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IP Holder Injects Itself Into Patent Lawsuit

Observers and those involved in the patent fight said it's the first time they've seen this happen

There are usually two options in patent litigation: fight or settle.

But San Francisco's RPX Corp. has thrown a wild card into a case between patent-holding company Acacia Research Corp. and 20 defendants.

Acacia announced on Friday that a subsidiary called Light Valve Solutions reached a licensing agreement with RPX, a new company that buys and licenses patents for its paying members (see .pdf). The idea is to take "dangerous" patents off the street for its members' protection. RPX involved itself with the case by announcing that defendants who sign up with RPX get a license to the Acacia patent, letting them out of the suit.

"If they don't sign up with us, they're still being sued," said John Amster, who co-founded RPX this fall. "If they get access to this portfolio through us, they're not just getting access to this portfolio, they're getting access to everything we have."

Amster wouldn't discuss the cost of joining RPX, or whether defendants would have to commit to a certain term of membership. RPX has said that dues can vary widely based on the size and nature of a company, from $35,000 to nearly $5 million.

Patent lawyers observing from the sidelines and those involved in the fight over light valve patents in the Northern District of Georgia said it's the first time they've seen this happen.

"The involvement of a patent aggregator such as RPX in settling patent litigation is very unique and unusual to see, and it will be interesting to see if it becomes a trend in the future" said James Gilliland Jr., chairman of San Francisco's Townsend and Townsend and Crew who represents Epson. Gilliland declined to comment on whether his client would negotiate with RPX.

"I've never seen patent rights acquired mid-litigation like this," agreed Michael Dorfman, a Katten Muchin Rosenman partner representing defendants Sanyo, Eiki International Inc., and Christie Digital Systems USA Inc.

Sanyo already has settled confidentially with Acacia. Dorfman declined to comment on whether his other two clients would be interested in a deal with RPX, but he did speculate that some defendants could be interested.

"I think it presents an interesting business option for companies interested in settling," Dorfman said. "It's a third option that wasn't available before."

RPX bills itself as a defensive patent pool, promising to buy and license patents for its members, which include Cisco Systems Inc. and IBM Corp. It also promises not to sue for patent infringement, but this case shows that it's not afraid to drum up new customers by working closely with those who are willing to sue.

"It's quite possible that there is an organization of these licensing entities that is starting to take place," said Amar Thakur, who co-leads Sheppard, Mullin, Richter & Hampton's IP practice and is not involved in the case. "I don't know whether it's illegal -- it does seem to be not in particularly good taste."

Thakur said there's probably more to the unusual deal between RPX and Acacia than meets the eye.

"It's not immediately clear what the real reasons are," he said. "There could be underlying reasons about [Acacia] needing to raise capital, or the case isn't going that well."

Acacia CEO Paul Ryan said there's nothing untoward about the deal with RPX.

"If you had been through the negotiations, you'd know we weren't working together," said Ryan with a chuckle. "When there are deals that are mutually beneficial, then we'll do them, otherwise we're in competition."

Neither RPX nor Acacia would disclose the terms of the deal. Lawyers for other defendants in the case either didn't return calls seeking comment or declined to comment about their interest in settling with RPX.