Rise of the Trolls: An Innovation Story

Rise of the Trolls: An Innovation Story Antigone Peyton CEO & Founder Cloudigy Law An Intellectual Property & Technology Law Firm #DCTrolls #DCWeek

Here’s How It Began . . . It’s an old story Figure out a system, then ﬁgure out how to game it

• Patent rights are not contingent on using an invention You create something new You ﬁle with the USPTO You disclose your invention You get your patent

Patent Rights• Right to exclude others• Violation=infringement • Using • Making • Selling • Offering to sell • Importing

Now, the game It’s the 1990s . . .And the patent litigation business was born.

Patent Litigation Model• Business=make more $$ off IP• Purchase patents for little $• Don’t make products or commercialize technology• Lack R&D function

Patent Litigation Model• File lawsuits & send infringement letters• Sue many companies at once• Several ﬁrms make their reputation on these suits• Seek early settlements for $$$• Contingent fee or low effort before trial

Sometimes it feels like . . .

And the Moniker Was BornNon-Practicing Entities (NPEs)

Non-Practicing Entities (NPEs)

A Case Study

In the Beginning . . .• Nathan Myrvold - • Investors included former Microsoft Microsoft, Apple, exec Nokia, eBay, Google• Approached Silicon Valley’s large tech companies• Buy patents and create a pool to keep them away from trolls

The Metamorphosis• Intellectual Ventures • Other companies did not sue directly would sue or send licensing letters• Set up shell companies to place IP • Over 1,300 companies assets traced to IV• Sold patents to other companies

The Metamorphosis• IV now suing directly • Sued Motorola Mobility for infringement of 6• Used more than $1.5B patents of $5B investor capital • Google acquiring• Over 35,000 IP assets company• Over $2B in licensing • Google also an early revenue investor in IV

The NPE Game Plan• A small town in TX • Has over 2,000 pending (Eastern District of TX) patent cases• Known to be Plaintiff • No real TX business friendly activity required

The NPE Game Plan• License or sue• Defense litigation costs approx. $2-5M• Get settlement• Give patent license

The NPE Game Plan• Monetizing IP• More than a nuisance fee• Leverage risk of litigation loss• Gag on settlement term disclosure

JPEG Patent Attacks• Forgent Networks & Global Patent Holdings patents• Forgent collected over $100 million in licensing fees before patent was invalidated• Licensed to 30 companies & sued 31 more

High-Proﬁle Win• Research in Motion gave over $612M to NTP (a patent holding company) to keep its Blackberries on

What’s the Problem?• Fees extracted out of • Dragging down line w/perceived IP companies w/lawsuits value • Cost passed on to• Not making or selling consumers inventions• Not bringing products to market

Protection Issues• Defensive patent suit involving company’s own patents ineffective• Not trackable like competitors• Antitrust & patent misuse charges don’t work • No market power • Suing isn’t patent misuse

Minimizing Risk• Design around costs • Fight clumping of reduce value of parties with different potential license products• Patent watch and • New patent laws don’t clearances allow one suit against multiple parties that• Oppositions in Europe “infringe” a patent and other countries & reexaminations at USPTO• Centralizing invalidity research & analysis

Minimizing Risk• Litigating for • Patent aggregation everyone behaviors and agreements• Collaboration among defendants• Early settlement• Patent infringement insurance

Defensive Buying• Allied Security Trust • RPX Corporation • 11 high-tech • Defensive Patent companies that Aggregation identify & purchase program pulls key tech patents patents off the open market

Defensive Buying?• Nortel Patent Auction-6K patents• $4.5B defense arsenal purchase• Nortel 6-Ericsson, EMC, Sony, RIM, Apple, Microsoft• $750,000/patent

Closing Thoughts• IP monetization • Behaviors drive use business is here to of pejorative term stay “troll”• Innovative $$ strategy• Well-known “patent trolls” are similar to patent pools or consortiums

Antigone Peyton CEO & Founder, Cloudigy Law (703) 436-2033 antigone.peyton@cloudigylaw.comTwitter: @antigonepeyton @cloudigylawFacebook: http://www.facebook.com/CloudigyLawLinkedIn: http://www.linkedin.com/in/antigonepeytonCloudigy Blog: http://cloudigylaw.com/news/

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Rise of the Trolls: An Innovation Story

by Antigone Peyton

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