1

“Trends and Developments Regarding

Nonpracticing Entities in the U.S.”

Chizai Kanri, Vol. 61, No. 4, pp. 445-54 (2011)

Peter J. Stern*

Timothy G. Doyle**

Abstract

There has been an explosion in recent years in the scope and variety of activities carried

out by “nonpracticing entities” (NPEs) in the U.S. That phenomenon, coupled with

continued efforts by U.S. companies to find new ways to leverage their intellectual

property (IP), has led to important developments in the U.S. IP marketplace. This

article discusses recent trends and examines one important aspect of them more closely.

The authors have undertaken a study of recent patent infringement cases in a U.S.

jurisdiction known to be a common venue for lawsuits by NPEs. The results of this

study, which is based on an examination of the assignment history of patents asserted by

NPEs in patent litigation, appear to confirm anecdotal evidence that relationships

between traditional companies and NPEs may be becoming more complex than

previously thought. In conclusion, the authors suggest ways in which Japanese

companies can seek to benefit from this new reality.

I. Introduction

For at least a generation, technology-rich firms in the United States have

aggressively asserted their intellectual property (IP) to recoup development costs and

increase their profits. Led by names such as IBM, Texas Instruments, Motorola, and

Kodak, countless U.S. firms have created sophisticated licensing and litigation

programs, backed up by well funded in-house legal departments and outside trial

counsel. The U.S. model for leveraging IP has spread, with many variations, to

prominent companies all over the world.

* Partner, Morrison & Foerster LLP (Tokyo office).

** Associate, Morrison & Foerster LLP (Tokyo office).

2

Though that model remains central to the U.S. IP landscape, it is changing around the

edges. Driven by ever greater internal pressure to generate value from IP, U.S.

companies are seeking to capitalize on their technology in new ways.

Companies are trying, for example, to monetize patents in their portfolios that

they previously overlooked or were satisfied to use only for defensive purposes.

Companies are also showing a greater willingness to enter into licensing and patent

purchase arrangements with unconventional partners, including brokerage or

“middleman” firms, patent “aggregators,” and even patent “trolls.” These deals may

lead to surprising alliances, with important implications for U.S. IP law and policy.

This article reviews recent trends in an effort to gain a better understanding of

how sophisticated U.S. companies are managing their IP. We begin with an overview

of the new players on the IP scene, some of which may be familiar to Japanese

companies. These new players include firms such as Intellectual Ventures, RPX, and

Ocean Tomo, as well as numerous other “nonpracticing entities.”

Pushing further, we use recent patent cases filed in the Eastern District of Texas

as a data set to examine the evolving relations between mainstream technology

companies and the new players. Significantly, our research shows that many of the

patents asserted by nonpracticing entities in Texas were acquired, directly or indirectly,

from traditional technology companies. Our findings thus suggest that the role of these

new players is more complex than is often admitted, and that the developing IP

marketplace in the U.S. presents a broader range of risks and opportunities than many

Japanese firms may have considered. By way of conclusion, we offer some

observations on how savvy Japanese firms can seek to take advantage of the current IP

trends that have appeared in the U.S.

II. Recent Trends

A. The Increased Role of NPEs

Nonpracticing entities (NPEs) have been a prominent feature of the U.S. IP

landscape for many years. Although there is no established definition of “NPE,” the

influential PricewaterhouseCoopers (PwC) Patent Litigation Study defines this term

3

broadly to include any “entity that does not have the capabilities to design, manufacture,

or distribute products that have features protected by the patent.”1

Among the many varieties of NPEs, some of the best known seek to extract

value from their patents through licensing and the threat of litigation. Jerome Lemelson,

for example, famously persuaded dozens of Japanese, European, and U.S. companies to

pay hundreds of millions of dollars in royalties for permission to use his numerous

patents.

In recent years, however, certain NPEs have increasingly become a source of

interest -- and concern -- for manufacturing companies. The rise of NPEs can be seen

as both cause and effect of the increasing commoditization of patents, and the

emergence of plaintiff-friendly patent litigation jurisdictions such as the Eastern District

of Texas.

