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Defensive Aggregators

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Using defensive aggregators as an NPE defense strategy. Here is our brief primer on using defensive aggregators and how it could stop patent trolls.

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Defensive Aggregators

  1. 1. Business Sense • IP MattersBusiness Sense • IP Matters Attorney-Client Privileged & Confidential 1 Defensive Aggregators Kent Richardson September 24, 2016 CIP Contact Information: +1 (650) 967-6555 info@richardsonoliver.com
  2. 2. Business Sense • IP Matters Evolution of Patents as a Business Asset Acts as the Catalyst for an NPE Armageddon NPE Business Model Rise of the professional Intellectual Asset Manager •30 years ago, almost exclusively lawyers •Now •IAM Magazine & IPBC •Undergraduate and graduate programs in intellectual asset management •Investment banking, funding for IP monetization IP hits the boardroom •Market for patents starts •$16M sales of the Commerce One portfolio •Regular patent auctions from Ocean Tomo •Intellectual Ventures deploys billions to buy patents •> $612M payment from Blackberry to NTP •AOL/Microsoft/Facebook purchase $1.1B •MIPS patent sale ($350M) •Nortel Networks purchase ($4.5B) Computer and mobile hit by suits •Boom in smartphones •How many patents in an iPhone? •Web 2.0 growth outdoes dot.com growth Attorney-Client Privileged & Confidential 2
  3. 3. Business Sense • IP Matters Why These Business Models? – Rise of NPEs •A patent troll, Non-Practicing Entity (NPE) or Patent Assertion Entity (PAE), is a company that acquires patents to be used solely to assert the patents and obtain license fees •NPEs don’t use their patents to create products or build businesses making traditional negotiations difficult NPEs (and PAEs and Patent Trolls) •10K companies have been sued by an NPE •Patent suit explosion in high tech – 34% compounded annual growth rate (1) LOT Network •84% of all litigation in high technology – LOT Network •171 patent suits brought against Apple (2009-2013) – LOT Network •Academic papers and research – Mark Lemley •US President announces steps to fight patent trolls •John Oliver on Patent Trolls Acceleration of NPE patent assertion •IV aggregates > 50K patent assets purchases (over 70K) Intellectual Ventures (IV) funding reaches multiple billions Attorney-Client Privileged & Confidential 3
  4. 4. Business Sense • IP Matters NPE Litigation See Enormous Growth Attorney-Client Privileged & Confidential 4
  5. 5. Business Sense • IP Matters Defensive Aggregator Overview Attorney-Client Privileged & Confidential 5 • All use collective action to address patent risk • Most focus on NPEs • Primary focus is in high tech although broadening out Common backgrounds • Not for profit: AST, OIN, LOT Network • For profit: RPX (public), Unified (private) • No single model has addressed all the NPE risk Motivation Aggregator Found ed Type Summary Membership Cost AST ~2006Patent laundry Aggregated patent buying/licensing $$$ OIN 2005Focused license for Linux Buys/aggregates patents for Linux developers Free RPX 2008Aggregated NPE patent licenses Buys licenses from NPE for members $-$$$$ Unified Patents 2013Technology zone defender Attacks NPE patents in specific technology zones Free-$$$ LOT 2014Licenses to patents sold to NPEs Corporations agree that all their patents are licensed if they ever fall into NPE hands $ IP3 2016Patent laundry Modeled after Google patent buying program. Run by AST $$
  6. 6. Business Sense • IP Matters Impact of Convergence – Increased NPE Threat Convergence implies greater integration of technologies, meaning greater and broader use of ingredient technologies NPEs favor patents where multiple targets exist, each target is a relatively low value, but the NPE profits where there are many Convergence feeds the NPE business model Attorney-Client Privileged & Confidential 6 • Product and underlying technology are tightly coupled • Concentration of technology in a limited number of companies • Limited number of end users • Limited number of impacted industries Before convergence • Underlying technology becomes ingredient technology in broad groups of unrelated products • Broad adoption of technology in a large number of companies • 10X-100X more end users • Any industry not effected? After convergence
  7. 7. Business Sense • IP Matters Combination of Solutions? Yes Define the risk problem Assign value to the problem •How much does the patent risk cost you? •5 year projection Assign value to the solution •Qualitative and quantitative analysis •Consider negatives of participation Join as appropriate Attorney-Client Privileged & Confidential 7
