Now It Begins? Litigation Rumors Surface Over Intellectual Ventures
Intellectual Ventures (IV) has insisted for a long while that its accumulation of patents has nothing to do with patent litigation. In fact, the company has prided itself on not filing any lawsuits, despite the claim that its patent portfolio, comprising 27,000 patents, has brought in over $1B in licensing revenue. Recently, IV was rumored to have struck a $120M patent deal with Intuit Inc., and also struck deals with companies like Cisco and Verizon for between $200M and $400M apiece.
Interestingly, no one knows the circumstances surrounding IV's licensing deals - to date, most every license is shrouded in mystery (Intuit's SEC filing stated that the company "entered into an agreement to license certain technology" for past and future licensing rights. The filing did not disclose the technology, the IP or the licensor.) Worse still, IV operates using a multitude of shell companies, making it difficult to track ownership of the patents.
Recently, IV was rumored to be engaging in "catch and release" licensing with some of its patents - after getting a particular patent or portfolio, IV gives prospective licensees a timetable to pay a set amount. After the time period expires, the patent is then sold off to anyone (read: patent plaintiff firm) that feels they can monetize the patent(s), with a "back end" payment being negotiated in favor of IV. In other words, IV has allegedly started to "outsource" their patent litigation.
Zusha Elinson from the Recorder has an excellent piece on IV's alleged foray into patent litigation, where the article covers the saga behind Picture Frame Innovations LLC who recently filed suit (see complaint here) against Kodak and CDW, seeking millions of dollars in damages. Elinson tracks the history of the patent, the inventors, owners, and even looks at the attorneys handling some of the behind-the-scenes matters to show IV's involvement, and concludes that the litigation represents "a new phase" in IV's business model.
- Read "Intellectual Ventures Takes Indirect Route to Court" (link)
NOTE1: An interesting factoid about the litigation is that the lead attorney for the plaintiff is none other than Ray Niro.
NOTE2: The complaint states that Picture Frame Innovations LLC is located at "125 South Wacker Drive, Suite 300 Chicago, IL 60606" - this location appears to be nothing more than a virtual office space.
NOTE3: In case anyone is looking for more information on IV and its collection of shell companies (over 362 of them in all), you can order a report from Avancept LLC that will give you all the grueling details over the span of 650+ pages. To order a report (or read the report summary), click here.
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Intellectual Ventures and other so-called patent trolls are really the beginning of a secondary market in patents. Most of these companies got their start in the failed companies of the dot.com bust. These patent recycling companies paid the investors of these failed companies something for their R&D in the form of buying their patents. This reduced the cost and the risk associated with R&D. The VC’s I knew were going to let these patents expire, resulting in zero return to the investors. Patent investing companies like Intellectual Ventures should not be vilified, but appreciated for the valuable secondary market they are creating. Like all new markets, the pioneers took enormous risks but also paid very little for the assets they acquired. Their success will encourage other entrepreneurs driving up the costs of buying patents (excess R&D). This will reduce the cost and risk associated with R&D, which will result in more investment in high technology start-up companies.
Vilifying Intellectual Ventures is like vilifying investors in the physical assets of failed enterprises. These investors recycle assets and make them part of the productive economy again. While it is sad to see a business fail, failure is part of the innovation process. Putting the assets of a failed enterprise back to work as soon as possible would be considered a humanitarian effort if performed by a non-profit. However it is really just as valuable or more valuable to the economy when do by a for-profit enterprise.
I have no problem to a patent the truely contributes meanigful technology, unfortunately the patents that had little or no value when the dot coms exploded have even less value now. The reason the patents are of no value is that they contributed little if any technology. In the hands of a spin-doctor a contingency fee attorney can take a Duck and spin it into an Eagle and seek nuisance settlements. So the dot coms that did not go bust end up having to pay off meritless claims resulting in wasted time and money for everyone.
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