I don’t usually pick up Fortune magazine because my nightstand is already covered in InStyle and Vogue and Elle on account of I’m a fashion icon
in my dreams. But I was tipped off (thank you!!) about the recent issue with this article about RPX. You and I both know that I can’t not get involved in this kind of thing, right?
Read it I did and boy oh boy oh boy, were there some nuggets in there! To wit:
1. John Amster plays guitar? I did not see that coming.
2. People (besides me) have hated Intellectual Ventures from the very beginning. Commerce One’s bankruptcy, as the article explains, was the catalyst for the secondary patent market in that their GC Paul Warenski said “Hey, let’s not just sell our assets as one package, lets split off the IP and sell it separately.” Kind of a Gordon Gecko-ish move, but I mean that in a nice way because Paul was a visionary kind of asset splitter-upper, not the nasty kind.
From the get go, it seems that the most important outcome of the auction was not that the patents fetch a high price, but that the winner had better not be IV. That’s interesting, since purportedly, they were the early RPX: the mission was to find and buy up patents to keep them “out of the hands of hostile NPEs”.
I suspect their business model got in the way…acting as a hedge fund and being expected to fetch a high rate of return for investors meant that IV going freak nasty and litigating to get that return was a forgone conclusion. Nathan’s idea that all he had to do was “[price] his licensing demands correctly, [and] he would never need to sue anyone” was all well and good, but then the big players got more than a little sick and tired of the demand letter game and it all went to seed. They stopped responding or starting fighting and then as we all know, in late 2010 the chickens came home to roost and IV began filing lawsuits.
It’s just interesting to me that Myhrvold has been a nemesis for so many for so long.
3. Nathan Myhrvold was an original partner in ThinkFire. ThinkFire was headed by Dan McCurdy, of none other than Patent Freedom and Allied Security Trust fame. At the time of the Commerce One auction, in which ThinkFire and IV were bidders, Nathan was in cahoots with both IV and ThinkFire, which means he was bidding against himself. See? Evidently, even Nathan doesn’t like Nathan! Anyway, this was news to me, despite the quote in the article that it was “a spectacle the press gleefully highlighted.” You can be rest assured of my gleefulness as I now re-highlight this information.
4. The idea of idea theft is no longer relevant to John Amster, as evidenced by this quote from the article:
In Amster’s world, patent suits against tech companies no longer turn on quaint moral issues like, “Did Company X steal from Inventor Y” For the most part, they don’t even turn on legal issues like, Is patent Z valid, and if so, is it infringed by Company X’s product?
What counts today are probabilities, statistics, and most of all, transaction costs.
I guess then that RPX’s business model is less “if you subscribe, we’ll invest your funds in buying patents that the trolls will use against you” than it is “statistically speaking, our data that we collected and collated ourselves shows that you will be hit by a patent troll unless you pay us a yearly fee, after which point we will protect you from an unspecified number of those suits and save you an amount of money that we arrived at using our own data.”
5. RPX divests it’s portfolios to trolls from time to time. Which, I guess if you realize that they are “friends with them” and “take them to dinner”, it’d be like me selling my stroller to my newly pregnant friend after my kids are older. I mean, it’s not as if RPX thinks those patents aren’t troll-worthy or they wouldn’t have bought them in the first place. It looks like they’re buying patents off the open market to snag new clients by telling them “Look! We hath thwarted the Evil Empire and if you sign up, you shall not be subject to suit by this portfolio!” And when that usefulness has been outlived and they’ve gotten a few years’ worth of subscription fees, they sell them back out to the open market. And then use the fact that those patents are now once again at play to bring in more new clients. Cue merry-go-round.
For the first time in a long time, this was an article that didn’t just restate the by now obvious facts about what patent trolls are. And they didn’t touch lightly on the RPX business model either; I was kind of surprised at the tone they took and wondered if Amster’s camp was happy with the final print version of the article.
I think the original strategy of RPX, to get patents that the trolls could use off the market, was and is a good one. I’ve praised them as one of the market-based solutions to patent trolling, something that was started by people who had a desire to stop bad behavior. The only problem is that if they “solve” the troll problem, why does anyone need them?
Maybe that’s what they’re figuring out, and why the divestitures now (occasionally) involve re-selling back to trolls?
All I know is, whenever I read about RPX in the future, I’m going to picture a guy on a sofa with a vintage guitar.