Image: Colbert Report
Intellectual Ventures, the patent holding company founded by ex-Microsoft CTO Nathan Myhrvold, is widely accused of being a patent troll — a company that exists mainly to extract patent-licensing fees from other companies.
The company claims to invest in invention — it has its own lab and a roster of super-smart inventors. It also says it’s sticking up for small inventors who otherwise couldn’t make money from their claims.
But last week, NPR’s “This American Life” did a story that makes a mockery of those claims. Here’s some of what the story revealed:
- Of the more than 30,000 patents Intellectual Ventures holds, about 1,000 of them were developed in house. The rest were bought.
- None of the inventions from the company’s lab has been turned into a commercial product.
- When NPR asked for an example of a little inventor who Intellectual Ventures helped, the company pointed them to Chris Crawford. It turns out that Intellectual Ventures sold Crawford’s patent to a non-practicing entity called Oasis Research, which used it to sue a bunch of companies, including ATT, GoDaddy, and Rackspace. When NPR went to the address of Oasis in Marshall, Texas, it found an empty office — alongside dozens of others who exist only to sue for patent infringement in the notoriously litigant-friendly district of East Texas.
- Although Oasis is nominally a separate company, Intellectual Ventures is still listed on the court filing. That’s because it “probably” has a “back-end arrangement” to get a percentage of any licensing fees Oasis is able to extract. (This is according to Intellectual Ventures’ own cofounder Peter Detkin — who ironically coined the term “patent troll” back in the 1990s when he was working for Intel.)
- Oasis has the same address as Lodsys — the company that is using a patent it bought from Intellectual Ventures to use iOS developers.
So Intellectual Ventures is a patent holding and licensing company. There’s nothing wrong with that — it’s simply taking advantage of the long-established legal fact that patents are property with monetary value, and can be traded like any other property. You can argue that some of those patents should never have been granted in the first place, but that’s not the fault of Intellectual Ventures — it’s simply taking advantage of how the system works.
What NPR does not get into, however, is the fact that Intellectual Ventures is backed by many of the biggest and most powerful companies in technology, including Amazon, Apple, Cisco, eBay, Google, Nokia, Sony, Yahoo, and — of course — Microsoft.
These companies are believed to have invested in Intellectual Ventures in part to make sure they have access to its huge patent trove. (Other investors include universities and investment firms.)
Microsoft probably has the strongest connection. Myhrvold was Microsoft’s chief technology office for 13 years, founded its research labs, and made hundreds of millions of dollars at the company. As Todd Bishop reported a couple years ago, Bill Gates and Microsoft researchers occasionally sit in on brainstorming sessions at Intellectual Ventures — which then files patents on some of their ideas.
Microsoft is no stranger to the patent game — it has filed thousands of patents in the last decade, and is using them to extract license fees from Android resellers.
But Microsoft is still exposed to patent lawsuits — the company was recently ordered to pay Canadian company i4i almost $300 million for patent infringement, and faces dozens of other suits at any given time. And Microsoft doesn’t have the time or staff to travel the world looking for inventions from individuals that can be patented. Neither does Apple, or any other big tech company.
So Intellectual Ventures does the work of mopping up inventions and turning them into patents. Then it turns around and licenses them to the companies who have the most to lose from patent litigation.
It’s not a bad business: Intellectual Ventures booked $700 million in revenue last year.
But it’s not about innovatIon or invention. It’s about protection.