Private Equity Drooling Over Huge Patent Rewards; Investing Millions In Patent Hoarding

from the welcome-to-innovation dept

It's no secret that getting a random broad patent and suing companies that actually innovated and succeeded in the market is a huge money maker these days -- even if it's exactly the opposite of the intention of the patent system. However, with so many headline-grabbing rewards for such patent lawsuits, it's really no surprise that the big money is rolling in. Last year, we mentioned that VCs were starting to get into the game, but these days it's the east coast hedge funds/private equity guys who are joining the party. Earlier this year, we wrote about one such fund, Altitude Capital Partners who had quietly invested in Visto, but made it clear that it really only cared about companies who had patents that could be used in lawsuits. John points us to a Forbes article that talks about Altitude and other private equity funds that have raised hundreds of millions of dollars solely to support patent lawsuits. In other words, if you thought things were bad in the past, they're about to get much, much worse. Once again, almost all of these lawsuits aren't about protecting the interests of an inventor at all. They're quite often cases of independent work on fairly obvious "next steps" in a market -- where the company who actually succeeds in bringing a desired product to market gets punished by someone who didn't successfully bring a product to market. Too often the patents are vague, exceptionally broad and have nothing to do with anything particularly new or innovative. That's not about promoting innovation -- it's about promoting patent attorneys.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Fred Flint, Apr 25th, 2007 @ 8:04am

    This is sickening!

    It's worse than spam, spyware, worms, virii, trojans, rootkits, DRM, WGA, virtual monopolies etcetera.

    Fix this incredibly moronic system!

    It's "lawyer capitalism" and therefore the one of the scummiest, anti-productive activities in the industry. It hurts all of us and it has to end.

     

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  2.  
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    sam, Apr 25th, 2007 @ 8:42am

    fred...

    while i fully sympathize with your feelings regarding bogus patents. ie, patents that should have more extensive research conducted prior to being granted, and i also agree that the patent office is over burdened, and that there might be investigators who are involved in the patent process who might be a little over their heads in certain cases.

    i would also suggest that the vast majority of patents are valid, with no issues.

    as to the point about patent companies, ie companies who buy up patents.. what's wrong with that?

    fred, if you work hard, come up with something novel/new/etc... and you apply/get a patent, you own it. you can do what you choose. you can allow it to be used by anyone for free, you can try to make a business using that IP of the patent, you can try to sell that patent to someone else. you're even free to tell other companies that you own the patent, and the company is infringing on your IP.

    i fail to see where the real issue is with this (aside from what i mentioned previously)

    if i put time/effort into something, and i can get a patent, then i'm damn well going to try to generate revenues from/with it.. and if my recourse is to sell it to a "patent" company, then that's my choice as well.

    on the other hand, if you really are upset over all of this kind of activity where companies buy up patents, there's nothing to stop you from taking your pennies, and trying to get others to add their pennies to the mix, and if you have enough pennies, you can make it known that you are now in the game of buying patents for the sole purpose of releasing the patents to the public...

    now, i'd applaud you if you were to put your cash to this kind of effort!!!

    i strongly suspect that you won't do this!

    peace

    sam

     

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  3.  
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    Chris, Apr 25th, 2007 @ 8:52am

    hyperbole

    Your math does not add up. Why would someone invest in buying patents to only sue someone who is bringing a product to market? Usually someone bringing a product to market doesn't have a ton of money.

    Maybe some real world examples of this actually happening instead of your prognostication of what might happen would help.

     

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  4.  
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    Chuck Norris' Enemy (deceased), Apr 25th, 2007 @ 9:06am

    Re: hyperbole

    They don't sue small inventors, they wait until a company brings out a new product, is extremely successful, and then spring the lawsuit on that company when they are ripe for the picking. Way to manipulate the system! To the poster prior to Chris, the sad thing is that this is a business, buying patents for the sole purpose of sueing an actual successful inventor or company, without whom the technology would never have advanced. Where is the incentive to innovate? The incentive to make a lot of money that will eventually be taken by scummy lawyers. Sign me up!

     

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  5.  
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    Vincent Clement, Apr 25th, 2007 @ 9:15am

    Re: hyperbole

    You misread the article. They sue companies who bring SUCCESSFUL products to market. As for a real world example, type in NTP RIM into search box in the top right corner of this page.

    NTP is a patent hoarder. Never brought a single product to market. RIM is a successful technology company that brought us the Blackberry. NTP sued RIM. RIM settled and paid $600 million. The USPTO recently rejected many of the patents used in the NTP-RIM case, but alas, it's too late for RIM.

