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Lawsuits filed by non-practicing entities (NPEs), or patent trolls, have become increasingly problematic for businesses that actually invent things or use patented technology (operating companies). In fact, the number of operating companies named in lawsuits involving NPEs in US courts has more than tripled between 2008 and 2012, even after adjusting for a recent one-time surge in filings caused by a change in US patent law.
But while NPEs continue to grow and pursue their claims more aggressively, a new type of company is emerging to challenge them and defend operating companies. For example, take Unified Patents, Inc., a new San Francisco startup aiming to recruit operating companies that wish to engage in a collective effort to deter NPE lawsuits. Unified Patents has already recruited some big names, including Google and data storage hardware maker NetApp, but its business model seems to involve recruiting companies of all sizes to take part in the collective defensive effort, particularly because smaller companies have found themselves targeted by NPEs more frequently than larger ones. Professor Colleen Chien of Santa Clara University Law School estimates that 55% of the defendants in NPE suits are smaller companies, with $10 million or less in revenue.
Other companies, such as RPX Corp. and Allied Security Trust, have been formed recently to help operating businesses deal with NPEs, but their strategy has focused primarily on buying up patents to prevent NPEs from getting them. Unified Patents, on the other hand, has a strategy that is much more far-reaching. While it does intend to buy up some patents, it also plans to use collective action and the information gathered by its member companies to get a head start in fighting NPEs–e.g., by alerting other companies when one member receives a threat from an NPE, or petitioning the USPTO earlier and more aggressively to review NPEs’ patents for validity. Unified Patents also recognizes the difficult situation that many smaller companies are in, and has said that it will charge them less for membership than larger companies, which may help it bring more members on board and lead to stronger collective action efforts.
It is certainly an interesting business proposition, and it is interesting to see how NPEs have paved the way for a new type of company, but will it work?
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