Acer is not alone: licensing negotiation groups draw ever more criticism from academics, practitioners, and patent holders

At the start of this year, Nokia v. Daimler was the most significant automotive standard-essential patent (SEP) dispute. Summer had barely started when that one settled out. Now that the year 2021 is drawing to a close, Acer v. Volkswagen is the most "inspiring" automotive patent spat, at least judging by the traffic my previous post gets (though Sisvel v. Ford is a not-exceedingly-distant second).

Acer's complaint mentions the proposal of licensing negotiation groups (LNGs) as a pillar of Volkswagen's alleged hold-out tactics vis-à-vis the Avanci pool. It is the latest criticism of the LNG idea. In recent weeks, there have been at least two webinars on the subject, and I'd like to share some observations on them here.

The European Commission's expert group report on SEPs tosses out the idea of LNGs as Proposal 75, but let's not forget that the entire expert group report is not a Commission communication, as the Commission itself clarified on more than one occasion. Also, a key participant (Ericsson's Monica Magnusson) distanced herself from the report by means of a published dissent. Still, when a facial absurdity--given that it's fundamentally at odds with existing cartel law--appears as a "proposal" in something that is not formally but almost an official EU document, I can see why some are concerned, and why webinars are held (or blog posts written, as in this case) to discuss the thing. It's like people are standing in front of an aquarium and staring at some big sharks inside: in a way you rely on being protected by the thick glass between you and the predators, yet there's this thought of what would happen if--against all odds, but you never know--the glass broke...

4IP Council held a webinar on LNGs last month, and a recording is still available. The two panelists were Dr. Igor Nikolic, who is a Research Fellow at the European University Institute, and doctoral student Haris Tsilikas. They looked at LNGs strictly from a competition law perspective, but taking into account an important difference between physical goods and patent rights: while physical goods are simply not delivered to someone unless an agreement on the terms has been reached, implementers are typically already using the patented techniques.

Dr. Nikolic clearly took the position that LNGs are not merely anticompetitive by effect (though he has no doubts about the effects being very significant) but by object, which I would informally call "by design." For example, one major concern Dr. Nikolic raised (and which I had not brought in prior blog posts on the subject) is that competitors must share sensitive information in order to discuss pricing, and when you have large parts of an industry--if not even an entire industry--sitting at the same table and establishing a maximum price (which is what that Proposal 75 suggests), you're simply getting what is called price-fixing.

What would happen if the maximum price an LNG deems reasonable is below the SEP holder's demand, but the SEP holder's position is actually FRAND? Probably a group boycott...

As Dr. Nikolic noted, there is a tension between reducing transaction costs and forming a group that has monopsony ("purchasing monopoly") power. This is a notable difference from SEP pools, which by definition aggregate complementary patents, while the members of an LNG would normally be competitors.

Mr. Tsilikas accurately noted that EU competition law only recognizes efficiency gains as desirable if they are achieved without reducing (let alone eliminating) competition. He also made a good point when he stated a simple truth: while there is some talk about how small and medium-sized enterprises might benefit from participating in LNGs, the political push for LNGs is clearly not coming from SMEs.

Last week, Lexology/IAM hosted an online panel discussion of LNGs entitled FRAND Licensing: The Curious Incident of the LNG Concept. The title indicates an understandable disbelief concerning how an idea that flies in the face of everything we know about competition law could make it into a document like that expert group report.

Fraunhofer's patent and licensing chief Stefan Geyersberger and Sisvel president Mattia Fogliacco looked at the subject from the angle of organizations that are concerned with keeping the licensing process efficient. As Mr. Geyersberger noted, Fraunhofer has for a long time been contributing patents to pools in order to speed up the adoption of new technologies. Sisvel is a pool operator, but also an acquirer of patents--and it's been around for ages.

Some implementers may disagree with Mr. Fogliacco's rosy picture of how the SEP licensing process works at the moment ("innovation is not stifled at all") or with his unsurprisingly positive view of the two Sisvel v. Haier decisions by the Federal Court of Justice of Germany. But he made a number of points that I agree with. For example, it is indeed against common sense that implementers would gather and determine a (maximum) price without the actual owners of the relevant technology sitting at the table.