Today, the impact of NPEs on U.S. IP law and practice is unmistakable. PwC,

for example, has calculated that between 2002 and 2009, the median damages award to

NPE patent holders was more than triple the award for practicing entities ($12.9 million

versus $3.9 million).2 Further, according to PwC, the “success rate” of NPEs in

asserting their patents on summary judgment and at trial has become stronger relative to

practicing entities that similarly seek to enforce patents. In 2009, NPEs won 48% of

litigated cases in which they were plaintiffs, as opposed to less than 40% for practicing

entities.3 In the Eastern District of Texas, where cases involving NPEs accounted for

31.8% of all patent decisions between 1995 and 2009, NPEs enjoyed an even higher

win rate of 55.6%.4

NPEs have even attracted the attention of the U.S. Supreme Court. In eBay Inc.

v. MercExchange, L.L.C., Justice Kennedy observed that, “quite unlike earlier [patent]

cases,” “[a]n industry has developed in which firms use patents not as a basis for

1 See 2010 Patent Litigation Study, page 26, available at http://www.pwc.com/us/en/forensic-

services/publications/assets/2010-patent-litigation-study.pdf. The present article focuses on NPEs that fit

the PwC definition, without trying to generalize about these firms or their business practices.

2 PwC 2010 Study, page 7.

3 Id. at page 15.

4 Id. at page 23.

4

producing and selling goods but, instead, primarily for obtaining licensing fees . . . For

these firms, an injunction, and the potentially serious sanctions arising from its violation,

can be employed as a bargaining tool to charge exorbitant fees to companies that seek to

buy licenses to practice the patent.” Citing the efforts of these firms to gain “undue

leverage in negotiations,” Justice Kennedy agreed with the Court’s holding that

injunctions should be granted in patent cases only where traditional requirements for

equitable relief are met. 5

Some NPEs are referred to as “patent trolls.” This term was coined as a

dismissive reference to NPEs that threaten litigation and extort settlements on the basis

of weak patents. Leaving aside its pejorative connotations, the term “troll” is not

particularly precise or useful: not all NPEs fit the “troll” stereotype, nor do they behave

uniformly. And even more confusingly, practicing entities may sometimes be viewed

as engaging in “trollish” behavior. Chief Judge Randall Rader of the U.S. Court of

Appeals for the Federal Circuit, for example, recently defined a “troll” as “anyone --

from IBM and Microsoft down to the smallest patent owner -- who asserts a patent far

beyond its value.”6

B. New Entities in the NPE Ecosystem

Recent years have seen an explosion in the number and variety of NPEs on the

U.S. IP scene. These firms vary widely in form and purpose, and often exhibit

considerable entrepreneurial creativity. This section provides a brief overview of some

of the more prominent new entities.

1. Brokers and Clearinghouses

In recent years, entities acting as brokers or “clearinghouses” for intellectual

property have served to increase the scope and fluidity of secondary markets in IP.

These middlemen typically do not retain an ownership interest in the patents they

handle. They support themselves by charging a commission on transactions. Because

they increase the liquidity of IP and reduce transaction costs for potential participants in

5 547 U.S. 388, 396-97 (2006).

6 See McDermott, E., “Beware the Skeptisaurus, says Judge Rader,” Managing Intellectual Property

(October 18, 2009).

5

the IP marketplace, such firms have helped to turn patents -- and patent litigation -- into

a commodity, freely bought and sold in the marketplace.

One prominent example of such a clearinghouse is Ocean Tomo,7 a company

that has garnered attention for high-profile patent auctions over the last few years.

Characterizing itself as a “merchant bank,” Ocean Tomo is also involved in financing

sales and licensing patent rights. It is the founder of the Intellectual Property Exchange

International, an organization based in Chicago that aims to become the world’s first

financial exchange with an intellectual property focus.8

2. More Sophisticated Patent Assertion Entities

By any measure, the assertion of patents by NPEs has become big business.

Patent licensing has shifted away from a simple model involving negotiations between

practicing entities, and now includes NPEs as central players. The size and

sophistication of NPEs has grown commensurately.

Today, NPE licensing campaigns and even lawsuits targeting entire industries

are not uncommon. One well-known example is the TPL Group, an IP holding

company whose related entities purport to license, among other patents, the “MMP

Portfolio” consisting of microprocessor patents issued to noted inventor Charles Moore.

TPL’s public filings show that it has licensed its patents to dozens of companies and

litigated against at least 8 companies, taking in tens of millions of dollars in royalties.

Another important trend is the adoption of the NPE model by practicing entities.

