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Intellectual Ventures, IP, IP Asset, Patent

Intellectual Ventures Flexes Some Patent Muscle

Intellectual Ventures made a name for itself by (originally) negotiating patent licenses outside of litigation.  However, when those prospects started to run dry, IV launched a warning shot–which later appeared a bit underwhelming for a mass aggregator holding tens of thousands of patents.  This opening blow was followed by a series of targeted rifle shots, like their ITC enforcement action against Hynix and Elpida.  What these lawsuits collectively lacked was shock-and-awe, like Jay Walker’s bold protestation against widespread, uncompensated use of his company’s IP.  Until now, that is.

This week, Intellectual Ventures sued AT&T, T-Mobile, and Sprint Nextel in a single lawsuit over fifteen different patents.  Breaking the news on its IV Insights Blog, the patent owner provided a copy of a complaint and a relatively simple statement noting that the aggregator “previously attempted to discuss licensing options with each of these companies, but none were responsive.” The technology appears to mainly deal with techniques for managing cross-carrier text and multi-media messages, hence the combination of carriers in a single suit despite patent reform’s partial ban on the practice.  Perhaps even more interesting are the various original sources of patents used in IV’s most recent attack.

This week’s lawsuit, more than the others IV previously waged, demonstrates the obvious power of massive patent aggregation.  The fifteen patents identified in the suit come from at least 10 different sources, including major companies, research institutions, one university and some individual inventors.  Separately, any given patent could be vulnerable to non-infringement arguments, or susceptible to a momentum-killing reexamination.  Combined, however, the patents are inherently much stronger.  Assume, for example, that for each patent asserted, the wireless carriers believed they had a 90% chance of invalidating all relevant claims at trial.  To prevail, the carriers must prevail in fifteen independent events, which carries only about a 20% likelihood of success.  And there is good reason to treat invalidation and infringement of each patent as an independent event because, although the patents are all related in general subject matter, most come from different sources and thus describe distinct inventions.

In fact, only three patents come from the same original owner–Conexant–who provided 6,977,944, 7,343,011 and 7,136,392.  Remaining contributors to IV’s pool of asserted patents are responsible for only one patent each, and include Verizon (the only major wireless carrier absent from the suit), Motorola, Nokia, Telecordia Technologies (formerly BellCore, the Baby Bell’s version of Bell Labs), and Hong Kong University of Science and Technology.

Interestingly, while Verizon contributed patents to IV’s collection, and managed to avoid this latest lawsuit, Motorola’s deal with IV apparently did not come with rights, at least to some portfolios.  Motorola’s contribution was part of a 344-asset sale to Torsal Technology Group back in 2008.  Torsal subsequently transferred the Motorola patent to Antozskij Research LLC, which merged with Intellectual Ventures I LLC earlier this month.  All three transactions used the same law firm to record the deal: Schwabe, Williamson & Wyatt in Portland.  Telecordia’s contribution is part of a transaction involving 45 assets sold to TTI Inventions B LLC in 2010.  TTI Inventions merged with Intellectual Ventures II, LLC earlier this month as well.  Telecordia is currently owned by Ericsson, but the sale to IV’s holding company occurred during the ownership tenure of two notable private equity firms: Providence Equity Partners and Warburg Pincus.

Listed as lead counsel for IV is Martin Black of Dechert LLP, marking the sixth different law firm used as lead counsel for the aggregator.  Several are large, well-known law firms (including Susman Godfrey Weil Gothshall, and Irell & Manella).  This is the first lawsuit filed in 2012 for IV, and the first in nearly four months (John Desmarais’ firm sued Nikon over five different patents in late October).  While IV’s next move remains to be seen, it’s safe to say things just got a lot more interesting.

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Discussion

11 thoughts on “Intellectual Ventures Flexes Some Patent Muscle

  1. Intellectual vultures is exactly what the problem is with our patents system. Patent litigation abuse costs the US a half a TRILLION dollars in lost products, software, and jobs. That is 5000 times more losses than the MPAA and RIAA claim to be their losses due to “piracy”, We need to put these vultures out of business that is undermining the purpose of patents and hurting our economy.

    Posted by Ken Bingham | February 19, 2012, 3:48 pm
    • Ken,

      Thanks for sharing your point of view.