The most enlightening part of the Lexology webinar was Mr. Fogliacco's discussion of the important ways in which Sisvel's 2018 license deal with multiple implementers via RPX differs from the proposal of automotive LNGs. Apparently, various RPX customers (or "members" as it's sort of a club) asked RPX to work out a deal in order to explore economies of scale, i.e., group discounts reflective of reduced transaction costs. RPX is not an LNG--companies become RPX customers (or "members") for other reasons. There was no intent by RPX and its members to determine the maximum royalty level before working out a license agreement.

In other words, Sisvel-RPX was a voluntary group purchase transaction, which some were invited to participate in--and the process was conducted in the shadow of existing competition law, while certain automotive industry players would like to achieve an exemption from cartel law in order to be allowed to form LNGs, which would then be above the law in some rather significant ways.

What might be acceptable in the case of a cooperation between a few IoT startups (simply in light of market share thresholds--15% in the EU, 20% in the U.S.) is not necessarily desirable when large automotive companies join forces. As the European Commission recognized in one of its communications, joint purchasing by companies with a high market share in the aggregate typically doesn't even result in any savings being passed on to consumers.

While Sisvel and Fraunhofer raised fundamental concerns regarding LNGs, Sullivan & Cromwell partner Garrard Beeney didn't want to rule out the possibility of there being a place for LNGs (and the prerequisite modification of competition rules) in some contexts, provided that several requirements would be met and that certain safeguards would be put in place. For example, it is key to Mr. Beeney that an LNG can't organize a group boycott. While IoT companies may like the fact that Mr. Beeney is not categorically opposed to LNGs, the criteria he laid out are clearly not going to be met by the automotive industry.

Looking at the opinions expressed by the speakers at those two webinars, there was a consensus that the kinds of LNGs the automotive industry has in mind cannot be reconciled with competition law as it stands, and that a departure from long-standing principles of cartel law is not warranted.

What's next? I guess LNGs will rear their ugly head again in the first half of 2022, in the form of proposals and debates in different jurisdictions, but in a year from now, the idea will probably be considered to have gone nowhere, as it creates more problems than it could ever solve.

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Apple-Ericsson spat shows some big-dollar licensing issues remain to be resolved in smartphone industry

Apple and Ericsson teamed up with others (Microsoft, Sony, BlackBerry, EMC) in 2011 to buy up Nortel's wireless patent portfolio. As expected after a November motion, the Rockstar v. Android dispute has come to an end. Patent aggregator RPX Corporation, which is closer to Google than to Apple and Ericsson, bought Rockstar's patents in December.

But Apple and Ericsson now have licensing issues to sort out between the two of them. They had a five-year patent license in place, and it has now expired, according to an Ericsson press release. Traditionally, 'tis the season for patent suits resulting from failure to agree on renewals. Many patent license deals have terms defined by calendar years, and in recent years there have always been filings of this kind in early January.

Apple has won the race to the courthouse with a declaratory judgment action (asking the court to find that some Ericsson LTE patents are neither essential nor infringed) it filed on Monday in the Northern District of California. Two days later, Ericsson brought this very interesting FRAND-declaration complaint in the Eastern District of Texas (this post continues below the document):

15-01-14 Ericsson Complaint Against Apple by Florian Mueller

In the past, FRAND rate determinations were requested by implementers of standards (Microsoft/Motorola, Apple/Motorola, Huawei-ZTE/InterDigital). This is the first such case, at least the first high-profile case, in which the patent holder goes to a court and requests this kind of ruling.

It may be tactics, but Ericsson does exude confidence in the defensibility of its royalty demands by triggering the FRAND rate determination process instead of waiting for Apple to do it at some stage of a patent infringement proceeding.

What's much clearer is that we're going to see a venue fight, and Apple filed first, which means Ericsson is going to need some really strong arguments to avoid formal or factual consolidation of its FRAND declaration suit with the California case. The venue could make quite a difference here. Not only are the Northern California judges less patentee-friendly in my observation than their colleagues in East Texas but Silicon Valley juries are particularly likely to buy Apple's innovation story. I'm not based there but, frankly, I also look at Ericsson as one of those companies, like Nokia, that were way too bureaucratic, technocratic, and unimaginative to deliver a mobile computer and useful mobile Internet device to consumers over all those years, so the world really needed the iPhone revolution for the sake of progress.

