Intellectual Ventures: World’s Largest Patent Troll Or Patent Dealer Building Global Market For Invention?

Adam Heckman is a JD candidate at Osgoode Hall Law School, and is currently enrolled in Professor Mgbeoji’s Patents class, in Fall 2011. As part of the course requirements, students are asked to write a blog on a topic of their choice.

Intellectual Ventures (IV), a company that was initially founded on the premise of acting as a defensive force against opportunistic patent litigation, is now routinely labelled as a patent troll, has been branded “patent troll public enemy #1” and most recently has come under fire for its lawsuit against Motorola. IV describes itself as a company that is developing a “more efficient and dynamic invention economy” by buying and building inventions then supplying those inventions to innovative companies through licensing and other partnerships. They believe that creating this “active market for invention and ideas” will encourage innovation and “energize technological progress”.
IV convinced early investors that their “Patent Defense Fund” would act as “troll repellent” against malevolent outsiders, who otherwise would go out and buy up cheap patents only to turn around and file lawsuits alleging infringement. By building up their own hoard of patents, IV persuaded companies they could protect themselves by preventing patent trolls from getting their hands on patents. Companies that invested in IV would also be given access to IV’s entire patent portfolio which they could use to defend themselves. To dismiss fears that IV itself would become a “very large patent troll”, Nathan Myhrvold, the CEO and co-founder of IV, has said he is opposed to patent litigation and that “lawsuits are a ridiculous way to do business”.

This aversion to patent litigation appears to have lifted in late 2010 when IV used its “defensive” patent portfolio to file three separate lawsuits in relation to software security, field-programmable gate array and flash memory technology. IV has also been accused of “patent trolling” by using closely connected third party non-practicing entities to do their patent infringement litigation for them. In a recent expose titled “When Patents Attack”, National Public Radio (NPR) looked into IV’s claim they “encourage innovation by ensuring that investors get paid”. When asked for an example, IV cited an inventor named Chris Crawford who had a great idea but was unable to profit from it. IV eventually stepped into the picture and bought his patent. It turns out that IV subsequently sold the patent to another company called Oasis Research in July 2010 who immediately used it to sue a random collection of high tech companies. NPR was able to locate a court document which listed IV as entity who had a financial interest in Oasis. NPR learned from Peter Detkin, a co-founder of IV, that IV likely has a “back-end arrangement” with Oasis whereby patents were likely sold to Oasis for a certain amount of money up front, but then IV would receive a share of any royalties that are generated from the patents or get a cut from any damages awarded from its lawsuits.

IV’s most recent lawsuit against Motorola Mobility involves six patents relating to Google’s Android operating system.  This comes shortly after Google announced that it would be acquiring Motorola Mobility and its patent portfolio, in a move largely seen as a means to help Google and its partners shield themselves from legal action. Adding to the intrigue is the fact that Google was an early investor in IV and actually helped them accumulate one of the largest patent portfolios in the world. Google’s investment in IV would naturally appear to immunize the recently purchased Motorola from this sort of legal action; however, incredulously it appears that Google only acquired licenses to certain patents owned by IV, but not the patents owned by Intellectual Ventures 1, LLC or Intellectual Ventures II, LLC, the actual plaintiffs in the lawsuit.

Intellectual Ventures noted in its complaint that it first approached Motorola about licensing its patent portfolio in January of 2011 and despite good faith efforts to negotiate was unable to arrange a licensing deal on reasonable terms. It is interesting to note that five of the six patents named in the suit were only acquired by IV in the last couple months (US Patent Nos. 7,120,462, 6,557,054 and 6,658,464 were acquired in September and Patent Nos.  7,810,144 and 7,409,450 were acquired in July). IV claims in the suit that they are the exclusive licensee of Patent No. 6,412,953 and is the assignee of all causes of action but it is unclear when they acquired these rights. IV states that they discussed “several” of the patents asserted against Motorola in the complaint over the next “several” months. However, the complaint does not specify which of the patents in the complaint were under discussion or at what time they came into the discussion. The ambiguity involved and the timing of when the patents were acquired opens up the fear that by refusing to license IV’s patent portfolio and accept their protection you risk the possibility that IV may then use their patent portfolio against you.

However, before condemning Intellectual Ventures, one must ask whether they are actually abusing the patent system or simply exploiting good patents and rewarding inventors. It must be first noted that there is no “use” requirement in patent law, akin to that found in trade-mark law. Patents do not confer positive rights to make, use or exploit the invention but rather the patent holder gets the right, for a defined period of time, to exclude others from making use of the invention without the consent of the patentee.

Without IV, many small inventors or entities may otherwise not be able to amass the necessary resources to pursue litigation or have the leverage to negotiate fair licensing agreements with much larger companies that are making use of their ideas. By matching patent owners with licensees, IV and similar companies help inventors monetize their inventions, creating a further incentive to innovate. One real life example is that of Richard Reisman. He is the inventor of two of the patents (US Pat Nos. 6,557,054 and 6,658,464) involved in the Motorola suit who sold his patents for $35 million which provided him with resources to develop further inventions.