Many times I find the most interesting news buried well below the fold. In this case, the news was actually front-and-center in an ALM newsletter, but the full impact of this story is still buried in a sense. The news item: “The Best Defense? Patent Aggregator RPX Prepares For IPO.”
RPX is advertised as a patent aggregator. I see this company as a disruptive force in the legal market. It’s a new type of business that is positioned to displace traditional providers (a.k.a law firms) in the patent disputes market.
In a case study of the patent litigation market (still to be blogged about here), I conclude there is a shift away from hourly-based pricing to fee-level pricing going on in this market. As this is happening there are significant inefficiencies in how this new pricing mechanism is working. In layman’s terms this means it is difficult to know what the market price actually is.
In economic parlance, imperfect pricing markets present excellent business opportunities for disruptive models, since buyers are more willing to explore alternative ideas for similar services. In the patent disputes market the traditional and expensive method of resolution has been litigation.
So RPX enters the market with a new way to value and resolve patent disputes by introducing a value-add component – aggregating and licensing patents. When a client is sued for patent infringement, they go directly to RPX who holds a pool of patents they can use to counter the suit. This vast pool of intellectual property (IP) allows clients to more capably and directly respond to any infringement claims. When insufficient IP exist for a given case, RPX resolves the dispute in question by acquiring a license for or even the actual patent from the plaintiff. This in turn adds to their pool of IP. So over time, the value of the service increases.
The bottom line for law firms here is that clients will be taking their patent disputes directly to RPX instead of lawyers.
Is RPX practicing law? Not really, but who cares. The clients will only give them their business if it saves them money and brings value.
RPX going public is a big signal that clients are doing exactly that.