Despite the fact that consumers the world over have far more reasons to thank Apple than to thank Ericsson, I want to be rational and Ericsson's innovation story is a pretty good one, too. It can legitimately claim that it still spends billions of dollars every year on research and development (it no longer builds mobile handsets, but is still big in infrastructure), and in its complaint it lists the following accomplishments, most of which go back such a long time that the related patents have expired:

• "in 1878, Ericsson sold its first telephone;

• in 1977, Ericsson introduced the world's first digital telephone exchange;

• in 1981, Ericsson introduced its first mobile telephone system, NMT;

• in 1991, Ericsson launched 2G phones on the world's first 2G network;

• in 1994, Ericsson invented Bluetooth;

• in 2001, Ericsson made the world's first 3G call for Vodafone in the UK; and

• in 2009, Ericsson started the world's first 4G network and made the first 4G call."

Ericsson does deserve respect for all of that. Whether the license fees it wants Apple to pay are excessive may have to be determined in court. While a settlement between these companies is fairly likely to happen before a judicial decision, Ericsson, based on its behavior, may be the most demanding one of the major wireless patent holders and Apple has a lot at stake here financially just because of its huge revenues. So it really could be that pre-trial discovery and motion practice won't provide these parties with enough guidance, and one or more decisions may really be needed.

Paragraph 35 from Ericsson's complaint makes some general allegations about Apple's behavior and how it compares to that of its competitors:

"The parties' licensing negotiations have been unsuccessful because Apple refuses to pay a FRAND royalty corresponding to those paid by its competitors for Ericsson's Essential Patents. Apple fails to honor the fact that FRAND licensing is a two-way street, requiring not only that the licensor is fair and reasonable in providing licensing terms, but also that the licensee negotiates in good faith and accepts FRAND terms when they are offered."

Apple may be the most difficult company to sell a SEP license to, but it's a fact that Apple's competitors that have taken a license from Ericsson haven't always done so without a fight. Ericsson and Samsung settled only after failed renewal talks had resulted in litigation. Still, that deal helps Ericsson now. If any U.S. court (be it a judge or a jury; be it in California, Texas, Washington DC or elsewhere) determined that held that Apple should pay lower royalties (relative to volume) to Ericsson than Samsung, the protectionism question would inevitably come up. It would look like the United States allows Apple to get away with an unusual unwillingness to license SEPs.

Ericsson tends to enforce its patents pretty aggressively in different parts of the world. I've seen them demand rather high (though clearly sub-Motorola) royalties over WiFi patents in Germany, and India's antitrust regulator opened two investigations of Ericsson's demands in FRAND licensing negotiations. Also, a document I discovered about a year ago explains why Ericsson prefers to sue device makers rather than do license deals with chipset makers like Qualcomm.

Apple v. Ericsson is definitely a perfect match when it comes to FRAND licensing. Billions of dollars--probably many billions--are at stake. But it's just about money and not about a strategic conflict between direct competitors. By now it's clear that patent holders who thought to protect or gain market share through patent assertions have been unable to achieve such goals, let alone to wage "thermonuclear war," but there still are some financial issues left to be sorted out in the industry, such as Apple v. Ericsson, and some will have to be rediscussed from time to time as existing agreements expire.

Other industry players are interested in more or less zero-zero cross-license agreements, which is what I believe the Google-Verizon deal announced in December is about. Google has done various such deals, including with Cisco, Samsung, and LG. But that's the way Google and some other companies would like it to work. Ericsson is different. Patent licensing is increasingly important to its business.

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Android device makers must tread carefully when colluding to bring patent prices down

Last Tuesday an interesting order addressing the intersection of patent and antitrust laws came down in the Northern District of California in a case I didn't watch (hence the delay here). Judge Yvonne Gonzalez Rogers dismissed motions to dismiss that Samsung, Google's Motorola Mobility, HTC and patent aggregator RPX had brought against an (amended) antitrust lawsuit by "patent troll" Cascades Computer Innovation alleging anticompetitive cooperation between those defendants in licensing and purchasing negotiations involving U.S. Patent No. 7,065,750 on a "method and apparatus for preserving precise exceptions in binary translated code", which allegedly optimizes Google's Android mobile operating system.

