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Patent Researcher Turns Tables on Litigants

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scion Member Level  Wednesday, 06/01/11 11:47:47 AM
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Patent Researcher Turns Tables on Litigants

JUNE 1, 2011

Patent research firm Article One Partners is offering frequent targets of patent lawsuits a new first-strike tool that turns the tables on initiators of infringement actions.

The New York company, which pays a network of scientists and technology experts to determine if a patented invention is truly novel, typically helps big companies after they are sued by patent holders. Now, it is launching a service that aims to invalidate "poor quality" patents before they are asserted in courts.

The service, called Litigation Avoidance, is targeted squarely at so called non-practicing entities, or NPEs. These companies, called "patent trolls" by some critics, don't make products and generate revenue solely by licensing and litigating patents.

"The NPE business model is quite easy today and the business model for high-tech companies is increasingly difficult," said Cheryl Milone, chief executive of Article One.

One of the early customers for the service is Microsoft Corp., which like many of its tech peers is engaged in various patent disputes. Microsoft declined to comment.

Founded in 2008, closely-held Article One has 110 customers who pay an annual six-figure fee for access to research generated by its network. Until now, the company focused on patents that had already been asserted in court. Now, clients can request investigations on patents that have yet to be litigated, for an addition fee, which Article One declined to specify.

In recent years, NPEs such as InterDigital Inc., Acacia Research, Wi-LAN Inc., Mosaid Technologies Inc. and Intellectual Ventures LLC, have grown in size and clout. For instance, Acacia's 2010 revenue and earnings more than doubled. The Newport Beach, Calif. firm recently raised $175 million, giving it a war-chest of $316 million. Wi-LAN and InterDigital also recently completed large financings.

Patent lawsuits filed by NPEs that went to trial last year climbed to 602 from 496 in 2009, according to RPX Corp., a San Francisco company that acquires patents to prevent NPE's from buying them and asserting them against its members. Many more patent suits were filed and settled before reaching the trial stage.

While the companies sued by NPEs complain that such lawsuits are often frivolous, NPEs and their supporters say they help independent inventors and companies realize value for their inventions.

Article One's latest initiative could be used to delay or avoid litigation by targeting legitimate patents, said Ray Niro, founding partner of Niro, Haller & Niro, a Chicago law firm that often represents NPEs. "To establish a business whose goal is to wipe out patents is disgraceful," he said.

Write to Stuart Weinberg at stuart.weinberg@dowjones.com


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