Defensive Patent Aggregation

Defensive patent aggregation (DPA) is the practice of purchasing patents or patent rights to keep such patents out of the hands of entities that would assert them against operating companies. The opposite is offensive patent aggregation (OPA) which is the purchasing of patents in order to assert them against companies that would use the inventions protected by such patents (operating companies) and to grant licenses to these operating companies in return for licensing fees or royalties. OPA can be practiced by operating companies or Non-Practicing Entities (NPEs)

Operating companies must often defend themselves against claims of patent infringement. To prevent such litigations, operating companies sometimes purchase patents in technologies which they use or develop. Another motivation for operating companies to acquire patents is the ability to counter-assert such patents in case another operating company files a patent litigation. Operating companies have also pooled their efforts and financial resources to purchase patents. An example of such defensive patent aggregation is Allied Security Trust (AST).

In 2008, a new business model emerged with third-party financing doing defensive patent aggregation whereby a third-party – the aggregator – purchases the patents or patent rights strictly to mitigate the risk and cost of litigation associated with non-practising entities (NPEs) and provides licenses to members against a fixed annual membership fee. This model was introduced by RPX Corporation, a start-up based in San Francisco. RPX received venture funding from Kleiner Perkins Caufield & Byers (KPCB) and Charles River Ventures (CRV).

In the United States, the cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $4 million or more for a complete defense, even if successful. And, when non-litigation licensing and settlements are factored in, the actual costs of fighting patent lawsuits is much higher. Because the costs and risks are high, defendants may settle even non-meritorious suits they consider frivolous for several hundred thousand dollars. The uncertainty and unpredictability of the outcome of jury trials also encourages settlement.

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Wikipedia