      First, the so-called study that claimed the “half a trillion” in losses has been debunked–not once, but twice–on this blog.

      http://gametimeip.com/2011/09/20/did-serial-infringers-commission-academic-patent-study-to-support-widespread-infringement/

      http://gametimeip.com/2012/01/26/myopic-patent-cynicism/

      Second, the study dealt with patent litigation. You are making the incorrect assumption that each instance of patent litigation is simultaneously an instance of patent litigation abuse. There is a world of difference between abusive and aggressive litigation, and the former is far less common than the latter.

      Finally, the purpose of awarding a patent is to provide the patent owner with a property right to the use of the invention claimed. The stated, aspirational goal of the patent system is to promote the progress of useful arts. As I’ve pointed out before, secondary patent markets, aided in part by the business models like Intellectual Ventures, and patent licensing strategies help transfer wealth from the technology takers to the technology makers. We want a wealth transfer to take place whenever the takers realize value from technology they utilize so technology makers remain incentivized to continue creating.

      Posted by Patrick | February 19, 2012, 4:20 pm
    • As the Boston University troll paper makes its way into urban legend I would like to call attention to the fact that most of the patents being litigated have been in the public domain for over eight years. Mr. Bessen notes this in his paper. The Convexent patent was filed in 2002 and published in 2003. IV also published press releases when they entered into a licensing agreement with Telcordia for their entire (and very valuable) patent portfolio. Why are people surprised?

      There are two important things going on here. Asymmetric IP warfare where the litigators can no longer settle these problems by negotiating a cross licensing agreement (doesn’t make the IP lawyers happy because they generally have to tell their clients they have to pay up and pay up big); and the NPEs simply do better research and FIND the patents that have value.

      The NPE business model is here to stay and frankly even IV can’t litigate 30,000 patents at once.

      Posted by Arleen Zank | March 1, 2012, 6:18 am
  2. Yes patents and copyrights are designed to create an incentive for creativity by making the creations marketable. The problem with organizations like Intellectual Vultures is they do not create works. They simply lie in wait for a company or individual to come out with something similar and then threaten to sue and use the draconian copyright penalties to coarse settlements. It is an abuse of the law.

    Yes there is a difference between aggressive and abusive litigation. Companies that zealously protect the products they are developing, making and selling is aggressive and those I can support. Those that make no products but keep others from making them and only use their IP for litigation purposes are abusive and are becoming a huge problem especially in software where patent litigation has become a bloodbath.

    Posted by Ken Bingham | February 24, 2012, 12:49 pm
    • Ken,

      Thanks again.

      You are still misunderstanding several points about IP. First, your comment that patent owners like Intellectual Ventures “simply lie in wait for a company or individual to come out with something similar and then threaten to sue” is (1) grossly misinformed, and (2) ignores key facts. In particular, your comment ignores the millions IV alone has paid to inventors and companies who originally owned the vast majority of the patents now under their control.

      Second, leaving aside your apparent (and illogical) definition that a non-practicing entity enforcing patent rights is somehow per se abusive, you still fail to understand the purpose of patent licensing entities. Patent owners like Intellectual Ventures want other companies to make products using their patented technology. For a company whose sole source of income is patent licensing, there is literally no money to be made by preventing others from using patents.

      Truthfully, as much as software people want to think they are special, they simply are not. They are experiencing the same patent fights every growing industry has experienced for at least the past 150 years.

      Posted by Patrick | February 24, 2012, 5:51 pm
  3. Yes for instance the Wright Brothers were so zealous with their patents that they strangled the fledgling aviation industry well into the first couple of decades of the 20th century. So much that the US had to buy aircraft from Britain and France to fight WWI. The US Aviation industry was crippled because the Wright Bros had little interest in developing the airplane just cashing in on their patent. There have been many other instances where inventions had to wait for patents to lapse before they were able to take off commercially. The reason we have patents is to promote creativity but in practice they are having the opposite effect and it has been that way for a long time.

    http://en.wikipedia.org/wiki/The_Wright_brothers_patent_war

    Posted by Ken Bingham | February 25, 2012, 11:20 pm
  4. Patrick

    I am not opposed to those that use patents for licencing purposes. So long as the inventions are developed it doesn’t matter if the patent holder develops it themselves or licences it out for others in fact many inventors including software developers like myself are greatly benefited when they sell or licence to companies that can mass produce the products. So for those things that IV does as far as licencing I don’t have a problem with. What I do have a problem with as I mentioned are those that sit on patents or amass a huge portfolio of patents with no intention on licencing or producing it. I think a lot of problems would be solved if there was some kind of requirement that a patent holder must do something constructive with their patent in order to maintain it. We the people by virtue of the Constitution grant patent holders a temporary monopoly to promote creativity. Implied in that grant is at least the moral responsibility of the patent holder to do something with the patent.