Consider, for example, the emergence of firms like MobileMedia Ideas LLC, founded in

2010. Partly owned by Sony and Nokia, MobileMedia has reportedly acquired 122 of

Sony and Nokia’s U.S. patents. In practice, MobileMedia has functioned as a “pseudo-

NPE,” seeking licenses from -- and, on occasion, suing -- traditional companies for

patent infringement, ostensibly without the involvement of Sony or Nokia. Sony has

7 The second half of Ocean Tomo’s name appears to be derived from the Japanese readings for 知 (and/or

智) as well as 友, suggesting “intelligence” and “friendliness,” according to the company website.

8 Data from Ocean Tomo’s recent patent auctions indicate that the dollar value of the firm’s transactions

has grown, even as the volume of patent sales at its auctions has declined since 2009. See

http://www.ftc.gov/bc/workshops/ipmarketplace/apr17/docs/jmalackowski.pdf.

6

described the assignment of its patents to MobileMedia as a part of its overall strategy

of making its patent portfolio “more broadly available in an efficient manner.”9 The

example of MobileMedia suggests that even practicing entities may seek to benefit from

the increased flexibility and discretion that the NPE form affords.

3. Patent Aggregators

A patent aggregator is an entity “whose business involves buying or obtaining

rights to a large number of patents in order to license the patents, either for defensive

purposes or for the purposes of earning licensing revenue, or both.”10 Aggregators

typically do not practice the IP assets they hold. Rather, they offer to license their

patents. In some instances, aggregators state that they will not sue on their patents;

these aggregators purport to provide a service by offering “defensive” licenses that

eliminate the threat of being sued on those patents.

One well-known defensive aggregator of patents in the consumer electronics,

media, and software industries is RPX. Founded in 2008, the company has since

acquired a portfolio of over 1,500 U.S. and international patents.11 RPX, according to

its website, undertakes “preemptive purchases of potentially dangerous patents in the

open market,” in order to remove them from circulation and keep them out of the hands

of more aggressive entities. RPX is thus an NPE that owes its existence to the litigation

activity of other NPEs. A co-chief executive at RPX has said that the company’s fee

would be justified if it manages to take just one or two patents off the market each year

that are considered true threats to a client.12 RPX actively seeks to acquire patents that

are being asserted in litigation, providing defendants in the litigation with a strong

incentive to license the RPX portfolio and thereby resolve the pending claims against

9 Joe Mullin, Patent Litigation Weekly: MobileMedia’s Unusual Patent Infringement Campaign,

LAW.com, April 19, 2010, http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202448222920.

10 Joseph Siino, “Dealing with IP Risk in the US,” Korea IT Times, December 4, 2009. The authors

gratefully acknowledge the assistance of Joe Siino in providing background information about many of

the issues discussed in this article.

11 About RPX, http://www.rpxcorp.com/index.cfm?pageid=7 (last visited Jan. 8, 2011).

12 New York Times BITS Blog, March 30, 2009, available at

http://bits.blogs.nytimes.com/2009/03/30/trolling-for-patents-to-fight-patent-trolls/.

7

them. Members of RPX can quit after a certain period of membership and retain the

licenses obtained during their membership.13

Proponents of the “aggregator” model emphasize that it usefully permits

companies to monetize IP (for example, by selling valuable but unused patents to RPX),

as well as to avoid expensive litigation by taking a broad license to the RPX portfolio.

As of January 2011, RPX claims to have 72 clients, many of which are large companies

paying millions of dollars per year.14 Insofar as patents owned by RPX may later be

sold to other companies or NPEs, RPX’s business model rests (at least implicitly) on the

threat that refusing to license the RPX portfolio may expose a company to the risk of

future litigation. Acquisition of patents by a “defensive” aggregator such as RPX does

not eliminate the possibility that those patents may later be asserted in litigation -- if not

by RPX, then by somebody else.

Yet another variation on a defensive IP strategy is illustrated by Allied Security

Trust (AST), an aggregator financed by 18 large member companies such HP, IBM, and

Philips. AST does not engage in out-licensing or litigation, and therefore differs from

many of the NPEs we have examined. AST’s stated purpose is to minimize the threats

of business disruption that result from patent actions brought by NPEs against operating

companies. AST acquires patents on the open market and provides interested members

with a non-exclusive license. The acquired patents are then re-sold, either to members

or once again on the open market, and all of the sales proceeds are returned to the

member companies that financed the acquisition. AST members that purchased licenses

in the patents retain their license rights. By means of this acquisition and divestiture

scheme, AST provides members with the flexibility to license and/or own patents that

might otherwise be asserted against them by NPEs.

