Former Intuit Lawyer Plays Offense Against NPEs
As the head of IP litigation at Intuit Inc. a few years ago, Kevin Jakel says he was essentially managing a docket of cases brought by non-practicing entities.
"I wanted to find a way to not just pay off patent trolls or buy our way out of the problem," he said. But none of the existing patent-pooling ventures took the approach Jakel had in mind. So last year, he left the Mountain View software company and founded Unified Patents, which is geared toward taking proactive measures designed to ward off NPEs from circling specific sectors.
The first fruits of his labor are ripening now: On Thursday, Unified petitioned the U.S. Patent and Trademark Office for an inter partes review of a patent held by Clouding IP since 2004, which covers file synchronization techniques employed by most cloud storage solutions. Jakel said the firm will file others, too.
The IPR is a revamped proceeding borne out of the America Invents Act, which was passed in 2011, and is meant to make it easier to beat back flimsy patent claims. The option doesn't come cheap, however: estimates of IPR costs range from upwards of $200,000, according to a September 2013 paper, "Patent Assertion and Startup Innovation," by Colleen Chien, associate professor at the Santa Clara University School of Law and new adviser at the White House Office of Science and Technology Policy. Reviews replaced inter partes reexaminations, which were similar but more protracted.
As of July, 377 IPR petitions had been registered, according to data compiled by Merchant & Gould, and 11 had been either terminated or dismissed.
Oracle initiated two IPRs against the Clouding IP patent earlier this year, but when the parties settled, the process ended. Before reaching its deal with Oracle, Clouding IP attempted to amend some claims — a step Jakel says concedes invalidity.
All told, Oracle had challenged 13 of Clouding IP's patent claims; Unified added seven more claims to that mix. In taking up where Oracle left off, Unified is even using the same firm, Oblon Spivak, which touts itself as the nation's number one filer of post-grant challenges.
RPX Corp., a patent defense industry leader, sees the IPR as but one arrow in the quiver, noted Robert Heath, the firm's senior vice president for corporate development. RPX has not filed IPRs itself, Heath said.
"Unlike buying patents, which will 100 percent reduce the risk, IPRs are not without risk," he said.
Brian Love, assistant professor at the Santa Clara School of Law, said reexaminations have long been a double-edged sword. "Sometimes it limits or outright eliminates patents, but often it actually makes them stronger."
Under the pre-AIA system, just 42 percent reexaminations succeeded in having claims canceled, according to patent office data. Courts will be naturally less inclined to second-guess a patent that has been twice "blessed" by the PTO, Love said.
IPRs are only one element of Unified's strategy. Headquartered in Los Altos, the firm intends to differentiate itself in the NPE defense market through its focus on particular technologies, dubbed micro-pools, which bring together competitors in sectors targeted by NPEs. Clients like NetApp, which advocate for industry solutions to shared problems, favor such an approach.
Michael Sacksteder, chair of the patent litigation group at Fenwick & West, said Unified's segment approach is smart because its clients pay only for the defense of patents in areas they care about. In addition to cloud computing, Unified says it's working on micro-pools in financial services and streaming media.
When it comes to selecting micro-pools of focus, Jakel and Unified COO Shawn Ambwani "follow the trolls."
"We want to affect their investment decisions," Jakel said, "so when they look at cloud storage they say, 'Why would we try to monetize there?'"
That's a key point for Julie Samuels, a staff attorney at the Electronic Frontier Foundation.
"The problem is that for the most part, what patent trolls do is perfectly legal," she said. "Trying to make life harder for them, and trying to make it a less desirable business model so there will be fewer of them," is the best approach.
Unified tracks NPE activity through demand letters and tries to identify patent areas before they become hot. "I use patent analytics in the same ways NPEs do," Jakel said.
RPX also employs an industry-centric approach, Heath said. RPX has more than 150 members and takes in more than $200 million a year in revenues from companies who subscribe in part to be able to defend themselves with the patent rights RPX has secured. "We have a lot of different micro pools within our macro pool," Heath said.
Moreover, he added, scale is the most important factor in shaping rational behavior, and Unified is a couple orders of magnitude smaller than RPX. He likened the newcomer's entry into the market to David trying to enter Goliath's playground.
Unified is recruiting both large and small companies to join its micro-pools, so they reflect the full ecosystem within a technology focus.
The little guys tend to be easy targets, Jakel notes, and Unified has extended membership to them for free. Unified won't disclose how much bigger players pay to participate.
In some ways, small companies are like canaries in the cave, signaling that NPEs are eyeing a particular technology.
"You're not going to send a demand letter to Google very often," Jakel said. "They can send those demand letters to small companies with relative impunity."
Companies with less than $10 million in revenue make up more than half of the unique defendants sued by NPEs, according to Chien's study.
Jakel hopes to curb such easy target monetization. And when companies fail, Jakel wants them to sell their patents to Unified, rather than keep feeding the NPE cycle.
It also plans to snap up patents in those areas on the secondary market to reduce the number available to NPEs. But Behrooz Shariati, an IP litigator at Womble Carlyle, speculated that might simply jack up the price for patents.Still, Shariati said Unified's approach struck him as good in theory.
"The only place NPEs are really vulnerable is their patents," he said, "so if you're going after their patents, you're blunting the weapon."