Patent Troll Auctions Free Passes From Lawsuits: Mobile in Its Sights

Last Updated Apr 8, 2011 9:16 AM EDT

Round Rock Research, a so-called non-practicing entity -- more commonly known as a patent troll -- conducted an unusual auction last week. The company owns 4200 patents and patent pending applications it bought from Micron in 2009. Instead of identifying corporations whose activities might infringe on the patents and then suing them, Round Rock offered a chance to bid on one of several covenants not to sue through intellectual property auction house ICAP Ocean Tomo. Only one of these "get out of lawsuit jail free" cards sold, but it went for $38.5 million.

Putting lots of patents up for auction is common. Not so for covenants to not sue. This seems to have been a first. The Gametime IP blog suggests that the auction might open a new world for all those who depend on patents, because it could offer a new way for companies to do business:

While comparing a patent auction to earth-changing events might, in itself, seem overly dramatic, consider the amount of money wasted on literally thousands of lawsuits each year that typically end in the same type of agreement that could have been purchased today, in a matter of minutes, not years -- and with the cost of a few transactional lawyers, not dozens of high-priced litigators-- So, no, I don't think the significance of today's events are capable of overstatement.
I spoke with Alex Poltorak, CEO of intellectual property enforcement firm General Patent Corporation, who was at the auction. He said that Round Rock had actually offered three different covenants for the same body of patents:
  • one for any company
  • one for any company other than one in the semiconductor industry
  • one for any company other than a mobile handset manufacturer or one in the semiconductor industry
It was the second covenant that sold, raising suspicion that a handset company purchased it and that Round Rock plans to use its patent portfolio to target the mobile industry.

Why take this route rather than the more typically expected lawsuit? "I think they're going for the low-hanging fruit," Poltorak says. "You want to ask people who are much more open to licensing patents they're infringing on. Let's save each other a lot of aggravation and legal fees. Some people will respond to that. Others will not."

And for the ones that don't, there are always patent litigators.

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Image: Flickr user mrbill, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.