After surviving the meltdown of telecommunications giant Nortel, John Veschi and his company, Rockstar, took control of about 4,000 Nortel patents purchased by Apple, Microsoft, Blackberry, Sony, and Ericcson.
The tech patent wars continue to cool.
Four years after purchasing a massive patent portfolio from bankrupt telecommunications giant Nortel—and moving about 4,000 of these patents into a company that proceeded to sue some of their biggest competitors—Apple, Microsoft, and other members of a controversial consortium called Rockstar have agreed to sell the 4,000 patents to a company that vows to use them solely as a way of protecting the industry from litigation.
The company is called RPX, and on Tuesday, it announced that, through a subsidiary, it has agreed to purchase the 4,000 Rockstar patents for $900 million. In 2011, the Rockstar consortium—which includes Sony, Ericsson, and Blackberry as well as Apple and Microsoft—acquired the Nortel portfolio at auction for an enormous $4.5 billion. But 2,000 of the patents in that original portfolio are still in the hands of the consortium’s member companies.
RPX has agreed to purchase the remaining patents, which were held by a separate company, dubbed Rockstar Consortium. Run by former Nortel employee Jon Veschi, this company spent the last three years trying to “monetize” these patents, seeking licensing deals with companies it believed were infringing on the patents and eventually suing some big-name companies, including Google and Cisco. When we contacted Veschi about the deal with RPX, he referred us to an Apple spokeswoman, who declined to comment.
On the surface, the deal amounts to another armistice in the long, expensive, and rather-complex patent wars. Apple and Samsung have agreed to settle many of their patent suits against each other over various mobile technologies. The Rockstar Consortium has already settled its suits against Google and others. And now the company is offloading all its patents—its reason for being.
What’s more, these patents are going to an operation that seems to have built a successful business subverting the Rockstar business model. RPX controls a large patent portfolio that it licenses to companies such as Google and Cisco as a way of guarding them against litigation. “This transaction represents a shift in mentality,” says RPX CEO John Amster.
Julie Samuels, a longtime patent watcher with the Electronic Frontier Foundation who is now the executive director of a think tank called Engine, says that the deal is indeed good news. “There has been a cooling off in the smartphone war,” she says. “The business model of using patents to make a boatload of money is not what it once was.” But also she points out that the patent landscape can so easily shift. Patents used for defense purposes can quickly become offensive. “It’s always troubling when one party controls that many patents,” she says, referring to RPX. “I don’t care who it is.”
Before starting RPX, Amster worked for another patent collector called Intellectual Ventures. Created by Microsoft co-founder Nathan Myhrvold, Intellectual Ventures began by vowing to protect companies from litigation, but ended up suing many companies instead, and Amster has always said he left IV so that he could tackle the patent wars in a healthier way. “There is no bait-and-switch with us,” he says, pointing out that in licensing its patents to over 200 companies, it has legally agreed not to sue those companies.
When its deal with Rockstar closes, says RPX chief financial officer Bob Heath, RPX will end all litigation involving the 4,000 patents it has purchased, including suits against Samsung, LG and HTC, and it will seek to license the patents to its existing customers, including Google and Cisco.
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