RPX Corp. Has a New Approach to Patent Litigation

Amy Miller

The Recorder

10-09-2012

RPX Corp. aims to help keep tech companies out of patent litigation.

Founded in 2008 and backed by Kleiner Perkins Caufield & Byers and other prominent venture capital firms, the San Francisco patent aggregator gives companies access to a shared pool of patents they can use to defend against infringement suits filed by nonpracticing entities in exchange for membership fees. But RPX doesn't distribute the fees to members. It uses the money to buy more patents to broaden the protection it can offer to its 110 members.

RPX has spent close to $500 million on more than 105 acquisitions of patents and patent rights in consumer electronics, software, media content, mobile communications, networking and semiconductors as of June 30, the company said in a recent regulatory filing. It's also begun to acquire what are called "covenants not to sue" to further mitigate clients' litigation risks. The covenants are legally binding agreements that prevent a patent owner from enforcing its patent rights.

RPX went public in May 2011, raising about $160.2 million after selling approximately 8.4 million shares at $19 per share. And its coffers continue to grow. Revenue for the six months ending June 30 increased 35 percent over the previous year, jumping to $99 million.

But not everyone is pleased with the RPX business model. RPX faces fierce competition from nonpracticing entities such as Acacia Research, Intellectual Ventures, Millennium Partners and Rembrandt IP Management, along with patent-buying consortiums such as Allied Security Trust, for patent assets.

In March, Cascades Computer Innovation, a nonpracticing entity, sued RPX in San Francisco federal court claiming that the company conspired with co-defendants Motorola Mobility Inc., Samsung Electronics Co., Dell Inc. and other electronics giants to fix prices on licenses for patents that optimize applications in smartphones using the Android operating system. The case is still pending before U.S. District Judge Yvonne Gonzalez Rogers in Oakland.

legal team and outside counsel

RPX hired Martin Roberts as its first general counsel in October 2010. Roberts heads a staff of four attorneys who, not surprisingly, specialize in acquiring patents and drafting licensing agreements. A committee decides which patents RPX should purchase, and the legal team goes out and does it. Roberts also oversees the company's human resources department, and the head of information services and technology reports to him as well.

Roberts said his team handles about 90 percent of the company's legal work in house and turns to outside counsel only when they need help with large transactions.

"It's an experienced staff, and we're fairly creative," Roberts said. "We really are a startup, so we figure out ways to get stuff done without spending a lot of money on outside counsel."

When RPX needs help with corporate work, Roberts often hires attorneys from Gunderson Dettmer Stough Villeneuve Franklin & Hachigian in Redwood City. Corporate partner Bennett Yee helped take RPX public last year, and other attorneys from the firm also help with SEC and other regulatory filings. Gibson, Dunn & Crutcher corporate partner Stewart McDowell in San Francisco also helps with large transactions, and she represented the underwriters in RPX's IPO, along with partner Douglas Smith.

"IPOs in general are challenging," Roberts said. "But the hard part is not the IPO. The hard part is being a public company. There are so many more rules than there used to be and you have to pay attention all the time."

After Cascades filed its federal antitrust suit against RPX earlier this year, Roberts hired Latham & Watkins partners Alfred Pfeiffer, Charles Crompton and Hanno Kaiser in San Francisco to defend the company.

But when RPX needs help with patent matters in the U.S. or abroad, Roberts typically hires less expensive smaller firms outside the Bay Area, he said, such as London-based Kilburn & Strode, Dallas-based Howison & Arnott and Dallas-based Glast Phillips & Murray. "We don't need to pay a large firm to do this work for us," Roberts said.

daily duties

Roberts' primary responsibilities fall into the "everything else" category, he said. He attends senior management meetings and is the company's primary liaison with the board of directors.

He also handles corporate governance and human resource matters, which includes everything from filing SEC financial reports to helping manage the company's stock and retirement plans.

"I have a relatively short attention span and I love the variety of my days," Roberts said. "The business model is evolving and I get to participate in the creation of something."

And he's also been getting up to speed on patent issues, a legal area he'd never worked in before joining RPX. He says he was hired for his experience taking companies public, not his patent expertise. "I got thrown into the deep end of the pool, and I'm learning from our patents lawyers every day."

route to the top

Roberts started his legal career as a finance and banking attorney, and since then, most of his time has been spent in house.

"I like the variety and I like being close to one client," Roberts said. "And I tend to like working for small companies better because you just feel a direct impact from the work you do."

After graduating from University of Alabama School of Law in 1985, Roberts worked for an Alabama law firm that represented bank holding companies based in Montgomery and Mobile.

In 1988, he left the firm to work as a managing attorney for the Federal Deposit Insurance Corp. in Los Angeles, where he handled numerous bank closures. In September 1995, Roberts joined Fair Isaac Corp. Inc., the credit score company, as senior counsel. He left in April 1997 to become senior counsel at The PMI Group Inc., a provider of mortgage-related services.

Then in May 1999, Roberts landed his first general counsel position at San Francisco-based LookSmart, a pay-per-click search advertising network that was preparing to go public, which it did three months later.

In February 2004, he joined Brisbane-based Shopping.com, which he also helped go public a few months later. Then a year and a half later, eBay Inc. acquired the website, and Roberts became a deputy general counsel at eBay.

In July 2007, he made another move to Linden Lab, maker of the online virtual world Second Life, where he stayed until joining RPX in October 2010.

personal

The Eufaula, Ala., native and his partner, John Rhodes, have been married four years. He's an avid gardener and home chef.

"I make up in enthusiasm what I lack in ability," Roberts said. "I will try almost anything."

Favorite restaurant

Diavola Pizzeria in Geyserville, just north of Healdsburg in Sonoma County.

This article originally appeared in The Recorder.