Is The Economy Taking A Bite Out Of Abusive Patent Lawsuits?

from the one-can-hope... dept

We've never been a fan of Ocean Tomo, the "patent auction" shop that was seen as something of a clearing house for lawyers and patent hoarders looking to buy up patents to squeeze money out of other companies. However, in February, we wrote about an article in the Chicago Tribune insisting that the tough economy was increasing patent sales as companies looked to squeeze more value out of their patent portfolios. We questioned the article, noting that it showed absolutely no proof whatsoever that sales were up -- other than a claim (with no data) from an Ocean Tomo exec, who had every incentive to make people believe that sales were up.

But, in reality, it turns out sales aren't up. They're way, way, way down.

Joe Mullin writes about the latest Ocean Tomo auction that can reasonably be termed a total disaster after sales didn't just fall, but fell off a cliff:
While some folks I spoke to before the auction said they expected sales this year to be down by as much as 50 percent from last year, the final results were much worse. Friday's auction took in just under $2.9 million--more than 80 percent less than the roughly $17 million in patent sales generated by the company's San Francisco auction last year.

Out of more than 80 lots of patents on the block, only six sold. (An Ocean Tomo auction "lot" can include a single patent, several patents, or a portfolio of patents in related technology.) Ocean Tomo tacks on a 10 percent fee paid by buyers, and also charges fees to sellers, meaning the company probably took in less than $1 million for itself....

Ocean Tomo CEO James Malackowski looked a bit shaken by the end of the day.

"Obviously the market has become more selective," he said in brief concluding remarks.
That, of course, is exactly the opposite of what Ocean Tomo was telling reporters just a few weeks ago (and those reporters repeated it without question).

In the meantime, Saul Hansell of the NY Times, notes that one of the very few buyers was RPX, a company we covered last year, which is still insisting that its business model is never to sue for infringement but to simply let tech companies "license" its portfolio as a way of having ammo against other patent infringement lawsuits. It's sort of "Intellectual Ventures-lite." This was the original business plan of IV, but no one really believes that IV won't eventually sue -- and I'd imagine the same is true of RPX. At some point, its A-list investors will demand a bigger return, and using the portfolio to sue will just be too tempting.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    identicon
    Skeptic, Mar 31st, 2009 @ 1:17pm

    Maybe it's not just the economy

    I suspect that there is more than the economy at work here. There have some court cases lately that throw the question of software and/or business models into question. We have also seen some corporations actually push back a little bit on IP issues. Even the USPO seems to be sensing that things need to change. If I were in the patent trolling business I would be cautious about spending much on acquiring new patents for my war chest. Even the hard-core trolls have to realize that their business bubble could pop.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Anon-II, Mar 31st, 2009 @ 1:21pm

    RPX won't sue. It has stated publicly it may, from time to time, sell off some of its portfolio. It's the buyers of RPX's patents who will sue [those not licensed by virtue of being an RPX member]. Think of it as a patent laundering operation, if you will.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Mar 31st, 2009 @ 5:50pm

    Other than being provocative, I do not have any idea how the title of the article relates to its contents.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Mike (profile), Mar 31st, 2009 @ 6:26pm

      Re:

      Other than being provocative, I do not have any idea how the title of the article relates to its contents.


      Ocean Tomo was a source used to purchase patents for abusive patent lawsuits. The fact that sales are down suggests that those lawsuits may be less economically feasible these days.

      I would have thought that was clear from the context.

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Mar 31st, 2009 @ 7:32pm

        Re: Re:

        Any specifics regarding parties who have purchased patents at auction and then asserted the patents against third parties?

         

        reply to this | link to this | view in chronology ]

      •  
        identicon
        Weird Harold, Mar 31st, 2009 @ 7:41pm

        Re: Re:

        The title is still somewhat misleading. Are lawsuits down, or is just the act of buying existing patents down? Is there any indication of less lawsuits?

        I think the only two things seen here is a lack of available funds from investors to take the risk on patents, and an somewhat naive business owner that thought his product(s) were recession proof.

        When credit gets easier and the economy is rolling again, let's check back and see how their business is.

         

        reply to this | link to this | view in chronology ]

      •  
        identicon
        Willton, Mar 31st, 2009 @ 8:46pm

        Re: Re:

        Ocean Tomo was a source used to purchase patents for abusive patent lawsuits. The fact that sales are down suggests that those lawsuits may be less economically feasible these days.

        No, it suggests that few want what Ocean Tomo is selling. It says nothing regarding how entities are exerting patent properties that were not acquired from Ocean Tomo.

