Patent Trolls: Acacia is One Company Tech Giants Like to Avoid

(Editor's Note: A retraction to the inference below that RTI is a patent troll: Rates Technology Inc. is a practicing company in the technologies they have invented and owns their own patents - not fitting into the traditional definition of patent troll. According to company founder Jerry Weinburger, RTI has covered over 370 companies under its current patents and Weinburger rarely files patent suits. The company charges a one-time fee, not a recurring license.)

An intense look around any industry is likely to turn up companies that seem to operate on a different level. For the technology sector, that company is Acacia Research (News - Alert). 

 

According to a recent Business Week report, this company has filed at least 337 patent-related lawsuits in the 18 years since its inception.

 

Just what does the company make? Nothing.
 

Acacia's business plan consists of acquiring patents from inventors and seeking fees from companies that it claims infringe on those patents. The company has been quite successful in its pursuits, anticipating $68.8 million in sales this year, up from $34.8 million in 2006.

The company licenses technologies it does not design or distribute and is classified as a nonpracticing entity. A number of tech companies refer to Acacia as a somewhat less friendly term: patent trolls.
 

"We're on the very front end in an explosion of frivolous litigation that's going to put a damper on innovation," said Brad Burnham in Business Week. Burnham is a partner at venture capital firm Union Square Ventures and highlights that about one-third of his firm's portfolio is being targeted by patent trolls.

 

It is clear that Acacia likes to spend time in court. The company has filed more patent cases than any other company and twice that of number two company Rates Technology. The company has noted that it has reached out-of-court settlements in roughly 95 percent of the lawsuits filed. In cases that actually go to trial. Acacia claims a win about half the time, according to CEO Paul Ryan.

For those on the winning side against Acacia, victory is especially rewarding. "Patent trolls are like neighborhood bullies," said Robert J. Shillman, CEO of machine vision-system maker Cognex in 2008. The company had recently won a struggle with Acacia.

 

"They can only be stopped by standing up to them, refusing to settle, and then challenging their patents in court," Shillman added.

According to critics, companies like Acacia try to enforce patents that are too broadly defined or that cover ideas that existed before the patent was even granted. For inventors who cannot go after tech companies who are trampling on their meaningful innovations, Acacia may be a valued partner.

James Malackowski, CEO of Ocean Tomo, an intellectual-property consulting firm, said in Business Week, "We're transitioning from a period of feudal lords where the only people who cared about intellectual property were large property owners who talked about it among themselves.
 

"There's been angst over patent trolls but it is not justified by materiality of economics." Patent-infringement cases cost an estimated $1 billion to $2 billion a year, a small fraction of the trillions of dollars companies spend each year on cross-licensing deals," Malackowski estimated.

While Acacia may offer solutions for inventors who have nowhere else to turn, some have turned to groups that can offer defense on their behalf. A growing number of companies that stand on the opposing side are trying to see the bright side of a potential partnership. Some have even partnered with Acacia to handle licenses on their behalf.
 

"Some of the companies that were calling us bad names five years ago," said Ryan, "are now partnering with us." This is one move that many of these companies never would have predicted.

In other Acacia news, the company recently announced that its Webmap Technologies LLC subsidiary has entered into a settlement and license agreement resolving litigation with Microsoft (News - Alert) Corporation. The agreement resolves patent litigation, Civil Action Case No. 09-C-104-C, pending in the United States District Court for the Eastern District of Texas.