4. Intellectual Ventures

Intellectual Ventures (IV) is a unique entity -- a large, well-funded, and

ambitious NPE whose activities cut across may of the categories described above. Part

13 About RPX, http://www.rpxcorp.com/index.cfm?pageid=39 (last visited Jan. 8, 2011). According to

RPX, the licenses to RPX patents that come with annual membership convert to perpetual after a certain

period.

14 RPX Main Page, http://www.rpxcorp.com/index.cfm?pageid=7 (last visited Jan. 10, 2011).

8

invention “incubator,” part patent aggregator, part licensing outfit, and part -- it now

appears -- litigation powerhouse, IV has occasioned great interest and fear on the part of

traditional firms.

Founded by former executives at Microsoft in 2000 and dedicated to furthering

“invention capital,”15 IV has built up a diverse portfolio of over 30,000 patents. IV

represents perhaps the most sophisticated and protean approach to IP management on

display in the U.S. today. IV seeks to promote invention and at the same time to make a

return on its investment, which it does by licensing its portfolio to major companies

(reportedly taking in over $1 billion in license fees) and offering a wide range of

services, including monetization and financing based on IP assets.

IV recently ended long-time speculation about whether it would assert its

enormous portfolio in litigation. On December 8, 2010, IV filed three separate lawsuits

in federal district court for the District of Delaware against major companies in the

software security, DRAM and flash memory, and field-programmable gate array

(FPGA) industries. Given its vast resources and its creative approach to IP management

and investing, IV’s future conduct will no doubt be closely watched by the entire

business community.

III. Increasing Interaction between Practicing Entities and NPEs

The brief discussion above suggests that as the scope and complexity of NPE

activity increases, the areas of intersection between practicing entities and NPEs may

also be broadening. As we have seen, practicing entities sell patents through broker

NPEs; license patents from aggregator NPEs; and in some cases have banded together

to form their own offensive and defensive NPEs.

15 The Intellectual Ventures website says its company goal is to “ develop a more efficient and dynamic

invention economy, establishing an invention capital system. We build, buy, and collaborate to create

inventions. We supply those inventions to innovative companies through a variety of licensing and

partnering programs. We believe an active market for invention and ideas will energize technological

progress, potentially changing the world for the better.”

(http://www.intellectualventures.com/Home/Overview.aspx)

9

One way to measure the degree of interaction between practicing entities and

NPEs may be to examine more closely the patents that NPEs have asserted in litigation.

Given the volume of NPE activity and the large license fees that some NPEs have been

able to extract from practicing entities, we wondered whether NPEs were asserting not

only patents obtained from low-cost sources such as individual inventors and bankrupt

entities, but also patents generated by traditional practicing entities. Anecdotal evidence

from public records has suggested that such may often be the case:

On October 9, 2007, the NPE IP Innovation LLC sued Red Hat and Novell in

the Eastern District of Texas for infringement of a patent directed to a “User

interface with multiple workspaces for sharing display system objects.” The

patent had been assigned to IP Innovation by Xerox.

On July 2, 2009, Shared Memory Graphics LLC, a company set up by Acacia

Research Corp., filed an infringement suit against Nintendo, Samsung, Apple,

and Sony in the Western District of Arkansas, based on patents directed to

computerized graphic accelerator systems. The patents had been assigned to

Acacia by Alliance Semiconductor.

On February 24, 2010, Optimum Power Solutions, an LLC set up by Acacia,

sued Dell, Apple, HP, Lenovo, and Sony in the Eastern District of Texas for

alleged infringement of a patent directed to managing power supplied to solid

state memory. The patent had been assigned to Acacia from Zilog, a

manufacturer of microcontrollers.

In an attempt to test our hypothesis, we undertook a detailed examination of

patent cases filed in 2010 in one of the nation’s leading IP enforcement venues.

IV. Research and Results

For our research study, we focused on all patent infringement cases filed during

2010 in the Eastern District of Texas (“EDTX”), a well-known hotbed of NPE litigation

activity. Our investigation thus provides a snapshot of NPE activity and, more

specifically, a data set from which to draw tentative conclusions about the patents that

NPEs are asserting in litigation.

10

First, we obtained a list of all patent cases filed in the EDTX in calendar year

2010. We removed all cases from this data set that did not involve an assertion of

patent infringement (thereby eliminating, for example, Section 292 false marking

cases). This yielded a total of 344 patent infringement cases.

