Last year, Philips Electronics (PHG) faced a potential legal challenge on its LED lighting products, and the company’s in-house attorneys had trouble formulating a viable defense. So the Dutch electronics giant turned to Article One Partners, a website where more than 27,000 researchers sift through obscure public domain materials including scientific papers, Ph.D. theses, and even product manuals to poke holes in legal claims—and possibly earn thousands of dollars.
Within days, New York-based Article One’s sleuths uncovered an older patent application that showed the claimant’s patent wasn’t original, says Ruud Peters, the chief intellectual property officer at Philips. Presented with the evidence, the claimant chose not to go to court. “Because of that, we could completely eradicate the assertion against us,” Peters says, adding that Philips paid Article One less than $100,000 for the service. “That’s small money compared with the millions you might spend on litigation.”
Tech executives have been paying huge legal fees for years to fend off competitors who make patent claims. They also must contend with patent trolls, individuals or companies that file or buy up little-known patents solely to sue others for infringement and perhaps score lucrative judgments. The number of patent actions filed in the U.S. has tripled to more than 4,000 between 1991 and 2011, according to a PricewaterhouseCoopers study. That’s a huge opportunity for Article One, where many of the researchers are engineers, academics, and retired patent attorneys looking for a little extra income.
The company charges a one-time fee, or in some cases an annual membership, to corporate clients in need of patent research. Article One pays part-timers who come up with the best research between $3,000 and $5,000. Last year, Philips hired Article One to probe 33 patents, triple the 2011 number. Microsoft (MSFT) and Sony (SNE) also are turning to crowdsourced patent research sites including Article One, Patexia, and Ask Patents to help combat infringement claims, check for existing patents on products they want to develop, and scrutinize rivals’ patents before licensing them. “A crowdsourced model works better than any grouping of staff that you bring in-house,” says Gerard Pannekoek, chief executive officer of startup Intellectual Property Exchange International, which used Article One to check the strength of several patents it plans to license to other companies.
Article One, the largest of the sites, has already awarded $3.69 million to researchers who conducted about 600 patent studies, half of them in 2012. The site winnows hundreds of researchers’ submissions using algorithms to find the most relevant material suited to a client’s request. Five Article One staff members further narrow the findings; clients can search and analyze them on the site using keywords, synonyms, and weighting algorithms, as well as semantic search.
CEO Cheryl Milone, a patent attorney and the co-inventor of a medical device, founded Article One in 2008 after a predecessor site she worked for, Bounty-Quest, folded for lack of funding. The site has raised $15 million from investors, including Marshall Phelps, the former head of intellectual property policy and strategy at Microsoft. Article One does not disclose its financial results because it’s a private company, but Milone says it should become profitable this year.
The 2011 Leahy-Smith America Invents Act, designed to reduce litigation and streamline the patent filing process, could also let sites like Article One deflect more nuisance lawsuits for its clients. The law, parts of which went into effect in September, allows researchers and patent attorneys to electronically file evidence related to pending applications at the U.S. Patent and Trademark Office. “It’s potentially a great way to improve patent quality,” says Todd Dickinson, executive director of the American Intellectual Property Law Association.
Article One plans to start submitting its researchers’ findings directly to the patent office this year, which could make it more difficult for trolls to win approval for patents and spare the site’s clients later legal hassles. In September the patent office partnered with online question-and-answer forum Stack Exchange to create Ask Patents, a site that lets users discuss patent questions and search for materials to send to government patent application reviewers.
The crowdsourced research push follows similar academic pilot projects funded by such companies as General Electric (GE) and Red Hat (RHT). The Electronic Frontier Foundation, a digital rights advocacy group, has used the method, too. Since 2005 it has posted patents it deemed “bogus” online and asked consumers for data questioning a patent’s validity. “We’ve had success narrowing down a bunch of patents and even invalidated a couple,” says Julie Samuels, an EFF staff attorney and the (actual title) Mark Cuban Chair to Eliminate Stupid Patents.
For some researchers working with crowdsourcing companies, the sleuthing can become almost a full-time job. In 2011, 8 percent of Article One’s 27,000-plus experts earned more than $50,500 a year, Milone says. David Sarokin, a 60-year-old ecologist who lives in Washington, D.C., says he has earned $14,975 in the past six months by spending two to three hours a day on the site. “It certainly has been worth it for me,” he says. “I have a bit of a Sherlock Holmes kind of personality. I like to find information.”