The standard for a complaint to survive a motion to dismiss is not extremely high: there must be a legal theory, and the alleged facts must support it should they be true, which is a separate question. All well-pleaded allegations of material fact must be taken as true and construed in the light most favorable to the plaintiff, but they don't count if they're merely conclusory, unwarranted deductions of fact, or unreasonable inferences. So the hurdle is low, but there is a hurdle, and while I personally feel that the judge could and perhaps should have granted the motions to dismiss, the important lesson to learn from this is that companies colluding to bring patent prices and license fees down -- in this case, three leading Android device makers (which indirectly includes Google itself because it owns and controls Motorola) -- can be accused of and sued for antitrust violations.

Most antitrust cases addressed individual monopolies, the acquisition of monopoly power by illegal means, or alleged conspiracies for the purpose of inflating prices or keeping them artificially high by leveraging a collective monopoly. There is, however, also the notion of a monopsony: a monopoly on the buying side of a market (again, by one player or collectively by a group). Cascades alleges that the three leading Android device makers, all of them clients of patent pool firm RPX, conspired to monopsonize the market for Cascades' patent licenses at least with respect to the aforementioned '750 patent. Simply put, they told the patent holder that there would be a deal with all of them (through RPX) or none of them. At some point, LG Electronics (which allegedly has a 4% Android market share) and Philips (which is just about to enter the Android market) "broke from the RPX-driven conspiracy [after the filing of this antitrust lawsuit] and independently negotiated settlements with Cascades", says Cascades in its amended complaint.

The court proposes to stay the case (unless Cascades still dissuades it from that idea) pending an infringement proceeding in the Northern District of Illinois since the outcome of the infringement case would provide useful information as to the actual use and validity of the '750 patent. If this case gets stayed, the likelihood of a settlement prior to its resolution increases significantly. So we may never find out who wins the case. It would probably be desirable for the alleged conspirers to work out a settlement just to avoid an adverse ruling on the antitrust side; but they might also believe that this case has now reached a stage at which it's actually necessary for them -- at least for RPX -- to be cleared of any allegations of wrongdoing.

This is not the first time for RPX's business model to face criticism. In May 2011, the Gametime IP blog reported on a letter by security software firm Kaspersky to the FBI accusing RPX of racketeering. Three months ago PandoDaily published a lengthy article on RPX's business model that is anything but consistently flattering. Both these articles mention dealings between RPX and patent trolls. While RPX likes to portray itself as the antithesis to Intellectual Ventures, it interestingly faces the same allegation of divesting patents to trolls with the allegedly intended consequence of convincing third parties that signing up as clients of those firms is a smart choice for avoiding those attacks (though there are still plenty of other patents in the hands of trolls anyway).

I don't mean to engage in RPX-bashing here. I just wanted to point out that this firm portrays itself as a White Knight but doesn't have a clean white shirt in some people's eyes.

Cascades may be a typical troll, but despite the Federal Trade Commission's inquiry into deceptive practices by patent assertion entities, the rule of law (regardless of the political environment) is that it also deserves to be protected by competition law. It's unlikely to get help from antitrust authorities, but it can bring antitrust lawsuits as it did here, and a court of law is not swayed by lobbying: it simply looks at the merits of a case. Here's the order (this post continues below the document with further thoughts and some information concerning the new publishing rhythm of this blog):

13-12-03 Order Denying Motion to Dismiss Cascades Antitrust Complaint by Florian Mueller

Cascades' allegations -- again, at this stage it doesn't matter whether true or not -- are a plausible conspiracy theory to the judge, and the conspiracy part per se also makes sense to me, taking the allegations as true. Allegedly some parties, such as Google's Motorola, told Cascades that they weren't going to take a license (or, alternatively, buy the patent) individually but only as part of a group, through RPX. RPX approached Cascades and allegedly said that key RPX clients wanted "a global solution", and offered a price that it indicated was the best offer its clients would make.

