Is RPX an NPE?

Ask 12 people to describe a non-practicing entity and you are likely to get a dozen different definitions, ranging from the dismissively pejorative (“patent troll”) to the unabashedly admiring (“defender of intellectual property rights”).  Most observers have a firmly held opinion or an axe to grind, but from a neutral perspective, here’s a broad-based, fairly straightforward definition:
 
A company that acquires patents or patent rights and that generates revenue by monetizing those patents without manufacturing or using the patented invention(s). 
 
This is a definition that certainly describes Acacia Research, Guardian Media, Intellectual Ventures, and dozens of smaller-but-similar companies.  As it happens, it’s a definition that also describes RPX.  We buy patents, and as part of our revenue generating service, we grant licenses to those patents. 
 
If the definition is broadened a bit, however, RPX may not fit quite as readily into the NPE category.  The key consideration is how each of the companies in question extracts economic value from the patents they own.  When most people use the term “NPE”, they are referring to entities that monetize their assets through the legal system by suing or threatening litigation.  RPX also generates value from owned patents, but rather than directly monetizing our assets, we earn an annual fee for providing services to our clients.  Our primary service is identifying and removing the legal threats represented by patents for sale on the open market.  We also provide corollary client services such as IP market intelligence and strategic counsel.  This alone differentiates RPX.  If the definition of an NPE further specifies that revenue is generated by enforcing patent rights through litigation activity, then RPX is definitely not an NPE. 
 
These are, of course, fundamental distinctions.  RPX offers a market-based solution to avoiding patent risk, rather than a litigation-based approach. Our approach reflects the understanding by operating companies of a new and central truth: patents are in and of themselves economic assets.  The days of patents existing solely to legitimize a business activity are over.  Operating companies will continue to develop, buy, and sell legal patent rights to achieve exclusivity for selling products and services.  But a parallel commercial environment focused entirely on buying, selling, and licensing patents is growing larger every day.  We believe it is only a matter of time before this market – transparent, orderly, and grounded in commercial transactions, rather than legal disputes – will evolve and surpass today’s litigation-based valuation model.  When it happens, the definition of an NPE will be much broader and their activities, we believe, will be much less contentious.  More on that in a future post.

Tags: Monetizing Patent Assets, Non-practicing Entities, NPE, Patent Market, Patent Valuation, Selling Patents

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