     

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  6.  
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    angry dude, Apr 25th, 2007 @ 9:15am

    Mike's patent problem

    Just give it up, dude

    I'm sick of your ignorant patent rants

     

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  7.  
    identicon
    Fred Flint, Apr 25th, 2007 @ 9:27am

    Re: A Response

    Too often the patents are vague, exceptionally broad and have nothing to do with anything particularly new or innovative. That's not about promoting innovation -- it's about promoting patent attorneys.

    sam, I appreciate your considered response. If I create something new, I would expect a patent to protect me from someone stealing my innovation. As often happens when lawyers get involved, it seems quite the opposite can happen.

    Please note the quote above.

    It seems as if someone can then take a hard look at my patent, several years after the innovation has been developed and is successful - and decide to (legally) blackmail me without doing any work except filing another patent or finding a previous patent for an innovation that is "sort of" like mine.

    If they find some tiny, unimportant change they can make - or they simply file the exact same patent for the exact same innovation at a later date with slightly different graphics and language, it appears they can make me pay them a lot of money, just to make them go away.

    Personally, I couldn't force myself to sink low enough to do that kind of thing and I don't have any friends who'd sink that low either - but then again I don't have any lawyer friends.

    live long and prosper

     

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  8.  
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    Vincent Clement, Apr 25th, 2007 @ 9:27am

    Re:

    i would also suggest that the vast majority of patents are valid, with no issues.

    I would suggest the vast majority of patents sit on a shelf at the USPTO gathering dust.

    as to the point about patent companies, ie companies who buy up patents.. what's wrong with that?

    Other then ignoring the whole 'promote the progress of science and useful arts' thing mentioned in the US Constitution.

     

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  9.  
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    Unlikely, Apr 25th, 2007 @ 9:32am

    Free money everyone!!

    "i would also suggest that the vast majority of patents are valid, with no issues."

    On what grounds do you claim that? It's like saying the majority of mines in a mine field haven't exploded yet so they're safe.

    "fred, if you work hard, come up with something novel/new/etc... and you apply/get a patent, you own it. you can do what you choose."

    And here's the rub. The USPTO defines prior art as 'can we prove there is published prior art'. Which instantly rules out everything thats a trade secret. And it completely disregards the 'obviousness' test altogether.
    Then they expanded into areas that are ALL protected by trade secrets, software, business processes etc.

    The USPTO created a big hole into which people can patent existing things and go sue existing companies. And nobody should be surprised that there's a bunch of lawyers and VCs that can see the flaw and exploit it.

     

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  10.  
    identicon
    Anonymous Coward, Apr 25th, 2007 @ 9:49am

    Re: Mike's patent problem

    Then why are you still here?

    Numerous people have pointed out to you that there is no reason for you to keep coming back. All you do here is complain that you are sick of being here. STOP COMING HERE, and all will be well.

     

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  11.  
    identicon
    IronChef, Apr 25th, 2007 @ 9:58am

    Potential Solution to patents...

    Maybe an amendment to patent law where extendability of the patent is available, only if a use-case, prototype et al, for the IP is created within, say 7 years...

     

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  12.  
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    angry dude, Apr 25th, 2007 @ 10:10am

    Re: Re: Mike's patent problem

    Anecdote:


    A lecturer comes to give a lecture at some remote kibutz...

    "Here is a skull of Karl Marx when he was 20, and he is a skull of Karl Marx when he was 65"

    Question from the audience: "Excuse me, sir, how can one person have 2 skulls?"

    "Hey, dude, where are you coming from?"

    "I'm from academia, just visiting here..."

    "So go to your academia, you smart fuck, this is a lecture for collective farm workers!"

    Have a nice day

     

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  13.  
    identicon
    Anonymous Coward, Apr 25th, 2007 @ 10:22am

    Chris,

    Here's 2 off the top of my head real quick. NTP/RIM in which successful RIM had to pay $612,000,000 to a company holding invalid patents that had done nothing towards bringing them to market. Verizon is getting $58,000,000 and the privilege of putting Vonage out of business for patents on something with tons of prior art and that is ridiculously obvious. I could easily come up with many more with a minimum of research.

    Fred,

    Your arguments have been shown to be fallacious again and again. I would also argue your contention that the majority of the patents being grant are good valid patents. Every patent legal case I've read about in the tech industry has been about idiotic patents that are idiotically obvious and have prior art. They've given out a patent on linked lists for gods sake. This has been taught in programming classes since long before I started school in mid 1980's

    The only solution I can see at this point is to implement large fines and punishment for anyone who files a patent that is later found to be invalid with a 1 year grace period for existing patents holders giving them the time to do the due diligence they should have done prior to filing a patent. The levels of fines and punishment can be mitigated by proof of the level of due diligence done prior to filing for a patent. If someone spent a great deal of hard work coming up with something truly unique and original they should have no problem spending a couple more months ensuring that's the case before they are given a government granted monopoly over it. It also puts the onus on the entity granted the monopoly to prove the validity of the patent rather than on any companies they attack with the patent or a bunch of clerks who get paid by the volume of cases they push through the system. It should weed out the bad patents by making them too risky while allowing valid patents and making them more valuable.