While I can understand that the judge looked at this alleged behavior as well as alleged meetings between RPX and those companies to discuss a joint negotiation strategy as price-fixing by potential buyers, I'm troubled or at least unconvinced by this antitrust theory for mostly three reasons:

1. It would actually have been the most logical thing in the world for Google (not just its device-maker subsidiary, Motorola Mobility, as part of a group) to negotiate a global Android license on behalf of its ecosystem. The fact that Google didn't do that is not surprising giving its notorious reluctance to take licenses (though it is apparently willing to pay up for software patents asserted against Android through Motorola Mobility, which makes it appear rather hypocritical). But a company that takes better care of its ecosystem would do so, and in that case there would also be a single licensee. If that single licensee told its device makers that they don't need to take a license individually because Google will deal with this problem one way or the other (and indemnify them if necessary), that would not be an antitrust violation. It would be perfectly above board, but it could have a similar effect on Cascades' business opportunity with the Android ecosystem.

2. Antitrust matters are centered around a particular market definition. Here, the judge basically said that since Cascades alleged that its patent licensing opportunity is specific to Android, that's the market definition based on which to adjudge the motion to dismiss. But this patent is older than Android. It's a general acceleration technique for a bytecode machine. If it's even valid and actually infringed, then it must also be possible to work around this one without a noticeable degradation of product quality because other bytecode machines don't use this technique (otherwise Cascades would have more targets than Android device makers, resulting in a broader market definition that, in turn, diminishes the collective market share of the defendants). If it's easily worked around, then it's not too valuable anyway, raising doubts about whether those Android companies were really trying to bring the price of this patent down to a subcompetitive level or whether Cascades, as the Android camp claims, simply tried to overcharge.

3. When I read the order I wasn't sure that the judge had fully considered the differences between how patent licensing works compared to how actual products are sold. If the patent is valid and infringed (and let's assume it's not worked around too easily), Cascades can enforce it through infringement proceedings. It can seek injunctions and damages, and damages alone should be enough of a disincentive for someone who refuses to take a license on reasonable terms -- in theory at least. But you can't sue someone over not buying your product (unless a contractual commitment was made).

The bottom line is that I'm more sympathetic to RPX and those Android companies than the court's analysis, and I'd really like to see this adjudged by an appeals court. But the fact that this complaint has now, in its amended form, survived a motion to dismiss -- in a tech-savvy district -- must be considered by companies devising strategies to leverage their collective purchasing power when trying to license or acquire patents. The Android camp has a particular problem because Google (see bullet point #1 above) doesn't negotiate those global licenses on a basis that no one could reasonably allege to be anticompetitive, and because the platform exposes device makers to more infringement allegations than any other.

This blog's publishing rhythm

For more than three years, starting in early October 2010, I tried hard to provide rapid analysis of new developments in the "smartphone patent wars", not only but also (and most visibly) on this blog. I didn't even take a vacation during those first three years and was on alert 52 weeks a year. I have since taken a week off on two occasions, but apart from that I still reacted very quickly to breaking news and frequently dug up court filings before anyone else did, making some people wonder whether I ever sleep or whether I have cloned myself. This level of activity, however, required a degree of availability that precluded me from the pursuit of other opportunities, especially an app development project I believe in.

I have been weighing and exploring different options. Starting this week, I am no longer going to make the same effort as before to be the first, or at least among the first, to analyze and comment on new filings, rulings, and announcements, 24 hours a day, seven days a week, 52 weeks a year. Instead, I am now going to work on smartphone patent (and related antitrust) matters only on some days -- typically, Mondays and Thursdays, though this can vary in certain weeks (and there will be weeks off or weeks such as the week between Christmas and New Year's, where I'll spend only one day on this, not two).

Today I happened to be around when the European Commission published a speech by the EU's competition chief that contained some interesting comment on a likely need for Samsung to improve its settlement proposal. So I commented on it immediately. If the same thing had happened tomorrow, Tuesday, I would have waited until Thursday. If, however, something absolutely huge were to happen (say, an Apple-Samsung settlement or a Federal Circuit ruling on a major case), I would still act upon it immediately, any day of the week including the weekend, any time of the day or night as soon as I hear about it.