We then identified all cases in which the patent infringement plaintiff was an

NPE as defined by PwC (see above, page 2). Generally, a company was determined to

be an NPE when its website or information from other third party sources suggested an

inability to design, manufacture, or distribute products in the field of technology of the

patent.16 To further simplify our analysis, we decided to eliminate universities from this

definition of NPEs. We also excluded the few cases in which we did not have enough

information to determine whether a plaintiff was an NPE.17 In this way, we determined

that 175 of the 344 patent infringement lawsuits initiated in 2010 in the EDTX (51%)

had been brought by NPE plaintiffs.18

Patent Infringement Lawsuits Brought By NPEs (175 cases,

51%)

Patent Infringement Lawsuits Brought By Practicing Entities

or Universities (169 cases, 49%)

Patent Infringement Lawsuits in the EDTX, 2010

In total, 392 patents were asserted in these infringement lawsuits, 248 of which

were asserted by NPEs (about 63.5%).

16 For example, if a company’s website contained only information on patent licensing and no

information relating to any products, it was categorized as an NPE.

17 Only nine such cases were removed from the NPE case data set on this basis.

18 This 51% value and all other percentage values presented in this article have been rounded off to the

nearest half-percent.

11

Patents Asserted by Practicing Entities or

Universities (144 patents, 36.5%)

Patents Asserted by NPEs (248 patents, 63.5%)

Patents Asserted in EDTX, 2010

Finally, we examined the assignment histories for all the patents asserted in

these NPE patent infringement cases to determine whether any of the patents had

previously been assigned to a practicing entity. For this purpose, we defined “practicing

entity” as the converse of our definition of NPE -- that is, “an entity currently having the

capabilities to design, manufacture, or distribute products that have features protected

by the patent.” We limited this category to entities currently capable of practicing the

patents (thereby excluding instances in which patents may have been acquired from

former practicing entities that sold off their patents due to bankruptcy or financial

distress).

In all, we found that of the 175 NPE patent infringement cases brought in the

EDTX last year, about 15% involved the assertion of at least one patent that had

previously been assigned to a practicing entity.19 This number increases to around

16.5% if we include three cases where an NPE asserted a patent that had previously

been assigned to universities.20

19 26 out of 175 cases.

20 29 out of 175 cases.

12

The numbers are even more suggestive if we examine the provenance of the

entire body of patents asserted by NPEs in the EDTX last year. Of the 248 patents

asserted, about 27.5% had previously been assigned to practicing entities (about 28.5%,

if one includes patents previously assigned to universities).21

21 Corresponding to 68 of 248 patents and 71 of 248 patents, respectively.

Patent Infringement Lawsuits Filed By NPEs in EDTX, 2010

Cases Brought by NPEs Asserting Patents Formerly Assigned to Universities (3

cases, 2%)

Cases Brought by NPEs Asserting Patents Formerly

Assigned to Practicing Entities (26 cases, 15%)

Cases Brought by NPEs not Involving Patents Formerly

Assigned to Practicing Entities (146 cases, 83%)

13

V. Analysis

These results, taken together with the other trends described above, suggest two

broad types of conclusions -- first, about the state of the current U.S. IP marketplace,

and second, about how Japanese firms can seek to benefit from that marketplace.

A. The U.S. IP Scene

Our data confirm that a significant -- though not predominant -- proportion of

the patents being asserted by NPEs in Texas in 2010 were originally obtained from

practicing entities. The data thus appear to provide further evidence that the U.S. IP

marketplace is becoming increasingly fluid, with margins between practicing and

nonpracticing entities blurring as never before.

The patents formerly owned by practicing entities were presumably developed

for defensive purposes or to assert against competitors in the marketplace. Although

our data do not permit us to probe into the decision-making of practicing entities, it

seems reasonable to infer that certain practicing entities were not satisfied with

traditional uses of their IP, and instead opted to sell patents into the IP system. Some of

Patents Asserted by NPEs in EDTX, 2010

Patents Asserted by NPEs

not Formerly Assigned to Practicing Entities (177

cases, 71.5%)

Patents Asserted by NPEs Formerly Assigned to

Universities (3 cases, 1%)

Patents Asserted by NPEs Formerly Assigned to

Practicing Entities (68 cases, 27.5%)

14

these patents found their way, directly or indirectly, into the hands of NPEs, including

NPEs that behave as patent “trolls.”

