Swimming in a Patent Suit Tsunami

We need some fresh ideas for reforming the patent system — or at least a forum to share experiences of what’s not working.

Patent suits are on the rise, especially from so-called non-practicing entities, companies that acquire and license patents but have no other products. Last year, NPEs filed 3,054 patent infringement cases against 4,351 defendants, 80 percent more than the number of defendants in 2008. The suits involved nearly 2,500 mostly small and medium-sized companies, according to a report from RPX, a provider of risk management services for such cases.

The New York Times highlights the RPX report in an in-depth profile of Erich Spangenberg, head of IPNav, one of the most active NPEs. His company sued 1,638 companies in the last five years, earning Spangenberg about $25 million a year in his personal compensation in addition to what his clients and their legal representatives received.

As the excellent NYT profile notes, The IPNav strategy is similar to that of many NPEs. It acquires patents, determines who it thinks infringe them, then threatens expensive and time-consuming law suits if companies refuse to buy a license, typically for an amount below the $1 to $5 million it would cost to defend itself in court.

The implications of this legal mess are showing up everywhere. An organizer of Hot Chips, one of the most prestigious microprocessor conferences, told me recently it is very hard to get any of the ARM SoC vendors successful in smartphones and tablets to present because they fear any disclosures will open them up to more suits.

I have written about companies such as RPXOcean Tomo, and Allied Security Trust that are trying in various ways to create patent markets as a way to avoid litigation. But their efforts do not seem to be stemming the rising tide of suits.

Recent efforts to overhaul patent law are apparently having an effect on this situation. The NYT article notes that Germany has a specialized patent court, which streamlines the process of patent litigation.

So, what do we do? Clearly, the patent system serves an important function: protecting the intellectual property of inventors. But it also operates in a way that lets some actors reap millions with chilling effects.

I’d love to hear some fresh thinking on a way forward. I know there’s no silver bullet, but I invite you to at least chime in with your experiences with NPEs so we can clearly see the current dimensions of the problem.




Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s