Patent disputes and litigation: A Q&A with Dan McCurdy, RPX Corporation

16th March 2015

Patents rights are essentially ‘negative’ or defensive rights – that is, a patent gives its owner the right to stop someone from making unauthorized use of a patented invention. All the same, those rights can be very important, and valuable. For instance, defending innovative products is also about defending market differentiation, competitive advantage and, in extreme cases, safeguarding an entire business.

Unfortunately, in the current patent ecosystem, exercising those defensive rights very often leads directly to litigation, which is not an efficient way to resolve a dispute. Since 95% of NPE patent disputes are settled, turning to the most expensive forum in the world (the U.S. Court system) to negotiate price is far from ideal.

We asked Dan McCurdy, Senior Vice President of Data and Technology Solutions at RPX Corporation, for his views on the issues associated with such a litigious model, and the steps that could be taken to make the whole process of patent dispute resolution more efficient. His views are summarised in the Q&A below:

What is the problem associated with a litigious market?

“A cost study conducted by RPX Corporation showed that NPE patent disputes cost operating companies $13bn in 2013. Of that, more than 50% is spent on legal expenses alone. This expensive path to these resolutions is clearly inefficient and a drag on shareholder value.  At RPX, we believe transparency is key to significantly improving efficiency in exchanging patent value, and shared data about costs of licenses and patent purchases is central to dramatically reducing the overhead costs associated with patent transactions.”

Why do so many patent disputes end up in court?

“Many people ask why litigation and charged emotions are so pervasive in the world of patents. Much of the answer lies in the fact that, unlike other assets, patents are a negative right. In other words, the existence of a patent doesn’t prevent others from using an invention; it merely permits the patent owner to take action to stop others from using the invention. People don’t like being told not to do something that they want to do, and when it comes to patents, frequently believe a request to “halt” is unreasonable or unjustified.   Finding a more rational way to bring the views of a patent owner and an alleged infringer to resolution is the key to efficiency, and substantially improved, detailed knowledge constructed from data that has been collected, tagged, made anonymous, and easily searched is central to that objective.

“Our view is that there must be a much more efficient way to resolve patent disputes than the extraordinarily expensive, disruptive, and time-consuming mechanisms used by patent owners and potential licensees today.

“We are pursuing collaborative data solutions to make dramatically more cost-effective solutions a reality.”

How can the process of resolving patent disputes be made more efficient?

“The availability of quality data that patent owners, both operating companies and NPEs, can trust will allow parties in patent disputes to resolve their differences much more readily and rapidly. Why? Rational decisions about any asset must be made with trustworthy data to model the risk/reward underlying a price decision, so that all participants can agree on numerous key drivers of patent value and commonly-accepted attributes that allow them to model risk, define valuations, and predict returns.

“Through broad, encompassing data made possible by RPX’s collaborative solutions, licensees will have the information they need to feel confident that the price they agree to pay for the use of a particular patent allegedly impacting a particular type of product or service is fair and reasonable relative to all the other licenses and sales that have preceded it.

“Clearly since roughly 95% of patent litigation is being settled, the only reason the parties are going to court is to negotiate a price. So the more data points we have about price, the more comfortable everyone is going to feel about rapidly arriving at a mutually agreeable price to resolve any given patent dispute. Billions of dollars in annual expenses and disruptions could be avoided.”

What about those businesses that do not have access to IP specialists?

“The risk mitigation tools offered by RPX provide a succinct view of the relative value and risk faced by an operating company, and can help executives, non-IP lawyers, investors, and advisors assess and compare patent issues without getting ‘lost in the weeds’. That said, with more information deployed over the course of a dispute, resolution will become more fact-specific, and will require extensive cost data that must be assembled through cooperation among the operating companies and NPEs and facilitated through RPX. The good news is, all parties and their shareholders will benefit from the efficiencies that will result, as the cost of licensing patents held by others becomes a line item in a product’s Cost of Goods Sold rather than part of total litigation spend.”

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