While one motivation for the practicing entities to sell their patents may have

been simply to monetize them, it is also possible that these patents were sold to obtain a

competitive advantage. Because these patents were all asserted in lawsuits, it seems

likely that they were perceived to be “litigation ready” in their respective technological

fields. It is plausible to infer that many practicing entities sold their patents knowing

they would likely be asserted against others in their industry. Although it is difficult to

draw conclusions based on assignment data, practicing entities may have sold their

patents to NPEs for strategic reasons, either to increase the risk of litigation for their

competitors or perhaps even to show potential licensees the perils of refusing to accept a

license.

An analogous strategy called “catch and release” has been employed by patent

holding companies for years. “Catch and release” involves some or all of the following

activities by a company other than the patent’s original assignee: buying the patent;

obtaining licensing revenues from the patent, if possible; and selling the patent back

into the marketplace (while retaining a non-exclusive license under the patent). The

patent may wind up in the hands of an aggressive entity that will assert it against entities

that formerly refused to take a license. Indeed, if a practitioner of “catch and release” is

reluctant to sue in its own name, the threat of litigation by a subsequent third-party

buyer can be used to gain leverage in licensing negotiations.

Our results suggest, therefore, that in some cases certain practicing entities are

benefiting from the activities of NPEs. This prompts the question whether recent

discussion of U.S. patent reform, including controversy about the role of patent “trolls,”

has been sufficiently nuanced. The reality of U.S. IP practice is more complex,

interdependent, and unpredictable than may have been supposed.

B. Recommendations for Japanese Companies

Japanese companies have a well-deserved reputation as innovators and

developers of strong IP portfolios. Our investigation highlights some of the many

strategic options by which Japanese companies can seek to leverage their IP to generate

money and strengthen their competitive position.

15

In addition to cross-licensing and offensive assertion of patents, Japanese

companies may wish to consider tapping into the complex network of NPEs in the U.S.

As we have seen, broker NPEs can help to facilitate the sale of patents by the patent

owner. Our data show, further, that NPEs commonly purchase patents from practicing

entities. By these mechanisms, the patent owner may be able to raise cash without

having to spend money on licensing or litigation. But the terms of sale and the license

protections to be retained by the original patent owner require careful attention, and as a

matter of strategy, a company selling a patent to an NPE must think carefully about the

practical consequences of a lawsuit by the NPE directed against other players in its

industry.

Some firms have also sought to make use of the NPE form to assert their patents,

often in conjunction with other companies in the same industry. The inventing entity

may wish to distance itself from litigation by transferring patents to a new NPE that will

conduct licensing and file infringement lawsuits. Pooling patents with other patent

owners may also increase the impact of a company’s portfolio. However, creating a legal

structure that permits the new NPE entity to sue and collect damages may not be a simple

task. Under U.S. law, questions of “standing to sue” require a detailed examination of

the patent rights transferred to the new entity, as well as any rights retained by the

transferring entity; these rights include not only the right to sue, but also to license and

sublicense, to assign rights and benefits, and to take other actions. Under the Supreme

Court’s eBay decision, moreover, the NPE’s ability to obtain an injunction -- a key

weapon in litigation -- may be in doubt.

Japanese companies may also wish to pursue “defensive” strategies by

contracting with a patent aggregator. Many of the more prominent aggregators are

already known in Japan. Here, it is crucial to research the aggregator firm and the

precise nature of the patent protection that is being offered. The willingness of business

partners to maintain confidentiality for key competitive information may vary

considerably. Moreover, the terms and conditions of the deals offered by aggregators

are constantly changing, and increasingly creative options are being put forward in

negotiations. It is important for Japanese companies to assess their needs, gather all

available information, and understand the details of any agreements they reach.

16

Alongside these many opportunities, our data also suggest that the new IP

landscape presents considerable risks for Japanese companies that do not take the time

to educate themselves. NPEs are gaining in prominence and become more aggressive.

Our data also show that NPEs are asserting not merely patents obtained from individual

inventors or defunct companies, but also patents formerly owned by practicing entities.

Thus, avoiding the risk posed by a competitor’s patent requires more vigilance than ever

before. That patent may be available for license from the competitor, but it may also be

sold to an NPE -- either for offensive assertion, defensive aggregation, or for use in

myriad other purposes. All of the options available to your company for using NPEs

are also available to your competitors. Your company’s failure to consider the uses of

the new IP players may benefit your adversaries.

VI. Conclusion

Recent developments in the U.S. IP scene present considerable opportunities as

well as risks for Japanese companies seeking to make the best use of their IP. Japanese

firms would be well advised to study the new structures and trends that characterize the

U.S. IP marketplace in order to best position themselves to succeed.

* * *