Reported over at Joff Wild’s IAM Blog, a Washington State Court Complaint (embedded below) filed by Cassius Elston, Jr., former Director of Acquisitions (and later consultant) accuses Intellectual Ventures Management of unethical behavior, breach of contract and interference with his business opportunities after being abruptly terminated in April of this year. Elston claims that IV is retaliating against him for alerting senior management to allegedly unethical, and counter-productive behavior at the hands of an unidentified executive. Wild cautions that “Elston is making allegations and nothing more. But IV will not welcome the fact that he has gone public with them.” (emphasis added). Specifically, Elston calls out Raytheon, Microsoft, Amazon and Boeing as potential sellers of IP for an Intellectual Ventures program he helped establish called the “$10M Club.” Somehow, I doubt that refers to the cost of a corporate suite for a Seahawks game …
Elston’s complaint offers very little in the way of detailed conduct, but suggests that an acquisition (codenamed “Project Casablanca”) was consummated despite lack of an independent valuation and structured “to avoid existing cross-license obligations.” From the complaint, it’s difficult to tell whose cross-licensing obligations the deal-makers were trying to avoid, but this could suggest that the architects of the Casablanca deal intended to pursue entities having reason to believe they are already licensed.
Elston also took issue with a newly hired (and unnamed) IV executive who, according to Elston, appeared to be acting in his or her own self-interest of the new executive, rather than IV and its investors (who contributed capital for such acquisitions). Specifically, Elston’s email to Peter Detkin, Adriane Browne and Loria Yeadon, a copy of which is available from IAM’s article, accuses the executive of paying redundant “finders fees” to friends of the executive, and pressuring others to sign off on questionable valuations.
Ironically, Elston’s email specifically asks the senior management team not to “shoot the messenger”, yet according to his lawsuit, IV did exactly that. His consulting relationship was allegedly terminated within a day and a half of sending his email, and all of the deals in his pipeline were “commandeered” without compensation. That’s where the name dropping starts. Elston claims that approximately $45M worth of deals were in his pipeline at the time of his termination, identifying companies such as Raytheon, Microsoft, Amazon and Boeing as possible contributors.
Given the nature of these accusations, IV investors would be no doubt be interested in how this case develops, but court records indicate IV is attempting to move the case into arbitration, which means it will most likely be resolved outside of the public record. Meanwhile, IV is no stranger to litigation. In addition to its various patent infringement lawsuits, IV has reportedly settled a lawsuit brought by its former lobbyist Pat Choate. Also this year, a lawsuit filed by IV investor Xilinx forced the highly secretive company to disclose a substantial portion of its investor list.
I’ve long suspected there was a connection between IV, Desmarais, and Micron, but the public document trail is very thin. The simplest “proof” of a relationship is that if this group wasn’t related, then someone would likely be upset that Desmarais finds the time to litigate so much for IV and its proxies while also doing Micron’s bidding … but if the two parties were effectively one party, then there’s no objection.
Ewing also mentioned another piece of the Micron-to-Round Rock puzzle, which was Keystone Technology Solutions, having the same address as Micron:
A huge hunk of Round Rock’s patents were formerly owned by Keystone Technology Solutions, an outfit that had the same address as Micron. So, the patents went from Micron to Keystone and then back to Micron and then on to Round Rock. The Keystone->Micron->Round Rock transaction occurred just days apart. If you look at the corporate formation dates for Round Rock, the whole thing had been planned for more than a year before the transaction. I’ve always been curious if Keystone was a proto-Round Rock that was abandoned because it was too closely tethered to the Micron.
On the effectiveness of privateering in general, Ewing noted:
On the other hand, it wouldn’t surprise me if sooner-or-later someone launched a patent war against a competitor on the assumption that a competitor was behind a given set of lawsuits. So, I’m not sure that “mutually assured destruction” has necessarily been circumvented.
While Ewing may be right, in that MAD is not completely circumvented, Micron still claims to have no control or financial benefit of Round Rock patent assertion. While Hynix could hypothetically sue Micron in retaliation for a Round Rock or IV lawsuit, Micron may very well be powerless to dispose of the underlying litigation. In other words, it would be a bit like kidnapping someone at random on the off-chance that you could find someone willing to pay to let the victim go free.
The complaint for Cassius Elston, Jr. v Intellectual Ventures Management, LLC (Washington Superior Court, Kings County Case no 11-2-21518-1):
- Did Intellectual Ventures Drive Micron To Privateer Patent Enforcement? (gametimeip.com)
- University of Texas Endowment Fund Manager Comments On Patents & Intellectual Ventures Investment (gametimeip.com)
- The Intellectual Ventures Investment List – An Unwelcome Revelation? (gametimeip.com)