Unified Patents hopes to be a "knight in shining armor" for small tech companies fighting off the trolls.

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?

Will Pickens

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7 Responses to Turning the Tables on Trolls

  1. Caitlin Angelette says:

    I’m not really sure that bad PR is going to affect NPEs. They’re already called trolls….

  2. Mike Silliman says:

    Really interesting post Will. I hope that measures like this and increased awareness (bad PR) will make NPEs think twice before they go after settlements from small businesses. While it isn’t a complete solution, I’m glad to see efforts like this getting started.

  3. Mike says:

    I hope these companies are truly altruistic and help those that face expensive lawsuits from patent trolls. The question is, as Niels pointed out, how much will being a part of this group help companies who can’t protect themselves? I worry that joining could simply become a new tax on small businesses and the owners of these new companies could simply be praying on the threat of patent trolls.

  4. Colton Cline says:

    Awesome Post. This is all really interesting as Rackspace just sued the “largest patent troll in the nation.” Seems like Rotable (the patent troll) offered to settle with companies Rackspace, Apple, Whole Foods, Netflix, Target, and EA, and this is probably going to result in those large companies being less likely to continue settling these types of things. Newegg actually did something similar last year. I think the big companies are getting fed up.

    • Will says:

      Yeah, sound likes it. The problem is that it doesn’t seem like there are the most likely targets at all. Hopefully companies like this one will let the big guys pass along some of this momentum to smaller companies.

  5. Niels says:

    Great post, Will. This sounds like an interesting, novel approach, and I’m curious to see how it plays out in the coming months and years. I’m not entirely convinced that “spreading the word” of NPE tactics and buying up member companies’ patents will stem the tide of patent trolling, but more emphasis on the reexam process could be helpful. Sounds like the PTO will be busy!

    • Will says:

      Hey Niels, thanks for your comment. I am also a little skeptical about how much sounding the alarm earlier will help. It seems that most potential troll targets know a suit could be coming at any time.