Non-practicing entities (NPEs) are nothing new in the world of patent litigation, but this past October, NPE litigation reached a new level when the Rockstar Consortium filed an infringement suit in the Eastern District of Texas. Rockstar Consortium (not to be confused with Rockstar Games, a videogame developer) is not a well-known name to the public: the company doesn’t actually make anything. Instead, Rockstar makes money by licensing its large (approximately 4,000 strong) portfolio of patents and enforcing its intellectual property through legal action. Rockstar employs a small cadre of engineers and technicians to reverse-engineer consumer electronics products to determine whether they might infringe one of its patents. When an engineer identifies a potentially infringing product, Rockstar’s attorneys approach the alleged infringer, likely threatening legal action if a settlement isn’t reached.
However, what distinguishes Rockstar from a run-of-the-mill NPE is the support that it has received from traditional technology giants. Rockstar was formed shortly after the bankruptcy of the former Canadian telecommunications giant Nortel Networks. Nortel auctioned off its stash of patents, and “Rockstar Bidco,” backed by the unliely alliance of Apple and Microsoft (among others), won the auction with a bid of $4.5 billion, beating Google after many rounds of bidding. After distributing approximately 2,000 patents directly to its sponsors, a newly minted “Rockstar Consortium” remained with a cache of 4,000 patents to enforce.
Two years of anticipated litigation was finally realized when Rockstar asserted patent infringement contentions against Google, Samsung, and a number of other companies who manufacture Android smartphones. Technology industry commentators called the act “DEFCON 1” in the patent wars. Google now faces a well-funded opponent, supported by Google’s direct competitors, with a large cache of high-quality patents. While the exact implications of this litigation have yet to be determined, Google is certainly facing potential disruptions to the distribution of its Android mobile operating system, possible licensing deals that could seriously damage its future profitability, and the near-certainty of spending many millions of dollars in legal costs. Google’s recent cross-licensing agreement with Samsung suggests that it may be looking for alternatives to litigation, and it would probably make good business sense for Google to explore options for resolving this dispute out of court.