NPEs have been acquiring patents and asserting infringement for more than a decade. Today, there are more than 900 active NPEs and as their numbers have grown so has the pool of operating companies being targeted for patent litigation. In 2008, 1,600 operating companies were embroiled in NPE lawsuits. By 2011, the number of defendants had grown more than two-fold to nearly 2,400. Many of these defendants are facing repeated assertions; some operating companies were named in more than 50 suits in 2012 alone.
The NPE model relies on a “divide and conquer” approach, in which the NPE can leverage a single patent asset it has prepared for assertion – including detailed technical knowledge of the claims, in-depth intelligence about the product and the markets in question, pertinent points of law and legal precedents, etc. – repeatedly against many defendants. Each operating company, however, mounts its own separate defense, using its own internal resources. And each company is in the dark as to how its co-defendants are approaching the case, leaving all defendants at a critical disadvantage to the NPE.
The costs of this go-it-alone approach are enormous. Even cases that settle quickly can last 3-6 months and cost $500,000 in fees to defense counsel. And many NPE cases extend for years and routinely cost upwards of $5 million to defend.
The NPE business model, then, is executed on an uneven playing field, where legal rather than market forces determine business success. RPX has leveled the field and pioneered a market-based solution to this growing problem.