buyers for some of its patents and was set up by Apple, Microsoft, Ericsson, Sony and RIM - but not EMC; while in January we named John Veschi, who now runs the NPE, as one of our IP personalities of 2011 because of the vital – but largely unheralded - role he played in the lead up to the Nortel sale.

What is new information is that the six members of the original Rockstar Bidco divvied up among themselves 2,000 of the assets they obtained (although the allocations are not revealed and neither is whether all six have licences to those rights which they do not own). This means that Rockstar Consortium’s business is founded on the 4,000 or so patents that remain. What's more, negotiations have begun with over 100 potential licensees. In what is chilling and, presumably, calculatedly uncompromising language, Veschi states: “Pretty much anybody out there is infringing … It would be hard for me to envision that there are high-tech companies out there that don’t use some of the patents in our portfolio.”

What we do not get, however, is any detailed exploration of Rockstar Consortium’s relationship with the companies that set it up. The author takes at face value the assertion from Veschi that even though the NPE is funded by five of the six Rockstar Bidco consortium members, it is not bound by any promises that may have been given to the DoJ by them that they would “license many of their core wireless patents under reasonable terms to anyone who needed them”.

What’s more, there is no exploration of the on-going relationship Rockstar has with its funders, or how the job that Veschi and his team are doing will be assessed. Presumably strong enough firewalls have been established to stand up to the in-depth scrutiny that discovery is bound to bring following Rockstar’s first suit against a big name player, but there is no mention of this. Not that I am blaming the author – he and his readers are not interested in that kind of thing. In any case, it is unlikely he would have got many helpful answers if his questioning had gone down those lines.

But it is on these and similar issues that the success of Rockstar will depend. In March, former DoJ anti-trust chief Christine Varney stated: “Intellectual property and the aggregation of patented technology will be among the biggest issues to emerge in the next few years, both in terms of reviews of transactions and industry conduct … We’re only in the early stages of understanding how the acquisition of patents might deter innovation.” Perhaps it was the kind of relationship that Rockstar might have with Apple, Microsoft, Ericsson, Sony and RIM that she had in mind. Will the DoJ be content to sit by and watch Rockstar relentlessly pursue licensees on terms that it sets? Or will it want to take a closer look at just how independent it is?

Likewise, it is surely unimaginable that any defendant with serious resources will pass on the opportunity to use discovery to dig deep into the circumstances under which Rockstar was established and how it is now managed. Whether Veschi and co really are free to do precisely what they want, who they answer to and under what terms, are all likely to be closely investigated. Given the companies potentially involved, all these questions will already have been gone through in depth with the best lawyers money can buy. But deep pocket defendants also have access to world class advice and nothing is certain when it comes to litigation.

The privateer model is now an established part of the patent monetisation landscape and, on the face of it, Rockstar Consortium is just another – albeit rather large – example of the type. But given its size and its roots, Rockstar may attract a lot more examination than those that have preceded it. If this does turn out to be the case, that could potentially have consequences not only for it but also for the model as a whole. Maybe if I were someone like Google and I was feeling ever so slightly impish I might make a very high-profile attempt to buy Rockstar just to see what kind of answer I would get. That could stir a few things up.