SAN JOSE, Calif. – Patent specialist RPX Corp. is hoping its work resolving an infringement dispute between ON Semiconductor and three memory companies leads to a new business in cross-licensing deals. To date RPX has focused on infringement cases filed by so-called patent trolls, a problem it says is on the rise.
RPX estimates in 2010 so-called non-practicing entities (NPE) filed about 70 patent infringement suits against the top 20 semiconductor companies it tracks, up from about 60 in 2009 and less than 40 in 2008. NPE's filed about 98 suits last year against top consumer electronics companies, it said.
Overall, RPX believes NPEs filed more than 500 patent infringement cases in 2009 against more than 1,400 unique defendants and more than 550 cases in 2010 against more than 2,000 unique defendants. Currently, RPX courts the more than 240 companies that have been sued more than twice since the start of 2010.
NPEs, also called patent trolls, are companies that sell no products, gaining all their revenues from licensing patents they develop or acquire. RPX was formed in 2008 to help shield product companies from expensive patent litigation from such companies by buying patents and licensing them to clients.
RPX currently owns rights to about 1,600 patents and has 80 clients—up from 20 a year ago. They pay annual subscription fees of $60,000 to more than $5 million, depending on the size of their revenues.
"The trend is [the number of patent infringement cases from NPEs] continues to go up, and the number of defendants per case is going up," said Paul Reidy, senior vice president of memberships for RPX.
About 70 patent suits were filed against chip makers last year, RPX says.
Over the past two years, U.S. appeals courts have handed down a number of decisions aimed at limiting the growth of spurious patent infringement cases and large jury settlements. So far those decisions have not impacted growth in filed cases, Reidy said.
"It’s a long, slow process working these changes through the courts," he said. "Every time there is what people think will be a seminal change in the law, the law of unintended consequences kicks in and things don’t change that much," he added.
Meanwhile, RPX hopes to find new business resolving conflicts over cross-licensing deals such as the ON Semiconductor case.
ON sued four companies, including RPX clients Hynix, Elpida and Nanya for infringing DRAM and flash memory patents from its parent company, Motorola. Hynix and Elpida filed countersuits.
"Like a lot of companies in the semiconductor industry, ON was asserting patents in a product area in which it was no longer participating, trying to monetize its patent portfolio," said Reidy.
In a series of on-on-one talks with all the companies, RPX negotiated a deal at the end of 2010 to buy sub-licensing rights to the ON patents for an undisclosed sum. The deal helped ON recoup some money for its patents, and all sides cut their legal bills.
"ON saw the power of what we were doing and decided to become [an RPX client]," Reidy said. "Now when companies are interested in entering cross licenses, we hope to be a in a position to help put fair value on a patent portfolio," he added.
RPX competes with at least two other companies. Intellectual Ventures started the trend of protecting product companies against NPE suits, but according to reports grew to become a threat to some of its member companies. Allied Securities Trust buys patents for its members on a not-for-profit basis. Some companies have become clients of more than one of the three companies.
In January, RPX filed documents to go public. According to those documents RPX had revenues of $28 million in 2009, its first full year of business, and in the first nine months of 2010 it recorded revenues of $65 million and profits of $10 million.
More than 25 patent suits were filed against Intel in the last three years, says RPX