Patent risk management company RPX Corp. is in advanced talks to acquire litigation data provider PatentFreedom, three sources familiar with the deal said, a move that highlights the growing importance of services for companies trying to fend off patent lawsuits.
Large tech companies use a variety of services to mitigate the risk of patent lawsuits. RPX’s primary business is to buy threatening patents from patent owners before its customers can be sued for infringement. The customers pay RPX a fee that RPX argues is cheaper than the cost of fighting the patents in court.
(RPX also sells patent litigation insurance. RPX Insurance Services (RPXIS) offers a policy that combines its proactive intervention in the patent market with insurance coverage. RPXIS is a coverholder at Lloyd’s, providing marketing, underwriting, and claims management services on behalf of a syndicate at Lloyd’s.)
PatentFreedom tracks the behavior of patent owners and sells subscriptions to companies and law firms so they can better negotiate.
The price and closing date of the PatentFreedom deal are not clear, though talks are at an advanced stage and PatentFreedom Chief Executive Daniel McCurdy would join RPX, the sources said.
RPX declined to comment, and McCurdy could not immediately be reached.
By acquiring PatentFreedom, RPX would also poach the CEO of one of its competitors for patent deals. In addition to leading PatentFreedom, McCurdy is chief executive of Allied Security Trust, a non-profit backed by Google, Oracle and other tech companies to buy risky patents much as RPX does.
Oracle declined comment and a representative for Google could not be reached.
During the last two decades, patent litigation in the United States has grown hugely, especially in the tech world. Critics say owners of dubious patents – dubbed patent trolls – can too easily threaten litigation to force companies into costly settlements.
President Barack Obama has highlighted patent trolls as a major problem, and legislation to make it easier to defend against patent lawsuits passed the U.S. House of Representatives last year. However, it was shelved in the Senate last month, because a compromise could not be reached that would prevent abuse of patent litigation without punishing legitimate innovators.
In the absence of political fixes, tech companies have turned to an assortment of companies such as RPX, which say they minimize patent risk.
Each of them employs a slightly different model. RPX says it acquires patents defensively and will not file lawsuits. Intellectual Ventures, meanwhile, also acquires patents but sues companies in an attempt to monetize those assets for its investors.
Allied Security Trust uses its members’ financing to buy patents before they end up in court, while Unified Patents attempts to invalidate threatening patents instead of acquiring them.
RPX has touted its data capabilities as a crucial component of the patent litigation insurance product that it sells.