     

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  14.  
    identicon
    sam, Apr 25th, 2007 @ 10:39am

    #9...

    your point about prior art, and trade secrets is part of the game, and it's a decision made by businesses everyday..

    when i worked at GE years ago, we decided to not get a patent for a special kind of stain resistant plastic, to be used in dishwashers.. we felt it gave us a huge advantage in that it was difficult to make, no one had anything similar, etc..

    a heckuva risk, as if someone had come up with what we were shipping and then patented it.. they would have had the glory, along with causing us huge issues!!

    but this is the decision you make. if you want the patent, and the protections it affords, you also deal with the issues of disclosure.

    there's nothing that states you have to get the patent...

    and no. if someone produced a patent, we couldn't have stated that we had prior art.. the docs that we had, processes that we had, etc.. were not in the public world!!

    the idea of suing for patent infringement is not a "hole" as you state. it's to keep me, from ripping off your work/research.

    so, like i've stated.. people should quit complaining, and get to inventing!


    life goes on...

    peace

     

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  15.  
    identicon
    Pro, Apr 25th, 2007 @ 10:39am

    Lawyers

    The truth is, spoken (or written) language is only an approximation of true meaning and intent. Lawyers are experts at exploiting those inefficiencies in language.

    Fact: Vonage broght a product to my home that signifigantly improved the value of my phone system. (value being overall cost/product). Verizon trying to take that away (claiming ownership of VoIP is like Al Gore saying he invented the internet) is a disasterous shame to America.

     

    reply to this | link to this | view in thread ]

  16.  
    identicon
    Reverend Joe, Apr 25th, 2007 @ 12:42pm

    Re:

    companies who buy up patents.. what's wrong with that?

    i fail to see where the real issue is with this (aside from what i mentioned previously)

    The answer to both these questions is really quite simple:

    In both cases, they are examples of the current patent system doing *exactly the opposite* of what its supposed to do, under the constitution of the US.

    Government-enforced monopolies are only allowed to exist at the sufferance of the "Progress" clause -- as the current patent system is no longer "promoting the progress", I'd argue that it is in fact, unconstitutional.

    (Not that it'll ever be ruled that way -- so long as the palms of judges are greased by those whose palms are greased by those who profit from the current progress-inhibiting system).

     

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  17.  
    identicon
    nhale, Apr 25th, 2007 @ 12:58pm

    Software and cooking

    Patents were intended for mechanical devices and become more problematic as they stray farther from that concept. Software patents just shouldn't exist. They should be treated the same way as a cookbook recipe. Your grandma's secret cookie recipe isn't patentable and neither should IP to phone address translation.

     

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  18.  
    identicon
    angry dude, Apr 25th, 2007 @ 1:31pm

    Re: Software and cooking

    Idiot,

    you should know that the very first US Patent was granted for the process of making potash.
    Chemical processes were always patentable
    Stop reading this shitty blog - read some serious books and articles about patents

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    Ryan, Apr 25th, 2007 @ 1:48pm

    Yeah, well what about the whole vonage deal. That was completely staged by Verizon. If they cared about their innovation they would have sued the second Vonage came into existence.

    It is the plan, of patenting something, then waiting for the most opertune moment to cash in on it, even though, you have made nothing, done nothing, created nothing, and helped humanity in no way shape or form.

    If you get 600 million for suing someone, you better damn sure deserve it, not the week of hardly any work it takes to file a damn patent.

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    Charles Griswold, Apr 25th, 2007 @ 2:14pm

    Re: Angry Dude

    Guys, don't feed the troll, OK?

     

    reply to this | link to this | view in thread ]

  21.  
    identicon
    Michael, Apr 25th, 2007 @ 2:39pm

    patent abuse

    So who's going to patent the "process" of abusing the patent system. If you did, you would make a niice mint as companies like altitude would need to buy a ticket first.

     

    reply to this | link to this | view in thread ]

  22.  
    identicon
    Xenohacker@hotmail.com, Apr 25th, 2007 @ 3:01pm

    Innovation :-)

    If an idea is truly original you don't have to worry about someone stealing it you will have to shove it down their throat... I hope they can reform the patent process just enough to bankrupt those law suit mongers...

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    syed Jahanzeb Raza, Oct 19th, 2008 @ 6:25am

    patenet ernquiry for Communication Idea

    I am having great benchmark communication Idea , want it to be patented , would you help me out
    Thanks
    S.Jahanzeb Raza
    Cells # 0092-345-2319266/ 0092-334-3103653

     

    reply to this | link to this | view in thread ]


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