Down To Business: Patent Acquirer RPX On A Roll Against The Trolls
The company now has sufficient revenue to buy $100 million in patents and patent rights a year as it shields members from "non-practicing entities."
RPX isn't against inventors getting fair compensation for their hard work and ingenuity, Amster insists. He just thinks the current patent market is skewed toward litigation (where NPEs and their lawyers get the lion's share of the money) and away from an efficient buyer-seller relationship. He compares the situation to having a real estate market where prices aren't listed and buyers show up at sellers' homes with their lawyers to hammer out the best deals. NPEs exist largely because inventors and other patent holders don't know how to approach potential commercial buyers, and buyers don't know what prices to pay. One possible future business for RPX, Amster says, is in creating a more transparent buyer-seller market for patents, similar in scope to a securities exchange.
Amster acknowledges a potential conflict between RPX members and the company itself. Say that Cisco wants a piece of the patent portfolio now being auctioned by a Canadian court as part of the Nortel bankruptcy proceedings, at the same time RPX wants to acquire some or all of those same patents to protect its members. In that case, the two companies would be bidding against each other. So be it, says Amster--that's a free market in action.
Tech Patents Overvalued?
Amster, who has a clear interest in seeing the market price of patents kept low, says that when "people use 'billion' and 'patent portfolio' together, it's absurd." For context, he says, consider that it took Qualcomm--the inventor of CDMA cellular technology and one of the world's leading technology licensers--many years before it earned $100 million in annual licensing and royalty fees, though in Qualcomm's latest fiscal year such fees generated close to $4 billion for the company.
RPX says that NPEs have raised more than $8 billion in recent years to buy and assert patents. Although the number of tech patent cases has declined of late--a trend RPX loosely ties to its existence--going back to 2001 NPE litigation has increased fourfold, the company says. Meantime, the number of defendants in each case is still on the rise, to an average of 7.6 defendants in the first quarter of 2010, RPX says, compared with 4.4 in the first quarter of 2009.
The recent Supreme Court decision in the Bilski case was supposed to help determine whether business method and related software patents have much of a future. But the Supreme Court declined to stipulate that business method patents as a class aren't patentable, and it reversed a federal circuit court's ruling that methods and software must be tied to a machine or "transform a particular article into a different state" to be patentable. So the market is as murky as it ever was--which can't be all bad for a company like RPX.