  8. 8. Business Sense • IP Matters Overlap by Solution Type • OIN/LOT Overlap in licenses • AST • IP3 • RPX Overlap in defensive aggregation • RPX • Unified Overlap in NPE resolution Attorney-Client Privileged & Confidential 8
  9. 9. Business Sense • IP Matters Example Scenarios •50K employees. Offers variety of traditional industrial and ICT •Solutions •RPX – remove current NPE suits •OIN – cover Linux based cloud services •Unified – reduce specific areas of risk •AST/IP3 – supplement your defensive buying/alternative to RPX •Annual costs •$2M to start •+ $5M in purchases Large multinational •50 people in ICT business •Solutions •OIN, Unified – yes because of specific area fit •RPX – unlikely •AST/IP3 – no •Annual costs •$0 SME Attorney-Client Privileged & Confidential 9
  10. 10. Business Sense • IP Matters Attorney-Client Privileged & Confidential 10 BUSINESS SENSE • IP MATTERS ROL Group has over 60 years of IP strategy and execution experience. We ask the business questions first. We blend in-house and large law firm experience to create clear steps for success. We guide companies through unique IP challenges—like buying and selling patents, developing licensing programs, defending against patent assertions, and creating a value-driven IP portfolio. We give direction to businesses that share our passion for new ideas, creative problem solving and forward motion. Contact Information: +1 (650) 967-6555 info@richardsonoliver.com
  11. 11. Business Sense • IP Matters AST – The Original Patent Laundry • Founded: 2008 • Group patent buying (and licensing) for defensive patent acquisitions History • Members can buy individually or collectively buy patents • Members do not have to participate in any purchases • Members get access to patent market data • Varying degrees of membership allows for different rights • Purchase money is over and above membership price Membership • Patents are on the market and may be bought by an NPE or another company • Defensive patent buying (buying the license for the member), reduces the cost of the license • Also possible to buy patents for offense (difficulties of anonymous action) Best uses Attorney-Client Privileged & Confidential 11
  12. 12. Business Sense • IP Matters Open Invention Network – Patent Risk Reduction for Linux Members • Recognition that Linux community is at risk of patents • Linux is based upon an open source (free) copyright license • Concerns that Microsoft, others will disrupt Linux community • Not for profit History • Members agree to license all the other members for Linux • Free Membership • Linux developers and users (large deployments of Linux) Best uses Attorney-Client Privileged & Confidential 12
  13. 13. Business Sense • IP Matters RPX – NPE Patent Litigation Risk Reduction • Founded 2008 • Goal to collectively settle/buy patents in NPE hands, or likely to be in NPE hands History • License to all patents bought/licensed by RPX Membership • NPE patent litigation resolution, or near litigation • High tech focused Best uses Attorney-Client Privileged & Confidential 13
  14. 14. Business Sense • IP Matters Unified Patents – Attacking NPE Patents in Specific Technology Zones • No payments to NPEs • Attack NPE patents in focused technology deters NPEs from entering the zone • Lower cost model • Challenges patents in the USPTO (IPRs and CBMs), also obtains zero dollar licenses History – founded as an alternative to RPX • Pay per zone and based on revenue Membership • Reliance on specific technologies protected by Unified • Cannot direct which patents to attack Best uses Attorney-Client Privileged & Confidential 14
  15. 15. Business Sense • IP Matters License On Transfer – Preventing Corporate Assets from Entering NPE Hands • Recognition that NPE patents mostly come from large (failing) corporations • Members grant other members licenses to patents that are sold to NPEs History • License to any patents sold by any other member to any NPEs, ever Membership • Long term strategic risk reduction from NPEs, where other companies are failing in your industry (expected to fail) Best uses Attorney-Client Privileged & Confidential 15
  16. 16. Business Sense • IP Matters Why LOT? Attorney-Client Privileged & Confidential 16
  17. 17. Business Sense • IP Matters IP3 – Group Accelerated Patent Buying/Licensing • Google experiment in 2015 • Buy ICT related patents – obtain licenses cheap • Buy patents quickly. Use computers to prioritize purchases, promise quick closes History • License to all of the patents purchased. Some influence on the purchase categories (more money means more influence) • Fixed fee: $75K-$500K Membership • Adjunct to other buying program, defensive acquisition Best uses Attorney-Client Privileged & Confidential 17

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