Eventually I will blog on my Case Study on The Evolution of Pricing in the Patent Litigation Market. One reason I keep putting this off is that this topic continues to evolve – quickly.
Over the past few weeks a number of news items on this topic caught my attention. Adding them together highlights how pricing and competition is evolving in the market for patent disputes. I chose that market for the case study as I believe it is an indicator of things to come in other markets (which I am already watching happen). My thesis is that the market is searching for pricing mechanism to determine fee-level pricing. One consequence is that in markets with imperfect pricing, new competitors will likely emerge. The recent news items highlight some disruptive players entering and expanding in the market.
RPX is a patent aggregator focused on serving the defense side of the market. I have previously posted on this player, noting their innovative model and the fact that they are taking market share from law firms. They went public at $23 a share and are now trading at about $28 a share with a market cap of $1.3B. I would call that a market force.
“These new agreements are specifically designed for companies currently in litigation with Walker Digital and provide the purchaser with the ability to eliminate the uncertainty inherent in litigation and to effectively manage their corporate risk.” “The sale of the Round Rock Research Covenant Not to Sue demonstrates a need for operating companies to efficiently, and anonymously, eliminate the risk of patent litigation,” Another reduction in market share for lawyers.
A judge ordered IV, considered to be a “non-practicing entity”, to reveal the names of its investors as they are “interested entities or persons” in an ongoing case. To give you an idea of who is on the list, both Apple and Google are there. Further market encroachment.
“Through the new service, Article One identifies pre-litigation patents and distributes requests to over one million scientists and technologists to research the validity of the patents.” This is a crowd-sourcing approach to finding prior art in order to invalidate others’ patent claims. The term “litigation avoidance” clearly identifies this provider as a disruptive player encroaching on lawyers’ services.
When I started writing this post, I had a general impression of how things are changing in the patent disputes market. After researching the information behind the press releases and articles, I am truly impressed by the speed of change occurring. Brings to mind the classic farewell words of the roller coaster operator, “Keep you hands and arms inside the car at all times.”
  • Addendum: Microsoft is now using Article One. http://blog.seattlepi.com/microsoft/2011/06/13/microsoft-joins-crowdsourcing-service-for-fighting-patent-trolls/

    This ball is moving faster and faster.

  • Nice aggregation of recent developments in the evolution of business models for the management and transfer of patent risk. You're right to note that each of these models tends to take market share away from law firms. However, this needs to be viewed in light of the liquidity that has been, and that will be, injected into the system by speculative investors looking to generate outsize returns by funding patent licensing and enforcement. One (anecdotal) estimate put the figure at $8 billion. On the whole, my sense is that the market opportunity for law firms that can competently handle complex patent infringement cases is growing despite the inroads made by the companies profiled in your post. I look forward to reading the case study and invite you to view and comment at my blog, Nonbillabl.es

  • Jorge – thank you for the thoughtful comment and the link to your blog.

    Although the market for these services may be expanding, there is definite price competition occurring. This gives the new players a distinct advantage in gaining market share, noted by Microsoft's use of Article One. From my front-row seat, firms are losing business to these providers. To your point, firms who are competitively priced will have a place in the market. Those who hold to old ways won't stand a chance in such a competitive arena.