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Spike in mobile lawsuits spurs changes in courts, business models

Nancy Gohring | Nov. 17, 2011
The dramatic increase in the number of mobile industry lawsuits is forcing changes in the legal system and spurring new business models around patent licensing.

The process of determining the potential value of a case could prove interesting to the parties in a case, McDonald noted. "If you're a defendant, you don't ever want to tell the plaintiff what they might win," he said.

The ballooning number of lawsuits is also spurring experimentation with new business models, some designed to profit from the activity and others that could potentially help companies better manage the new litigious environment.

For instance, some companies are starting to try out the patent privateer model, said Davina Inslee, IP counsel for Vulcan, Microsoft co-founder Paul Allen's company. A patent privateer obtains an exclusive license to intellectual property or buys the patents from a company typically in order to sue the competitor of the original patent holder. The deals are set up in a variety of ways such that the original patent owner might get a return on legal wins or they may simply get the benefit of not having to absorb the expense of litigation, she said.

In addition, because the patent privateer is not an operating company, there's no threat of a court imposing an injunction on the company that originally owned the license.

One example of a company using this model is MobileMedia Ideas, which bought patents from Nokia and Sony and sued Apple, HTC and Research In Motion. Similarly, Round Rock Research bought several thousand licenses from Micron and has licensed them to or formed covenants not to sue with Apple, Sony, Samsung, IBM, LG and others.

Mosaid operates in a similar vein. It is managing thousands of Nokia patents and absorbing the cost of litigation in exchange for a portion of proceeds of any winning suits.

Patent aggregators are also popping up to help companies avoid suits or quickly settle them. RPX, for instance, is amassing patents and offering companies a yearly subscription, giving them rights to the patents in the portfolio.

Obeidat categorizes Intellectual Ventures as an aggregator and hopes that more companies follow its model. Rather than offering a subscription, Intellectual Ventures licenses its entire portfolio, which currently comprises 35,000 patents, to its customers.

"We're hopeful others will see our business model and will do similar things," he said. In that case, a phone maker could sign licenses with three or four companies like Intellectual Ventures for all their needs rather than having to work with hundreds of license owners, he said.

While Obeidat positioned his company as helpful to the wireless industry, many people are critical of the company because it typically threatens a lawsuit before signing a licensing deal with its customers.

Still, he says that his scenario shifts the industry more toward commercial transactions, he said. "You're always going to have to resolve some disputes in litigation. But at the rate we're going, it's not sustainable."


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