Defensive Patent Aggregation - Rationale

Rationale

In the United States, the cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $4 million or more for a complete defense, even if successful. And, when non-litigation licensing and settlements are factored in, the actual costs of fighting patent lawsuits is much higher. Because the costs and risks are high, defendants may settle even non-meritorious suits they consider frivolous for several hundred thousand dollars. The uncertainty and unpredictability of the outcome of jury trials also encourages settlement.

In the first 10 months of 2008, more than 2,300 patent lawsuits were filed the United States. The majority of these cases are filed by the companies that created the patented invention. But a growing share of the lawsuits is coming from non-practicing entities (NPEs) – also called patent trolls – which acquire patents for the sole purpose of licensing and asserting their patent rights. In fact, NPE litigation grew from 2.6 percent of filed cases in 2000 to 16.6 percent of filed cases in 2007. And unlike product companies, known as operating companies in the IP commerce world, NPEs are not susceptible to counter-assertion by their licensing targets because they do not make or sell any products or services.

The NPE offense includes single inventor assertion firms, patent licensing and enforcement companies, litigation financiers and investors, and patent aggregators, both institutional and strategic. However, NPE offense is ultimately concentrated on asserting patents to the detriment of operating companies. NPE defense methods include defensive patent aggregation from companies including RPX Corporation, cooperative purchasing efforts, such as defensive patent pools and buying consortia, from companies including Allied Security Trust, outright purchasing of patents, settlement and litigation.