We are not an NPE
RPX is like an NPE in one way only: we buy high-value patents in the open market. The similarity ends there. Unlike an NPE, we never assert of any of the patents in our growing portfolio. We do not opportunistically license our patents (every member of the RPX client network generally receives a license to every patent we own immediately upon joining). And we never offensively assert or litigate the patents we own.
RPX provides a purely defensive service. Our goal is to acquire and clear high-risk patents so that NPEs cannot assert them against our clients. It is a strategy – and operating philosophy – that is the polar opposite from the NPE model.
We are a unique solution to NPE risk
Companies have few viable ways to reduce NPE risk, and none are as effective as RPX's defensive patent acquisition model.
Fighting each assertion can cost tens of millions of dollars each year, (even for a company with only a moderate NPE problem) and independently buying up dangerous patents is also extremely expensive (and a dubious use of capital, since it provides de facto protection to other companies that paid nothing). Patent-buying consortiums are rarely successful because peer companies – unsurprisingly – are reluctant to share key information about technology exposure and financial risk. Collaborative efforts are also hampered by an inability to act quickly on open market opportunities.
RPX overcomes these drawbacks. We are the only solution that combines the capital strength of multiple participants with the expertise of proven patent professionals. And only RPX is 100% focused on patent defense – our goal is to remove patents from circulation before they can become a costly problem for our clients. At the same time, RPX is also uniquely able to help clients even after a litigation has begun by negotiating early dismissals.
Only RPX can share the cost of reducing NPE litigation across a large network of members. Only RPX has the scale, independence and trusted position in the market to efficiently and consistently acquire high-threat patent portfolios. And only RPX can deliver – to companies of any size and with an NPE problem of any severity – significant, quantifiable and cost-effective reduction of patent risk year after year.
We deliver measurable risk reduction
RPX directly reduces patent risk in two primary ways: by acquiring high-risk patents in the open market (before NPEs can buy them) and by acquiring patent rights out of litigations (to gain early – and low-cost – dismissals for our clients). These two activities have reduced the incidence of NPE litigation for our membership by approximately 40%.
This measurable risk reduction is based on the total threat our clients have faced since our founding in 2008. Since then, RPX clients have been named in nearly 2,947 NPE litigations, and we estimate – by analyzing the patents we bought in the open market and knowing how NPEs would have asserted those assets – that without RPX acquisition efforts, our clients would have been named in at least 1,329 more lawsuits. So the total threat to RPX members since 2008 has been 4,276 litigations.
Of this total, we have directly removed 1,666 threats, the 1,329 suits represented by our open market acquisitions and 337 litigation dismissals we achieved. This translates to a roughly 40% reduction in risk – and as RPX acquisition efforts expand and we play a steadily larger role in the open market, we expect our ability to reduce risk for our clients to continue to grow.
We can quantify your patent risk in financial terms
RPX has compiled an extraordinarily broad and deep database on NPE patent litigation and its costs, including frequency of assertion, length of suits, behavior of specific plaintiffs, industry sector trends, and more. The sources of this data are exclusive to RPX. We administered an in-depth study commissioned by the General Accounting Office to provide Congress with accurate data on the economic impact of NPE litigation. Coupling the aggregated and anonymized responses from more than 100 participating companies with information we have acquired from many of our 160 clients, RPX has built a unique – and uniquely comprehensive – actuarial picture of NPE litigation dynamics and costs.
Using this data, we are able to calculate with a high degree of accuracy how frequently a particular company will be the target of assertions in the future and how severe a financial burden those suits could represent. Before RPX began compiling accurate and detailed data on NPE behavior and the true costs of litigation, operating companies were making critical and costly decisions in the dark. We have entirely transformed the status quo, and RPX clients are now able to make financially rational and strategically sound responses to the specific NPE threat they face.
We provide compelling ROI
RPX’s interests are 100% aligned with those of our clients. Our primary goal is to reduce the risks and costs associated with NPE litigation for every member of our network. In plain financial terms, we work to ensure that each RPX client avoids more in legal costs and settlements each year than they pay RPX in subscription fees.
As our strong client renewal rate above 90% reflects, we have been very successful delivering this degree of avoided NPE costs. We quantify these cost-savings into a specific ROI that is a collaborative calculation between the RPX Client Relations team and each client. Together we review every patent RPX has acquired that is relevant to the client and determine a specific “avoided cost” for each. We then apply the cumulative avoided cost for each client against their annual fee to calculate the ROI we have delivered for the year.
We price our service cost-effectively
The RPX rate card is designed to be highly cost-effective, providing clients with a reduction in NPE-related costs that markedly exceeds the annual fee (and for many clients this is often less than the cost of fighting a single litigation). Subscription fees are calculated based on the client’s annual financial results (the calculation varies, but roughly approximates operating income). The rate card begins at $75,000 for smaller companies, and because larger companies have historically faced a higher incidence of NPE litigation, our fee structure ensures that as companies grow, their investment in reducing NPE litigation increases accordingly. Importantly, a client’s rate card is established when the client initially joins RPX.
