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Lawyer's Creative Take on Patent HoldingGoing Public: John Amster is starting a new career, as the founder of a patent holding company that, he says, has a different philosophy.
2008-09-18 12:00:00 AM
Businesses trying to get a piece of the lucrative patent market are popping up like mushrooms on a rainy day.
The latest is RPX Corp., which announced its launch Wednesday. The San Francisco company promises to sell reasonably priced protection from patent infringement suits to companies by buying dangerous patents off the street.
But John Amster, the patent lawyer turned entrepreneur who co-founded RPX, said it will be different from others that have come before.
RPX won't be looking to make money by licensing the patents it buys, as does Acacia Research, which often sues for patent infringement, or Intellectual Ventures, which leverages its huge portfolio for licensing deals worth hundreds of millions. Instead, Amster said, RPX will charge predictable rates to customers who want to avoid infringement suits.
"The goal is for the people paying us money to view us as a service provider," he said.
Investors certainly think it's a good idea. Two of the most prominent venture capital firms, Kleiner Perkins Caufield & Byers and Charles River Ventures have put money into RPX. Although Amster wouldn't say how much the funds are putting in, RPX will buy $100 million worth of patents in its first year, he said.
Joe Chernesky, president of IPotential, a San Mateo IP investment bank, said RPX will have to prove that it's different — and that it can actually make its investors happy with good returns.
"It's a little bit of a gold rush because patents have value and companies are willing to buy," Chernesky said. "It sounds like these guys are pretty well-connected in the financial world, but when it comes to actually executing, I think they'll face challenges."
Chernesky said one challenge RPX faces will be buying enough patents to make a difference. Another will be signing up customers if there's no direct consequence for those who don't.
With the high price of defending a patent infringement suit (about $5 million if it goes to trial) and the high risk for patent holders going after companies, Amster said it shouldn't be a hard sell.
"We're trying to eliminate friction from the traditional licensing transaction," he said.
RPX is also trying to eliminate the seemingly pervasive secrecy surrounding the emerging industry.
"The market is starting to mature a little bit. One thing that's lacking from the market is transparency and visibility," Amster said. "We think that we will help address that issue."
That means RPX will be disclosing its investors, the patents it's buying, and its customers, unlike, say, Intellectual Ventures, the giant secretive patent acquisition company in Seattle.
Amster was an IP lawyer at Weil, Gotshal & Manges. Later, he worked at seminal patent auctioneer Ocean Tomo, and most recently he did a stint at Intellectual Ventures (a company he has nothing but praise for).
Already he's got 13 people in the company. That includes co-CEO Geoffrey Barker, who also worked at IV; Eran Zur, a patent lawyer who gained his fame with the prolific patent holding company Lemelson Medical, Education & Research Foundation; and chief IP officer Paul Saraceni, who is joining from Yahoo's legal department.