Litigation reform is unlikely to make much difference to the US's most active NPEs 14 Jul 13
The New York Times has a couple of articles (here and here) today that focus on Erich Spangenberg, the CEO of IPNav, identified by RPX as the US’s most litigious NPE. There’s a lot of colour in both pieces, none of which will comes as a surprise to experienced operators in the IP markets. But in terms of new information there is very little; though one fact did stand out: the deal offered to Parallel Iron, an SME which got $250,000 from IPNav in return for a fixed-term exclusive licence to monetise its patents: “Parallel Iron would keep 42.5 percent of any settlement revenue and verdicts, with the rest split between IPNav and the lawyers it hired.” That strikes me as probably being a lot more than those patents would have a chance of generating were Parallel Iron to do the monetisation job itself.
The most helpful item the NYT provides is a link to RPX’s 2012 NPE Activity Report. It’s the first that the defensive aggregator has produced and it is jam-packed with interesting charts and diagrams. The information is all based on RPX research and analysis, and its introduction states “RPX has made a conscious effort to present the subject data in the most straightforward and objective manner and has withheld its own potentially subjective views and analyses”. Having had a good look through I think that is fair comment. There is no editorialising, as far as I can see.
One observation that the report makes that I found very striking is that just 10 NPEs in 2012 “accounted for about 35% of NPE cases filed and total NPE defendants added”. RPX identifies these 10 and also provides a table that lists a top 10 of most litigious NPEs for 2008 to 2012. I have combined these into one table, focusing on cases filed since 2008, cases filed in 2012, the number of cases still active at the end of 2012 and the 2012 YE active cases as a percentage of those initiated since 2008. This last item was not provided by RPX, I did the maths myself based on the other figures. While not that scientific, it is interesting to see what could be termed NPE solution rates. I’d have thought that NPEs want to resolve litigations as soon as possible. Those that are able to, at terms which are satisfactory to them, must be considered to be doing a pretty good job. Of course, what these figures cannot tell us is how many cases filed were lost or dropped or settled at a loss. Anyway, this is what I have come up with:
1. IP Navigation Group – 446 cases filed since 2008; 305 in 2012; 280 active at 2012 YE; 63% of cases filed since 2008 still active as at 2012 YE.
2. Acacia – 402 since 2008; 202 in 2012; 235 active 2012 YE; 58.5% still active.
3. Arrivalstar SA / Melvino – 212 since 2008; 98 in 2012; 32 active 2012 YE; 15% still active.
4. Empire IP – 137 since 2008; 102 in 2012; 118 active 2012 YE; 87% still active.
5. Geotag Inc – 105 since 2008; 1 in 2012; NA active 2012 YE
6. Brandywine Communications Technologies LLC – 93 since 2008; 66 in 2012; 69 active 2012 YE; 74% still active.
7. Network Signatures – 81 since 2008; 9 in 2012; NA active 2012 YE
8. The Tawnsaura Group LLC – 74 since 2008; 74 in 2012; 53 active 2012 YE; 72% still active.
9. Pragmatus Telecom LLC – 67 since 2008; 66 in 2012; 50 active 2012 YE; 75% still active.
10. Uniloc Corporation Pty Limited – 61 since 2008; 51 in 2012; 53 active 2012 YE; 87% still active.
According to RPX there are two new and very active kids on the block for 2012: Novel Point Holdings LLC filed 55 cases during the year, 27 of which were active at the year’s end (49%); Blue Spike LLC filed 55 cases, 52 of which were active at year end (94.5%). Two in the 2008-2012 top 10 do not feature in the 2012 top 10 (Geotag and Network Signatures), so there is no information on how many of their cases are still active.
Like RPX I am not going to make any subjective comments about these figures. They are what they are. However, what I do wonder is to what extent – if any – these NPEs which, let’s not forget, “accounted for about 35% of NPE cases filed and total NPE defendants added” in 2012, will seriously rethink their operations should any of the proposed patent litigation reform legislation currently before Congress ever makes it onto the statute books.
My guess is that while some adjustments may be necessary, the basic business model will not change: these are largely deep-pocket firms which are pretty upfront about what they do, so increased transparency will not directly harm them (though it may make operating companies less likely to assign patents to them except on a strict sale-only basis); while they also do a lot of due diligence before taking portfolios on and rarely chance their arm on assertions, so loser pays is not going to be a huge deterrent – when they go to court they expect to win (though they may have to rethink relationships with contingency law firms).
Once that becomes apparent, where do those who dislike NPEs go next? I suspect it will be towards reform of substantive patent law. Indeed, I am beginning to wonder whether that has been the plan all along; it’s not as if opponents of NPEs do not know how the IP market works. If you want to get rid of, say, software patents, it’s a hard sell straight off the bat. Much easier is to persuade legislators and the public that there are certain kinds of problem that have to be dealt with because US innovation and the economy are suffering. You suggest a solution – reforming the litigation system. When that is done and it makes no real difference, you propose something else – “maybe what we need to do is just get rid of the patents causing the problem in the first place”. Once you have an audience that has already bought into your main argument it is going to be easier to persuade them of the need for this radical option. It’s a process that will take a bit of time, but for those who want big changes to the US patent system the ultimate prize is well worth waiting for. In short, focusing on troll/NPE/PAE harms is the means to a much bigger end.
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