Registration ›Does the Walker Digital case say something about the route of patent monetization?
In my last blog post in the CIP Forum blog, I wrote about Round Rock Research, who had four “Covenants not to Sue” up for sale at the last Ocean Tomo auction. There was also another company offering four Covenants not to Sue at the auction – Walker Digital. In this blog post I will take a closer look at this company, and their new litigation route after the auction.
But let’s start from the beginning. Walker Digital is a privately held research firm based in Connecticut, US, formed in 1994. The company has a patent portfolio of around 500 US patents with some international counterparts. In their webpage Walker Digital describes their research to be “solving business problems by studying human behavior and designing unusual solutions utilizing modern information technologies”. The patents are found within fields like financial services, secure document authentication, telecommunication systems and media broadcasting.
The initial business model of Walker Digital seems to have been to create spin-offs in the IT field, where the two most well known ones are Priceline.com and Synapse Group Inc. The next business model Walker Digital has been taking on is technology licensing. Offering voluntary licenses is of course a natural way for research companies to make money.
However, in the last few years Walker Digital seem to have been looking for new business models, or at least new ways to get the attention from media towards their licensing offers. In March 2010 they had a large chunk of their portfolio up for sale at an Ocean Tomo auction, resulting in some high bids, but no sales. After this Walker Digital tired to offer parts of the portfolio for private sales with the help of NextTECHS.
In January 2011 Walker Digital got a new adviser, IP Navigation Group, who seems to have helped the company to further evolve their business models on how to monetize on the patent portfolio. In March this year we saw Walker Digital trying out the “Covenants not to Sue” set-up, together with Round Rock Research, at Ocean Tomo, but without succeeding in selling any covenants.
Last month, on the 11rd of April, Walker Digital surprised the IP community again, this time by filing 16 lawsuits against more than one hundred companies, including giants like Apple, Google, Microsoft, Amazon and Walmart. Walker Digital’s Chief Executive Jon Ellenthal comments the litigations:
“We are disappointed that after reaching out to so many companies in an effort to secure reasonable licenses, we were consistently told that without litigation our requests would not be taken seriously.”
So why has the business model of Walker Digital changed so much? From nurturing start-ups and relying on many small transactions in start-ups like priceline.com along with voluntary license fees, Walker Digital today seems to focus on few but large transactions like patent sales and litigations.
Is it true what Ellenthal says; that research institutes are forced into litigation based business models to be able to get reasonable license fees? When the patent thicket is getting more and more impenetrable, it becomes extremely hard for actors within patent intensive fields not to unintentionally infringe on any patents, and it becomes difficult to deal with the large amount of requests for licensing fees. Also, are the incentives high enough to take a license before an initiated litigation? The economic incentives will only be high enough if the license fees are substantially higher after a settlement during a litigation process. If it is like Ellenthal claims, is it then reasonable to complain when companies like Walker Digital get tired of putting their trust into cordial licensing arrangements, and instead demand them through litigations?
One could also argue that it is the American patent system which is flawed, leading to increased patent litigations. When we have an increasing flood of patents we will probably see more and more litigations and increasing the actions some people refer to as “patent trolling”. What is clear is that an increase in litigations will lead to increased transaction costs for knowledge based businesses, and who benefits from this except the lawyers? I will follow the Walker Digital lawsuits with great interest, since no matter what the output of the individual cases will be, they might become yet another reason to reform the American patent system.
Karin Dahlqvist, ICM Class of 2011
Relevant links to read more:
http://www.digitaltrends.com/computing/priceline-inventor-walker-digital-sues-everybody/
http://www.ipnav.com/ipnavigation_walker_digital_press_release.pdf
http://www.allfacebook.com/priceline-founder-sues-facebook-for-patent-infringement-2010-11
http://www.iam-magazine.com/blog/detail.aspx?g=8db68b6e-8c73-4462-92e5-5845ebde4be4
http://gametimeip.com/2011/04/13/has-jay-walker-rendered-intellectual-ventures-irrelevant/
http://gametimeip.com/2011/04/12/behind-walker-digitals-velvet-glove-lies-an-iron-fist/