Wednesday, April 13, 2011

Walker Digital: The Buried Lede

Patent suits from an NPE are not a show of strength.  They are a sign of failed licensing.

Many of the articles covering Walker Digital's filing of fifteen patent infringement suits against 100+ defendants paint the action as "aggressive assertion," or a show of strength.

Looking at it a different way, each assertion of each patent against each defendant is likely an indication of a failed attempt at licensing.  As Walker's own press release puts it:

Commenting on recent developments, Ellenthal stated, “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.

One translation: Major companies are now saying, "If you really think your patent is valid, and you really think we infringe, step up, put your money where your mouth is, and file a suit.  We are not just going to hand you cash."

It seems that the rising number of parties attempting to extract revenue for licenses or protection have produced a fatigue in the industry.  With the higher bar for injunctions, the CAFC move towards sanity in damage awards, and the rising effectiveness of reexams, motivation to settle has diminished.  The clear impression from Walker's press release is that their ability to obtain licensing revenue without litigation has diminished, and generating new revenue will require more expense.

What remains to be seen is whether an ongoing viable business model remains with these higher assertion costs.


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