Cisco backing patent startup

Cisco backing patent startup

Cisco Systems is throwing its support behind a new startup company that fights "patent trolls." The new company is called RPX, and it does nothing but buy up patents to protect big tech companies.

Cisco has increasingly turned the spotlight on "patent trolls," defined as people who do nothing but collect obscure technology patents and make a living suing tech companies for multi-million dollar settlements.

RPX essentially plays defense for tech companies -- buying up those patents to prevent future lawsuits.

Startup RPX Corp. is launching a novel subscription service for patent licenses that aims to act as a broad umbrella shielding members from patent infringement suits. So far it has bought $40 million in patent rights and signed up Cisco Systems and IBM as members.

The startup aims to buy as much as $100 million in patents each year in a broad range of electronics and software fields. It will focus on gaining a broad base of small-to-large members who will pay a flat annual fee based on their size ranging from $35,000 to $4.9 million.

To date a handful of companies including Intellectual Ventures and Allied Security Trust have formed to protect their backers from a growing number of so-called patent trolls. The trolls, also known as non-practicing entities, acquire patent rights to assert them against established product companies but have no product businesses themselves, so they cannot be countersued.

But the shielding companies have created their own problems. A Wall Street Journal report in September said Intellectual Ventures is charging increasingly steep fees to members including Intel, Microsoft and Sony.

Others said when Allied debuted in July it has been slow to acquire patents. Its model requires members which include Cisco, Ericsson, Google and Hewlett-Packard to chip in $5 million each to a pool and decide as individuals whether or not to participate in specific patent acquisitions.

RPX emerges at a time when the U.S. patent office reports its backlog of patent applications continues to rise. Patent litigation is also on the rise.

The startup cites figures that more than 2,100 patent infringement cases have been filed so far this year, 16 percent of them from non-practicing entities. That's up from 13 percent last year and ten percent from the so-called trolls in 2006.

"A subscription model is a new twist in the patent world," said John Amster, chief executive of RPX and a former vice president of acquisitions for Intellectual Ventures. "We provide a license to everything we are buying so companies don't have to make a decision every time we make a buy," he added.

"One of RPX's key value points is the speed of their decision making with respect to potential acquisitions, enabled by an independent team of professionals that does not require membership or investor approval," said Mike Mclean, vice president of professional services at Semiconductor Insights (Kanata, Ontario), part of United Business Media which publishes EE Times. "Speed is a strong differentiator in the patent marketplace as many sellers are as motivated by time to money as they are by the size of the offer," he added.

RPX is essentially a volume play, aiming to charge its members less per patent license than other approaches but hoping to harvest a larger set of customers. With membership fees starting as low as $35,000, "we provide a service for potentially thousands of companies," Amster said.

The company could continue to buy up to $100 million in patent rights with as few as ten members, but probably needs at least 20 members to remain cash-flow positive, Amster said.