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Before RPX Corporation (NASDAQ:RPXC) went public in 2011, Forbes ran a headline proclaiming that "RPX IPO Helps Slay Patent Trolls." Of course, usage of the derogatory term "troll" went largely undefined in the Forbes piece, but the author mentioned several companies whose business model centered around investment in patent rights and monetization of patents through licensing, enforcement and litigation. Alternate commentary published around the same time exposed a far closer relationship between RPX and patent monetization companies than Forbes author Nathan Vardi likely understood.

Briefly, RPX's unique business model involved acquiring patent portfolios and providing automatic, royalty-free licenses to companies that chose to pay RPX a membership fee. To avoid sending mixed messages, RPX simultaneously pledged never to enforce the patents it acquires. While Vardi believed, at the time, that RPX's participation as an aggregator of patent rights would 'disarm' patent monetization companies and starve them of future patent acquisition opportunities. However, recent patent licenses and "License Option" agreements between RPX and one such monetization company, Acacia Research (NASDAQ:ACTG), demonstrate how this belief has so-far failed to materialize.

Acacia, whose business model centers around investing in patents through acquisition and partnerships with patent owners, resembles many of the companies that Forbes claimed RPX would "slay." However, far from feeling threatened or attacked by the RPX business model, Acacia CEO Paul Ryan views RPX's presence in the market as a strategic benefit and a strong complement to Acacia. "It's a great relationship," explained Ryan during a private telephone conversation. "They [RPX] are in the business, essentially, of buying IP rights for their members, and we're obviously in the business of selling IP rights on behalf of ourselves and our partners." As a result, according to Ryan, "We work with them on a pretty regular basis."

Indeed, recent 8-K filings demonstrate that RPX entered into 4 separate "Patent License and License Option" agreements with various Acacia subsidiaries, including Document Management Systems LLC, Fast Memory Erase LLC, Content Delivery Solutions LLC, and Unified Messaging Solutions LLC, all on September 18 of this year. Although terms are undisclosed, the "License Option" reference in the announcements appears similar to past situations where RPX acquired "sublicense rights" rather than buying patents wholesale. In a previous interview with Intellectual Asset Management Editor Joff Wild, RPX's CEO John Amester explained why:

Amster cited the theoretical example of a litigation involving 10 companies - five of which were RPX members, five of which were not .... "We might well buy a sub-licence to the technology for our members and leave the other five to their own devices," he explained. It would not be something RPX would always do, and there are reasons why they would not want to do it, but it is there as an option.

The reason why RPX does this is simple: the primary threat of using patented technology without a license is the threat of enforcement and litigation. Because RPX pledges never to enforce their patents, the enforcement threat related to anything RPX acquires is largely already neutralized. Thus, non-members could 'piggy-back' from RPX acquisitions funded by the members contribution.

Naturally, if RPX instead acquires only limited rights to a portfolio, then non-members remain potentially exposed to IP enforcement. Further, by negotiating options for additional licenses, RPX provides itself with business development opportunities. Earlier this year, RPX acquired sub-license rights to a portfolio owned by a company called Preservation Technologies and announced that it retained "certain license options for future RPX clients, including seven companies who remain in litigation against Preservation."

RPX similarly can use license options for the Unified Messaging portfolio to continue expanding its membership base. With 38 lawsuits recently aggregated before Senior Judge Joan Lefkow of the Northern District of Illinois, Unified Messaging Solutions easily represents the largest potential business development opportunity for RPX. Defendants in the Unified Messaging litigation include companies in social media (Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG)), travel (American Airlines, Southwest (NYSE:LUV), Orbitz (NYSE:OWW)), finance (Morgan Stanley, Vanguard, Bank of New York Mellon (NYSE:BK), and Discover Financial (NYSE:DFS)) along with many others.

Working with a company like Acacia, as Ryan explains, helps RPX grow its business and add members. Ryan notes that "if RPX can step in and solve certain litigation" for a potential new member, then a new business relationship becomes all the more likely. By working with Acacia, to understand what the patent owner is willing to take to settle its patent claims and dismiss litigation, Ryan explains that it makes the economic decision for RPX more straightforward.

The primary benefit of RPX's existence in the patent marketplace, at least from Ryan's point-of-view, is its position as an intermediary, which makes the negotiation process smoother. "We represent the patent owner and partner, and they represent the users of rights, so when we sit down to negotiate, it takes some of the direct ego out of the position." Ryan continues to say that deals with RPX are able to reach more mutually satisfactory pricing more quickly. This also reduces the amount of time before Acacia's investment in a patent portfolio translates into revenue.

From the point-of-view of RPX's members, the aggregator provides a similar function. By negotiating on behalf of multiple members for multiple portfolios, fees paid to RPX serve to save the members from the individual license and legal fees. Spread across a large enough multitude of deals, and RPX members can realize an overall cost savings, particularly by removing individual lawyers from the equation. In this respect, RPX's business is a lot less like monetizing patents, and lot more like monetizing inefficiencies in our legal system.

Ultimately, this leads to two ultimate possibilities. First, this places a constraint on the overall "addressable" market if the primary benefit relates to a reduction in legal fees, because law firms will find ways to adapt and re-structure fees in an effort to keep their position at the bargaining table. Second, it means the monster that RPX very well could slay would be monstrous hourly fees for legal services.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.