    Posted by Ken Bingham | February 26, 2012, 12:57 am
  5. Ken –

    The “dog with a sock” approach isn’t getting you anywhere with you’re argument, since you just conceded his point while gutting your own. Let’s take the IV situation for a moment… IV is comprised of bright people (including as many inventors as there are lawyers) who’ve raised billions of investment dollars from corporates and institutions, who’ve put money up either defensively (i.e., they want the implicit licensing arrangements) or strategically (they want a financial return on their dollars. Like a hedge fund IV MUST figure out how to make a return on their war chest or no one will ever invest another nickel in their various funds (some wags might say that’s already happening). They look carefully through various patent portfolios, making selections they think will generate value for their investors (and, therefore, themselves) within the time frame established by their charter. Of course, they use some of the money to try to self invent laser fly-swatters, cool nukes, and other effete pursuits, but those particular endeavors are ego driven rather than by market based supply-demand realities, so naturally are doomed to commercial failure.

    The other side of their house is different, and more interesting. First, IV tries the friendly approach with potential licensees, eschewing litigation. They generate an impressive amount of licensing revenue, but not enough to provide a sustainable return on their funding. Meanwhile, the legal dam breaks around them; Apple does the unthinkable, sues other technology companies (zut alors!) and mobile patent wars ignite a holocaust of complaints, cross complaints, and motions for declaratory judgments. Nortel, a brilliant technology company without a whit of common business sense, augurs in – – it’s bondholder base changing from despondent to elated as the patent portfolio value shoots the moon. Motorola follows suit. In the meantime Google, Apple, and Microsoft, (and every other corporate titan who previously stood in the back bench bleating “patent troll! patent troll!” every time they were sued by a jilted patent licensor who’s technology they were “using” without compensation) began arming themselves to the teeth, fully aware that Apple’s actions let the genie out of the bottle.

    IV didn’t invent the patent troll business, as you put it. Read any technology history book and you’ll see that began hundreds of years ago. IV was simply smart enough to understand that the rules were about to change in technology development, so they jumped on a business opportunity. Whether they succeed at their current strategy is still unclear. But suffice to say that IV has already done more good things for the individual inventor and small patent portfolio holder than the silly “America Invents Act” ever will.

    As for your attempt to distinguish software from other technologies as a matter of patentability, the metaphor I need to draw from is a timeless one. You and a lot of open-source devotees out there are like every generation of teens who come along and think they invented sex. Since even the most professional software developers out there admit that 99.9% of software development consists of “borrowing” code from prior projects why shouldn’t genuine prior art patent holders benefit from an upsurge of demand for a product built on the backs of some their innovation? Why are mobile patents so important to Apple? Because they understand that their iphone is a systems integration effort of EVERYBODY’S prior technology developments (admittedly put together with a slick design and clamshell). They foresaw the 400 plus software complaints that would become the true marketplace for distributing the proceeds from a high value retail product; they clearly didn’t think they’d get to keep all that value…

    And Facebook? Your argument suggests that all $100 billion+ of IPO imputed market value belongs to employees and investors. Hah! The core technologies for Facebook were invented when Mark Zuckerberg was still popping zits in junior high. Can you imagine for a moment a more unjust patent system than one that lets Facebook principals keep all the proceeds from this grossly inflated and overhyped public offering? If you say “yes” to that question then the implication is that all institutional investors out there should be buying lottery tickets rather than making common sense funding decisions.

    Sorry, Patrick is right. And he is much more a gentleman than I am.

    Posted by Emanuella | February 26, 2012, 10:23 am
  6. Whatever the flaws of the patent aggregator business model, at least its rise will likely change the entire terms of the “patent troll” debate.

    Posted by patent litigation | February 26, 2012, 7:04 pm

Trackbacks/Pingbacks

  1. Pingback: Patent Portfolio Theory: Aggregation and Patent Valuation | CleanTech PatentEdge - April 16, 2012

  2. Pingback: The Patent Portfolio Theory: How Aggregation and Synergy Increase Patent Portfolio Valuation – ipstrategy.com - October 30, 2012

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