The benefit to me is that I know I can not just devote time to my own project on certain days of the week but that I can also concentrate on it without being constantly interrupted (see Paul Graham's blog post on "Maker's Schedule, Manager's Schedule").

I know that this will work fine for my consulting business while allowing me to create an app (which will have nothing to do with patents, by the way). And this blog, which is basically a byproduct of and promotional tool for that consulting business, will remain popular, I'm sure. A couple of years ago this blog mostly got attention when it reacted rapidly. By now, the most popular posts are actually Q&A documents and in-depth analysis that doesn't have to come out on the same day as, or the day after, an important event.

This will be my rhythm for the remainder of the year, and for going into next year. I can't look too far into the future, but this is the plan, so please don't be surprised if my commentary is no longer going to be as instant as it used to be for a few years. I'm confident that you'll still find interesting information here. And on certain days of the week, even breaking news.

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ITC doesn't allow HTC to assert Google's patents against Apple -- Rent-a-Patent model fails

An ITC judge has granted an Apple motion to throw out five of the patents Google gave to HTC last summer. Apple had argued that HTC lacks standing (the right to sue). Administrative Law Judge Thomas Pender apparently concluded that HTC failed to acquire all substantial rights in the relevant patents. The ALJ made the decision on Friday, and it entered the public record today (click on the image to enlarge):

As a result, only three of eight patents remain in HTC's second ITC action against Apple. Last week Apple brought a third ITC complaint against HTC, asking for rapid enforcement against new devices of an import ban ordered in December 2011.

The decision to throw out Google's five patents is appealable, and the identified deficiency is theoretically curable, but it's now fairly probable that Apple won't have to defend itself against those patents in the ongoing ITC action:

• Appeals against initial determinations that an ALJ makes at this stage of an investigation rarely succeed (though the Commission, the six-member decision-making body at the top of the ITC, frequently modifies the ALJs' final initial determinations).

• It's theoretically possible that Google could solve the problem by joining the investigation as an additional complainant. In a different ITC investigation involving Apple (and, indirectly, HTC), AMD claimed to be the rightful owner of the patents-in-suit and simultaneously said that it declined to join the investigation as a complainant.

  If Google decided to join the investigation, this could result in further escalation between Apple and Google (though the two companies are already suing each other as a result of Google's acquisition of Motorola Mobility. Also, it's unclear whether Google can satisfy the ITC's domestic industry requirement with respect to the asserted patent claims. HTC argued that it practices those inventions in its own products. Google didn't make mobile devices at the time of the complaint. Its acquisition of Motorola Mobility was just closed last month.

The decision is an embarrassment for Google, which waited almost a year and a half after Apple's first patent lawsuits against HTC before it provided this kind of support to HTC, and then apparently failed to do this the right way. Too little, too late. If Google had assigned all substantial rights to HTC by truly transferring those patents to the Taiwanese company (as opposed to imposing limitations and restrictions), Apple's motion wouldn't have succeeded. But Google's support for the Android ecosystem has clear limits.

The fact that a Rent-a-Patent deal was rejected by a judge has implications beyond this particular ITC investigation. Google isn't the only patent holder that assigns patents to other companies for the purpose of suing third parties. Major patent aggregators such as Intellectual Ventures and publicly-traded RPX also allow their members to "check out" patents in order to bring counterclaims, and their transfer agreements may raise similar issues with respect to standing as the Google-HTC deal.

The Open Invention Network (OIN), a smaller patent aggregator that claims to "protect Linux", gave four patents to Salesforce.com in 2010, three of which were immediately asserted against Microsoft. Since Microsoft and Salesforce.com settled their dispute a few weeks later, with Salesforce agreeing to take a royalty-bearing license, the question of standing never had to be adjudicated in that particular case. But Judge Pender's decision in the HTC-Apple case exposes the problematic nature and legal vulnerabilities of deals under which a patent is assigned only temporarily for the mere purpose of suing a third party.

