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An active investor since 1998, both long and short, I make my decisions based on all the information available to me and continue to monitor that information for items that will change my investment thesis.
  • RPX And IPRs: Let's Play Hide The RPI. 9 comments
    Apr 10, 2014 11:32 AM

    Part of the business model extolled by RPX (NASDAQ:RPXC), to file IPRs with the PTAB, should be terminated before it can be allowed to suffocate patent holder's rights to be free from continued, and costly, harassment over the same patents. The PTO's Patent Trial Guide (PTG) has an area that addresses the possibility of such entities becoming champions for the already defeated. The fight against RPX's business model is front and center in the controversy between VirnetX (NYSEMKT:VHC) and RPX currently ongoing at the PTAB. VirnetX found enough unscrubbed metadata in RPX's filings to compel the PTAB to allow additional discovery in their case. This is one of the few times since the initiation of the IPR process in which the PTAB has been confronted with enough evidence that not even they can avoid allowing additional discovery.

    One of the documents that the PTAB has asked VirnetX and RPX to use in their arguments regarding Real Party of Interest (NYSEMKT:RPI) and "privy" is the PTG, here is an excerpt where party A is the potential RPI:

    >>>That is not to say that Party A's membership in Trade Association X, or the Joint Defense Group, in those scenarios is irrelevant to the determination; deeper consideration of the facts in the particular case is necessary to determine whether Party A is a "real party-in-interest" or a "privy" of the petitioner. Relevant factors include: 1) Party A's relationship with the petitioner; 2) Party A's relationship to the petition itself, including the nature and/or degree of involvement in the filing; 3) and the nature of the entity filing the petition. In short, because rarely will one fact, standing alone, be determinative of the inquiry, the Office cannot prejudge the impact of a particular fact on whether a party is a "real party-in-interest" or "privy" of the petitioner. (I numbered the factors)<<<

    1) Apple (NASDAQ:AAPL) is a dues paying client of RPX (Assumed. We do know Apple has been involved with RPX and patent infringement settlements in the past)

    2) Apple stands to pay $$ billions in royalties and damages if the petition fails. Involvement in the filing is answered by the metadata, discussions of which are redacted in the filings.

    3) RPX advertises that they will file IPRs for their clients, even though they cloud the language..

    As RPX files more and more IPRs for their clients they will become better and better at hiding the RPI and all the privies. By doing such things as scrubbing the metadata from their submitted documents, not utilizing the same law firm as the RPI to file the IPRs, and keeping email conversations to a well-scrubbed minimum, RPX can limit the chances of an original smoking gun reaching the point that the already overwhelmed, and seemingly interested in speed and not justice during the proceedings, PTAB will even initiate additional discovery.

    RPX is a public traded company. Their one goal is to increase shareholder value by increasing their value to their clients and increasing the number of those clients. They do not file IPRs to better the market place or to rid the world of poor patents. These "philanthropic" activities do nothing to elevate the bottom line and would not be tolerated by goal oriented management looking to increase shareholder value and bottom line performance (are there any other types of top management these days?). To allow RPX or any of its ugly successors to file IPRs is, by default, either allowing one of its clients to; skirt the one year rule for litigation preclusion or getting a second bite of the Apple in litigating an already adjudicated outcome. Both of these actions are unfair and detrimental to the rightful patent holder whose rights protection should be the ultimate goal of the PTAB. After all it was their agency which issued the patent in the first place. I might add that RPX management seems to be voting with their feet on the ultimate destiny of their entire business model, as the number of insider sales is quite impressive.

    The PTAB is designed for cost effective, fast, and fair resolution of patent invalidity disputes. So far, it seems when one of these three must be sacrificed for the good of the other two, fairness gets the boot every time. Unless RPX and its ilk can be cut of from the body of the needy patent infringers they will become more practiced at hiding their true motivations and patent holder's rights will suffer accordingly. Far be it for me to speculate on whether this was the intended purpose of this legislation and the creation of the PTAB.

    Disclosure: I am long VHC.

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Comments (9)
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  • Jeff's WaterWorks
    , contributor
    Comments (89) | Send Message
    Author’s reply » Yes, I know I have "of" when it should be "off". SA is not being kind to editing efforts.
    10 Apr 2014, 11:41 AM Reply Like
  • Chinabob
    , contributor
    Comments (36) | Send Message
    Good article Jeff. Part of the strength of our country is the new ideas and processes created by the many entrepreneurs that have been patented with resulting product sold around the world. If RPX and the PTAB weaken patents by their actions, our place as a leading country in the world will suffer.
    10 Apr 2014, 12:04 PM Reply Like
  • Tom Shaughnessy
    , contributor
    Comments (1145) | Send Message
    Great article Jeff, thanks for sharing.
    10 Apr 2014, 12:53 PM Reply Like
  • ClintH
    , contributor
    Comments (98) | Send Message
    Personally, the PTAB should only be used by an "accused infringer" not anyone and everybody who wants to file one. Maybe we ought to load up the courts with frivilous filings for PTAB and see what they do. After a couple thousand filings, they will find that they should not award these to just everyone.
    10 Apr 2014, 12:53 PM Reply Like
  • Scaramouched
    , contributor
    Comments (28) | Send Message
    Mr Waterworks, I find your article intriguing and very informative. I have been following closely the results of the above conflict and the PTAB's resolution. If I've ever seen a more flagrant foul attempt at eluding the truth I can't remember when. Apple's attempts to circumvent the many fine organizations and laws of our country border on the absurd and very, very, abusive. They filed late--live up to it and move on for the truth's sake. The gall of Apple often makes me regret that I own much of their stuff because buying American seemed the right thing to do and their technology, though much of it apparently pirated, it quite nice. If the PTAB cannot see through this nonsense I personally would say money and power can influence even more than most of us could even fathom. I will watch closely the result here. If Apple gets another bite by "cheating their way" through the patents process I will find a way to take personal action. Although it many not do much, I want those responsible for the shenanigans to know they aren't doing it without others knowing they are "playing the money." Results here take no time whatsoever. You may quote any law you wish here, but the truth is plain to see--open your eyes PTAB, it isn't that complicated and you know it too!! Nonsense, and a waste of time and effort, but Apple seems to always "sneak" out the back door when possible!!
    10 Apr 2014, 02:38 PM Reply Like
  • jstevenbaker
    , contributor
    Comments (13) | Send Message
    Good blog, Jeff.
    10 Apr 2014, 04:41 PM Reply Like
  • manix
    , contributor
    Comments (209) | Send Message
    What would be the best course of action for a group of concerned citizens/investors to take in order to inform PTAB of our concerns regarding the current perceived abuse of these new patent laws?


    Petitions? Personal letters? Pickets?


    What is the best approach these days to make an impact on those at the PTAB?
    10 Apr 2014, 04:58 PM Reply Like
  • jorgerodr
    , contributor
    Comment (1) | Send Message
    Great insight.
    10 Apr 2014, 09:27 PM Reply Like
  • Strawsine
    , contributor
    Comments (13) | Send Message
    RPX is a hackneyed metaphor lifted from the mid-Twentieth Century "B" Westerns. They are hired guns who saunter into town with intention of cowing the townfolk into compliance with the will of the local land/cattle barron (AAPL in this script). It remains to be seen if the PTAB will tuck tail and run or show spine. I expect spine. We'll see soon.
    Great piece Jeff.


    10 Apr 2014, 10:08 PM Reply Like
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