         

        reply to this | link to this | view in chronology ]

        •  
          icon
          Mike (profile), Mar 31st, 2009 @ 11:18pm

          Re: Re: Re:

          No, it suggests that few want what Ocean Tomo is selling. It says nothing regarding how entities are exerting patent properties that were not acquired from Ocean Tomo.

          Heh. Nice try. Last month, Ocean Tomo was claiming more people would be making use of these patents to get extra money, a statement many people agreed with.

          The fact that the sales dropped off by a HUGE margin, certainly suggests Ocean Tomo is wrong, and thus it's hard not to believe that it's a lot less feasible to go down this road.

          Or do you think that Ocean Tomo was lying last month?

           

          reply to this | link to this | view in chronology ]

          •  
            identicon
            Weird Harold, Apr 1st, 2009 @ 4:52am

            Re: Re: Re: Re:

            Mike, right now, there are plenty of huge marging business opportunities that are not getting snapped up because nobody has the free cash, or the desire to take any risk at all.

            I think that Ocean Tomo's claims were overdone, but they look worse because of how truly crappy the economy is today.

            Again, do you see a decrease in lawsuits?

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              Anonymous Coward, Apr 1st, 2009 @ 5:41am

              Re: Re: Re: Re: Re:

              According to http://www.patstats.org/Patstats3.html, patent lawsuits were down 5% in 2008 as compared to 2007. Most districts held steady (thus implying that there is no decrease in lawsuits, at least through the end of 2008), except for the Central District in California, which saw a drop in lawsuits from 325 to 124.

              Also at patstats.org, the total number of filings in 2007 was 2,903 and the total number of filings in 2008 was 2,749, or a drop of 154.

              Now, if you take away the Central District of California, patent lawsuits WENT UP slightly everywhere else.

              While I wish to avoid getting into the difference between causation and correlation, sprinkling in speculation, I would suggest the following possibilities for the down turn in Ocean Tomo sales:

              (1) The patents Ocean Tomo had to offer were in industries that had little cash to purchase (Mike's economy theory).

              (2) The patents Ocean Tomo had to offer were of the types that were most affected by recent litigation, such as Bilski (a non-economy affected cause).

              (3) The patents Ocean Tomo had to offer were perceived as having less quality than Ocean Tomo seemed to believe (a non-economy affected cause).

              (4) The patents Ocean Tomo had to offer were in industries where litigations favored the plaintiff even less than other industries (according to the AIPLA, only about 20% of all lawsuits initiated end up favoring the plaintiff; you can see that it would take very little to convince people that unless your complaint is really solid that the odds are not in your favor)(a non-economy affected cause).

              Statistically speaking, there are perhaps more possibilities that are not economy based for the poor Ocean Tomo sales than those that are based on the economy - though ultimately all such decisions have economics behind them.

               

              reply to this | link to this | view in chronology ]

          •  
            identicon
            Willton, Apr 1st, 2009 @ 2:04pm

            Re: Re: Re: Re:

            Heh. Nice try. Last month, Ocean Tomo was claiming more people would be making use of these patents to get extra money, a statement many people agreed with.

            The fact that the sales dropped off by a HUGE margin, certainly suggests Ocean Tomo is wrong, and thus it's hard not to believe that it's a lot less feasible to go down this road.

            Or do you think that Ocean Tomo was lying last month?


            No, I think Ocean Tomo was dead wrong, but not because of the economy. I think it has much more to do with the change in the law on patentable subject matter. Apparently Ocean Tomo's executives never read In re Bilski. Otherwise they would have realized that potential buyers probably don't want to be buying patents that are ripe for quick invalidation.

            However, patentees whose patents pass muster under Bilski are still engaging in just as much litigation, "abusive" or otherwise. Had Ocean Tomo had more patents that met the "machine-or-transformation" test in their inventory, perhaps they would have had a better turn out. Using Ocean Tomo's lack-luster auction as evidence that the economy is diminishing "abusive" (whatever that means) patent lawsuits is taking one data point and extrapolating it to the world.

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              Anonymous Coward, Apr 1st, 2009 @ 2:37pm

              Re: Re: Re: Re: Re:

              So, you are thinking my point #2 above has some merit. However, there are other possibilities as well.

               

              reply to this | link to this | view in chronology ]

  •  
    identicon
    moelarry, Apr 1st, 2009 @ 6:10am

    patent hoarders

    "patent hoarders"

    Call it what you will...patent hoarder, patent troll, non-practicing entity, etc. It all means one thing: “we’re using your invention and we’re not going to pay”.

    for the truth about trolls please see http://truereform.piausa.org

     

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This