Theoretically, all of those aggregators could become co-plaintiffs in order to resolve the standing issue. But patent aggregators like OIN, which doesn't have any licensing business (you either accept its terms and get a free-of-charge license to its patents, or you don't and may get sued), can hardly satisfy the ITC's domestic industry requirement or the four-factor eBay test for a patent injunction.

All those Rent-a-Patent firms have to reconsider their business model. If they transfer all substantial rights, their partners/customers have standing. But in that case they may never get their patents back. And that actually makes sense: the idea of a patent is that one patent holder has an exclusionary right. Intellectual property is all about exclusivity. Multitenancy may work for some cloud computing purposes, but it's not an option for patents.

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Data points on US patent litigation and the huge patent assertion business

Yesterday's IPO of patent aggregator RPX Corp. took the three-year-old company to a billion-dollar market capitalization. I don't mean to comment at this point on the business model of RPX (or on that of Intellectual Ventures, where its founders previously worked). For now I just want to glean some useful data on patent litigation and assertion in the US from the IPO prospectus and media reports.

Companies going public must take great care in how they describe their business and the market in which they operate. Any distortion, particularly an overly optimistic outlook, can result in liability issues. That's why the numbers RPX states in its prospectus are most probably very conservative estimates. Some of them are also very vague, sometimes stating just a scale instead of specific numbers.

Total patent litigation cost in the "tens of billions of dollars in the United States from 2005 to 2010"

RPX looked at the total number of patent lawsuits in the US during that period and at the different cost levels on a per-defendant basis.

In an interview with Xconomy, a venture capital investor who funded RPX and poured $300 million into Intellectual Ventures, estimated that "there’s a $50 billion-plus market in IP rights and licensing, versus a $6 billion litigation market based on legal fees." Those are annual numbers, while RPX's "tens of billions" statement related to a six-year period.

40,000 defendants from 2005 through 2010 (some of them named more than once)

RPX figures, based on its own analysis and third-party data, that patent infringement claims were filed against more than 40,000 defendants in the US from 2005 through 2010. That number of 40,000 includes "companies that were sued more than one time." The wording used by RPX could be clearer in terms of whether they mean some of the 40,000 were sued more than once or whether we're talking about 40,000 instances in which some plaintiff named some defendant, which would result in much less than 40,000 unique companies. I assume that the latter is the case. (In connection with non-practicing entities, RPX uses an unambiguous wording.)

Almost 1% of those instances were brought about by GeoTag Inc., a company against which Microsoft and Google are jointly taking action. Considering that GeoTag asserts only one patent while other litigants hold many, it's pretty obvious that GeoTag is disproportionately litigious.

Non-practicing entities responsible for annual costs "in the billions of dollars"

RPX's prospectus narrows in on the activity of non-practicing entities, colloquially often referred to as "trolls." Analysis conducted by RPX showed that "there were over 600 patent infringement cases filed by NPEs in 2010 against more than 4,000 defendants, which comprised over 2,000 unique companies, some of which were sued more than once. Most cases are resolved prior to trial but still result in significant defense and settlement costs. For cases that reached summary judgment or trial, a study of over 1,500 final decisions found that damages awarded to NPEs had a median value of $12.9 million during 2002-2009."

Of the more than 4,000 defendants named as defendants by NPEs in 2010, GeoTag alone accounts for almost 10%, which again underscores how outrageous that particular company's actions are.

Defense costs per claim vary greatly

RPX says that the costs of defending and resolving a patent litigation claim "can range from modest, such as $50,000 for nuisance suits, to substantial, such as tens of millions of dollars or more in the most complex cases."

Developments that "have led to an attractive environment for patent assertions"

RPX provides a non-exhaustive list of six particular reasons for which there's so much patent assertion going on. There are two items related to Internet search as a powerful tool, and the sixth and final item relates to the Court of Appeals for the Federal Circuit. Factors (iii) to (v) make particular sense in connection with smartphone patent litigation:

"(iii) a proliferation and overlap of technology patents, (iv) the use of multiple technology components in a single product or service, (v) an increase in the number of businesses that make, use or sell products or services that utilize technology"

I'll keep an eye on other patent market data and will publish interesting and updated numbers here when I stumble on them.

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