RPX claims to be a friend to operating companies, but in reality their interests are more closely aligned with patent lawyers, capitalizing on the consequent confusion, expense and delays of the patent litigation system. Although they may provide liquidity, on balance RPX’s existence may also be detrimental to patent owners, but that’s a separate matter. For its part, the patent aggregator has been effective at convincing investors that it provides operating companies a valuable service. But are investors seeing the light, or merely being
bribed convinced in a monetary fashion? A $1.6 MM payout from RPX to one VC raises questions, but more on that below.
I’ve been asked more than once why I “hate” RPX. For the record, I have no problem whatsoever with RPX’s actual business practices. I’d be a hypocrite if I did because I’ve spent the majority of my career helping patent owners commercialize inventions through licensing programs. The fact that RPX has figured out a way to do that on a subscription basis through aggregation of patents, or in many cases merely the acquisition of certain rights, shouldn’t (and doesn’t) bother me one bit.
So why have I been so critical of RPX? Quite simply, because they have chosen a marketing strategy that aligns themselves with companies that prefer to efficiently infringe patents rather than negotiate a fair deal. If the reluctance to negotiate was intended to discourage invention and assertion of patent rights, it has utterly failed. Instead, patent owners partnered with financial muscle having the means to mount a fair fight with large businesses. Unfortunately, the muscle, more skilled in the arts of persuasion and leverage than public relations, are losing the PR battle to established companies that fund entire departments dedicated to encouraging the media to portray the companies in a favorable light. Consequently, patent owners are given the black hat and seen as a stumbling block attempting to prevent consumers from acquiring the products and services they so desperately crave. (Don’t believe me? Read any mainstream media coverage of a patent complaint and see how they always point out that the patent owner asks for “an injunction prohibiting the sale of Company X’s popular product,” as if that request has any real meaning.)
Infringing companies have turned patent licensing into an “us vs them” battle, and RPX has cast their lot in with “them.” Some of the statements RPX makes on its own website about patent owners include references to “the significant negative impact NPE litigation has on operating companies,” and the unsupported claim that “NPE litigation is a large, growing, and costly problem.” RPX even blames patent owners for companies’ own inability to effectively keep their own lawyers in check, claiming that it is the “NPE business model [that] creates inevitable cost inefficiencies for operating companies.” It’s actually far more accurate to say that ineffective use of legal services is far more to blame for the cost inefficiencies than the patent owners themselves.
Nevertheless, RPX has effectively used its PR campaign to convince operating companies that their mutual interests are aligned, despite all of the obvious evidence to the contrary. For example, consider Giuseppe Zocco, partner and co-founder of the venture capital firm Index Ventures. Back in 2009, Zocco praised RPX’s business model, saying “RPX has created a great white-hat business by providing a very compelling solution to a well recognized and growing problem faced by many companies worldwide.” Zocco is undoubtedly still likely to propagate the firm’s PR tripe, at least for the next three years while he’s on RPX’s payroll to the tune of $1.6 MM over the next 36 months (60,000 shares, valued at $27.45, 1/36th of which become exercisable each month).
Meanwhile, Zocco’s other investments include numerous technology companies. Among them is Conexant Systems, which in recent years dealt with infringement allegations from patent owners like Commonwealth Research Group, Atwater Partners, Wi-Lan, and Qualcomm. How would Conexant compare its past experiences with multiple patent owners to Kaspersky Labs’ own experience dealing with RPX’s “white-hat” business. (For background on the Kasperksy story, see the previous article: Patent Aggregator RPX Accused Of Extortion, Racketeering & Wire Fraud, painting a stark contrast to RPX’s claim of acting as a “neutral and independent market participant.”)
Index Ventures describes itself as “true partners” with the companies it invests in. Given the animosity that currently exists between patent owners and start-ups, I wonder how these “partners” feel knowing that their partner Zocco is collecting a seven-figure pay-day from RPX.