NEW PATENT INVESTMENT FUND BUYS $30 MILLION IN PATENTS

ANTI-TR-LL COMPANIES CREATE A TR-LL FUND TO BUY PATENTS Patent startup gains high profile backing - RPX already purchased $30 million in patents Rick Merritt (09/17/2008 12:52 PM EDT) URL: http://www.eetimes.com/showArticle.jhtml?articleID=210602186 SAN JOSE, Calif. - A startup that claims it has a better approach for helping high tech companies deal with the rising costs of patent litigation and licensing has gained backing from two large venture capitalists. RPX Corp. announced it has received an undisclosed amount of equity investments from Kleiner Perkins Caufield & Byers and Charles River Ventures. The startup is one of a growing number of companies sprouting up to address the problem of trolls, also known as non-practicing entities whose sole business is in acquiring and asserting patents, typically against large product companies. As many as 20 percent of the estimated 1,500 patent lawsuits filed in the first half of the year came from such companies, according to John Amster, co-chief executive of RPX. Intellectual Ventures (Bellevue, Wash.), launched by former Intel and Microsoft executives in 2000, is said to be among the first and largest of the group of companies formed in part to address the troll issue. Investors in the company are reported to include Intel, Microsoft, Nokia and Sony. In June another startup, Allied Security Trust, came out of stealth mode to describe its plan to buy, license and sell patents for its corporate investors including Cisco Systems, Ericsson, Google, Hewlett-Packard and Verizon. At that time, industry observers predicted it would be the first of many such collaborations. A report in the Wall Street Journal suggested Intellectual Ventures is itself becoming troublesome for some large companies because it is demanding increasingly high licensing fees for a growing treasure trove of patents it has acquired. The article said RPX will try to carve out a business as an alternative, setting fixed fees for companies to license its patents. John Amster, one of two former Intellectual Ventures executives that formed RPX, said he will not detail the company's business model or customers until October. However he did say RPX will acquire patents in a broad range of technology and e-commerce areas, especially when the patents are being asserted or involved in litigation. "That's the area of most pain for companies," said Amster, who left his position as general manager of strategic acquisitions and licensing at Intellectual Ventures to form RPX. RPX will not assert patents against other companies, but generate revenues from licensing and selling the patents it buys, Amster said. The startup does not expect to seek other direct equity investments either from venture capitalists or high tech companies. The model of a "patent-buying cooperative" set by Allied does not optimally align the interests of potential customers, something RPX will address, Amster said. The startup also aims to help companies reduce personnel time and costs spent defending patent suits. Amster quoted figures from a 2005 survey by the American Intellectual Property Law Association survey which estimated litigation costs were approximately $4.5 million per case, not including the costs of any settlement. RPX aims to buy as much as $100 million in patents and patent applications in 2008. To date it has spent $30 million acquiring about 100 U.S. patents and 50 patent applications including a portfolio that applies to mobile communications and Internet search and another on RFID and distribution of goods. "They have important implications for existing and emerging applications that could create problems for a wide range of companies," Amster said. The startup has been building its staff, hiring Paul Saraceni, an associate general counsel for intellectual property strategy at Yahoo as the startup's Chief IP Officer. Joe Chernesky, president of IPotential (San Mateo, Calif.), a patent consulting and brokering firm said RPX could do well, in part due to its founders' backgrounds at Intellectual Ventures. "This is one that I think will be interesting to watch," Chernesky said. Chernesky was less bullish on Allied which he said has struggled to purchase patents in the face of stiff competition from Intellectual Ventures. "Intellectual Ventures has a huge presence and they have been buying everything up," he said. "They can have an offer on the table within three weeks, and Allied didn't have the procedures in place to do that," he added. Brian Hinman, former chief executive at Allied, said Intellectual Ventures was "a very aggressive competitor," but he said he expects Allied to be successful. In his 18 months at Allied, Hinman said the company grew its staff and tapped into multiple sources of patents. "Some strategic patent portfolios were purchased," said Hinman. "When I joined in March 2007, there was nothing in place except a few companies, a concept and a strategy," he added. "The execution was left to me." Hinman joined Verizon, an Allied member, in August of 2008 as vice president of intellectual property