The cost-effectiveness of our rate card is the direct result of the growth of the RPX network. As we have expanded our membership, we have increased our capital base, allowing us to acquire more – and more relevant – patent assets, while also spreading the incremental cost of those acquisitions across a broader base. As a result, we are helping more of our clients avoid more litigation, but with only modest increases in our fee structure.
We provide valuable market intelligence
The patent market is complex, rapidly-evolving, and frustratingly opaque for most participants. RPX gives its clients a uniquely clear and comprehensive view of this challenging ecosystem. Our central role in the market allows us to do so. RPX is one of the largest acquirers of patent assets, and we interact regularly with all major buyers and sellers. We also have the most experienced team in the industry with years of experience in IP transactions. Our patent expertise is unsurpassed, and we share it freely with every member of our network.
Clients can access our data repository through the RPX Client Portal, a dedicated online resource with easy-to-use analytical tools that simplify searches and customize research, including profiles of specific NPEs, overviews on the ownership and litigation history of individual patents or portfolios, other data, and much more.
Importantly, we also help our clients maximize the value of this growing database. We treat each client engagement as an individual (and confidential) strategic relationship, and every RPX client works with a dedicated Client Relations team that provides regular intelligence, insights, and analysis of both general and client-specific trends in the patent market. In a very real sense, this team is an extension of the client’s IP department, and we are always available to provide advisory services that can translate RPX’s unique market data into actionable market intelligence.
We prevent patent litigation
RPX was formed because NPE patent litigation is extraordinarily inefficient and wasteful for operating companies. The best way to eliminate this inefficiency is to eliminate its cause: dangerous patents. RPX’s open market acquisition efforts proactively remove patents from circulation. We identify and acquire patents before they can be bought by NPEs. By doing so we prevent litigation – and the associated legal defense costs, internal expenses and settlements – that would otherwise have occurred.
Historical data shows that a majority of patents asserted by NPEs against operating companies were acquired in the open market an average of 8-9 months before the first litigation is filed. Clearly NPEs use the open market to fuel their business model. RPX’s Defensive Patent Acquisition can stop the problem before it starts.
We can help after a litigation has begun
RPX is uniquely able to help members of our client network quickly and cost-effectively extricate themselves from NPE lawsuits. Our central, trusted position in the market enables us to negotiate with plaintiffs, acquire a license to the litigated patent and selectively clear our clients from the suit. Through September 30, 2013, we had achieved more than 414 dismissals for our clients in 62 litigations.
Our intervention is beneficial for both the plaintiff and the defendants. For NPE plaintiffs, we have the capital resources to offer a more compelling price than any single company will usually be willing to offer. We are also able to negotiate more dispassionately and effectively than a defendant in suit. For our clients, we act as a trusted representative to find a workable resolution and are able to achieve a far more cost-effective price for dismissal than any operating company can achieve unilaterally.
We have a growing network of 160 satisfied clients
The RPX client network is the largest and most successful collaborative effort to reduce the cost and risk of NPE litigation. In less than five years, the network has grown to 160 companies, ranging from early-stage firms to Fortune 100 industry leaders.
As the network has steadily expanded, we have established strong representation in a wide array of sectors, both in core technology areas (E-commerce, mobile communications, networking, semiconductors, software, etc.) and increasingly in less traditional technology markets, such as financial services and automotive, where NPE litigation is on the rise.
The strength of our network is also reflected in a contract renewal rate above 90%, illustrating the viability and durability of RPX’s patent risk solutions and our clients’ belief in our ability to help them significantly reduce the cost of NPE litigation.
We have solutions for large and small companies
A company’s patent risk increases as the company grows. Higher revenue and profitability translate into higher visibility and NPE attention. For these companies that have an established NPE problem, RPX’s core defensive patent acquisition service is a proven and cost-effective way to reduce risk.
For smaller companies, RPX offers an insurance product that combines a base level of our core subscription service with an innovative insurance policy to cover legal and settlement costs. The product is ideal for companies that are in the early stages of dealing with NPE litigation (and history shows that once a company is targeted by NPEs, the incidence of litigation only increases and rarely diminishes) and provides a cost-effective way to mitigate a potentially damaging litigation, while also benefiting from the longer-term benefits that defensive patent acquisition confers on all members of the RPX client network.
We are making the patent market more rational
RPX’s defensive patent acquisition service is only the first step toward creating a truly efficient and rational patent market. Today, the exchange of value between patent owner and patent user occurs largely through the legal system, possibly the least efficient way to conduct a financial transaction.
Our goal is to move patent transactions out of the courts and into a true market ecosystem – with multiple participants, price transparency, and valuations based on competitive bidding rather than legal deliberation. The RPX model is designed to establish and strengthen these open, market-based conditions on a large scale. The company is independent, our portfolio is managed solely by RPX, and all transactions are conducted at arms length. Every client receives a license to every asset we acquire, but each acquisition decision reflects the needs and benefits of the network as a whole.
This operating autonomy and broad perspective are clear differentiators for RPX, and have allowed us to build a neutral and flexible platform for multi-party transfers of patent value. As our network continues to grow, RPX should eventually come to represent a leading share of the patent market in terms of participating client companies, total dollar volume and number of transactions. As it does, we believe our platform can become the de facto central clearinghouse to efficiently execute sales, cross licenses, and other market transactions for all owners and users of intellectual property.