Know Your Enemy: Lex Machina Raises $2 Million For IP Litigation Analytics

It is a common perception that IP litigation is exploding, in part because the patent system is allegedly broken. Enter Lex Machina, a Palo Alto based company providing IP litigation data and analytics to help companies “anticipate, manage, and win patent and other IP law suits,” which just closed another $2 million in a funding round led by X/Seed Capital.

Investors in this latest round include Costanoa Venture Capital (founded by Greg Sands), Naval Ravikant (Angel List), Jeff Hammerbacher (Cloudera), and David Chao (DCM). Prior investors include Dan Cooperman (former General Counsel for Apple and Oracle) and Jerry Yang (Yahoo!).

“This funding will enable us to improve our existing SaaS product and develop more IP analytics products that will employ our proprietary data to predict litigation outcomes, inform transaction and investment decisions and value and monetize critical IP assets,” said Josh Becker, CEO of Lex Machina, in a statement.

Sounds good, here’s how:

Lex Machina’s crawler extracts documents and data from PACER, the individual websites of all 94 Federal District Courts, the International Trade Commission’s Electronic Document Information System, and the USPTO website. Deploying both natural language processing and legal text classification technology developed at Stanford University, the crawler classifies cases, dockets, entities, patents, and case outcomes, which are then reviewed by attorneys and indexed for search.

Companies and attorneys may use this information to determine whether litigation or settlement makes sense in an individual case, for example, by evaluating how successful a particular plaintiff has been in prior IP lawsuits, how an individual judge has decided similar cases during her career on the bench, and the overall win/loss record of a specific law firm. (This data is also great for discovering trends, as you can read about in this post that TechCrunch did last year on patent lawsuit trends.)

Although attorneys have traditionally relied on Westlaw and Lexis for online legal research, Lex Machina seems poised to provide a more intuitive legal research experience that will appeal to a broader user base. The research tools also include relatively robust infographics, which are otherwise scarce or non-existent in current legal research products.

Still, an individual license is not cheap, coming in at a reported $10,000 per year. If smaller start-ups could gain access to the Lex Machina research tools at a discounted rate, or a reasonable per-use fee, I could see this service having broader appeal. The company is reportedly considering some free services for smaller companies, but nothing is yet available. The company also claims to provide free access to its data for federal courts, public agencies, academics, students, and select non-profits.

Lex Machina was founded in 2006 by Stanford Law School Professor Mark Lemley, who graduated from Stanford in 1988 and then, surely against his Cardinal instincts, attended law school at UC Berkeley. The company grew out of a Stanford University Law School and Computer Science Department project named the IP Litigation Clearinghouse (IPLC), which at the time mapped every electronically available patent litigation event and outcome.

Certainly one of the greatest research indignities is collecting, organizing, synthesizing, and analyzing data from widely divergent sources. Lex Machina’s IP litigation research tools look promising in this regard and the strategic value of such information is undeniable.”So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss.” Immortal wisdom from Sun Tzu.

Daniel McKenzie is a California attorney. He graduated from Stanford in 2004 and advises various entertainment startups in addition to an active private practice in the northern San Francisco bay area.