Hedge Funds Betting On Patent Lawsuits With Courtroom Spies

from the you-need-that-edge dept

For many in the hedge fund world, the game is based around having some sort of edge -- that single piece of information that no one else has (yet) that allows the hedge fund to make the trade that will pay off big time when the information spreads. Apparently, a number of hedge funds are looking for that edge as it relates to patent trolling cases. There are so many patent troll cases these days, and they often impact large, public companies, that knowing the results before the news hits the wires can open up the opportunity to make an awful lot of money. That's why hedge funds have started sending spies into the court rooms of prominent patent troll cases (via Paul Kedrosky). Apparently there have been several cases where as soon as the verdict is read, a bunch of folks run out of the courtroom (you're not allowed to use mobile phones in the court room). They're not reporters, but patent litigators hired by the hedge funds to report back in within seconds of the verdict coming down. That gives the hedge funds enough time to make their trades before the reporters write their stories and the news hits the wires. We've talked about investors betting on patent trolls before, but this takes the practice to a new level.


Reader Comments (rss)

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  1.  
    identicon
    Danny, Sep 25th, 2007 @ 5:24am

    This is another reason...

    why the patent system is in need of reform. It's gotten to the point where companies are sending runners into courtrooms to spread the word of a ruling before it hits the street?

    I'm not saying that reform would end this practice of running but at least the runners would be reporting on real patent lawsuits instead of the frivolous nonsense thats going on these days.

     

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  2.  
    identicon
    Brad Eleven, Sep 25th, 2007 @ 5:55am

    old trick, new twist

    The original stock exchange in the 1th-century Netherlands traded on the temporal advantage of new information. Traders developed methods to hide their conversations, which had to be held near the brokers' desks, because opportunists hired spies to eavesdrop on the traders.

    I agree that trading on bogus patent lawsuits is a problem that can be dealt with, but trading on new and exclusive information--true or false--is here to stay. Consider that the market reacts to rumors and real news in the same way.

    Now think about the monetary value of warrantless surveillance.

     

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  3.  
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    angry dude, Sep 25th, 2007 @ 6:24am

    Open your eyes, idiots !

    Hey, mikey,

    Are you relly that dumb or just pretending ?

    There is NOTHING special about patent court cases - this shit happens all over the place with all kinds of court rulings.
    Watch the movie "Wall Street" - it's a good movie BTW
    "BlueStar Airlines" etc.
    Sort of cuts to the essence of capitalism...
    be honest and stay poor

    Stop being a pussy mike, go to some real people's country like Cuba and start a new happy life over there...
    You won't need yout shitty tech blog over there - those fellas don't have any tech... They still drive some shitty cars from the old Soviet era... But no patent trolls either

     

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  4.  
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    RandomThoughts, Sep 25th, 2007 @ 6:24am

    Nice spin, but it doesn't sound like the case involved a patent troll or that it was a bogus patent lawsuit.

    Why wouldn't Wall Street be involved in tracking lawsuits that will change companies fortunes?

     

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  5.  
    identicon
    Steve Wren, Sep 25th, 2007 @ 7:47am

    Hedge Funds Betting On Patent Lawsuits With Courtr

    What is a patent troll?

    According to some a patent troll is a firm who licenses patents they do not themselves commercialize. Yet many of the large firms who are most critical of the practice do it themselves. Out licensing is now an important profit center of most every firm. Often, as a result they end up licensing out patents covering technologies they themselves do not use as they are not consistent with their corporate plan. Rather hypocritical isnt it?

    Still, there is nothing illegal or unethical about a small entity only licensing or selling their inventions. In fact, the traditional approach for many if not most independent inventors is to solely license or sell the rights to their invention. This is because most inventors, while they may be quite creative and even have genius in their field, are not always so adept at business, such as marketing or manufacturing, or simply lack the money. Inventors frequently find they are better off leaving the business end of it to someone else. Then again, some just love inventing and don't want to be bothered with the business end of it so that their time is fully focused on invention, not on business. Edison himself, one of the world's most prolific inventors, most often sold or licensed his patents to others that they might commercialize his inventions. No one derided him as a "patent troll". Many times when he attempted to manufacture and/or market his products himself he struggled with profitability. Therefore, the argument by large multinationals and other parties that there is something wrong with inventors solely selling or licensing their inventions is mere dissembling or only signals a lack of understanding in invention and inventors. So they should stop this childish name calling.

    Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups), and stealth PR firms. Don't be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings.

    All this talk of "patent trolls" is then but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue...that they have no valid defense against charges they are using other parties' technologies without permission. It’s not about reforming the system. It’s about legalizing theft!

    The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That's what these large multinationals are betting against. This legislation in regressive, not progressive.

    When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.
    Steve Wren
    StL, MO

     

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  6.  
    identicon
    RandomThoughts, Sep 25th, 2007 @ 8:17am

    "Patent No. 5,918,909 owned by Barry Fiala Inc. In addition, the jury found that the asserted claims of the patent invalid for obviousness, found that patent is invalid for failure to name all of the inventors, and that the patent is unenforceable due to inequitable conduct before the United States Patent and Trademark Office."

    Seems like the system worked, no?

    "We've talked about investors betting on patent trolls before, but this takes the practice to a new level."

    Ummm, those investors were betting against the patent trolls.

     

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  7.  
    identicon
    A Good Citizen, Sep 25th, 2007 @ 8:26am

    Hedge Funds Betting On Patent Lawsuits With Courtr

    So what's your point?

    Investment capital has a perfect right to seek out opportunities wherever they may be. It's your derogatory epithet "patent trolls" that implies some anti-social, or immoral activities here on the part of those that provide extremely valuable 'investment capital' to new, extremely risky ideas in this country. Whose interests are you promoting, the major corporations who have the capital to prosecute patents, and who are in a dominant position to bury a small inventor in endless and expensive patent infringement litigation for years?

    80% of new jobs in America are created by small business and individuals, yet only 10% of utility patents are issued to individuals. I wonder why. Could it be because it takes years to get a patent issued, and then years of extremely expensive litigation to enforce it, typically against big companies.

    You must have really hated your parents to write crap like that.

    Shame on you.

     

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  8.  
    identicon
    angry dude, Sep 25th, 2007 @ 8:37am

    Re: Hedge Funds Betting On Patent Lawsuits With Co

    Mike has no shame.. it's just business, dude

    He is on payroll of some of those "patent fairness" thiefs, doing his PR assighnment for the large tech bullies
    Good job, Mikey, but it's getting a little boring lately , isn't it ?

     

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  9.  
    identicon
    ranon, Sep 25th, 2007 @ 8:48am

    It not spying

    The actions of the hedge funds are just the same as any other reporter, just more efficient.

    How, can you by any strech of imagination call it spying?, except to sensationalise the headline.

     

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  10.  
    icon
    Mike (profile), Sep 25th, 2007 @ 10:46am

    Re:

    Why wouldn't Wall Street be involved in tracking lawsuits that will change companies fortunes?

    Not saying it's wrong for them to be involved. Just noting how it fuels these types of cases.

     

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  11.  
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    Mike (profile), Sep 25th, 2007 @ 10:48am

    Re: Hedge Funds Betting On Patent Lawsuits With Co

    Out licensing is now an important profit center of most every firm. Often, as a result they end up licensing out patents covering technologies they themselves do not use as they are not consistent with their corporate plan. Rather hypocritical isnt it?

    I like how you define patent trolls the way you want to and then bash us for your definition. Try again based on what we actually say: We have no problem with licensing technology here. The problem we have is firms that have received patents on broad or obvious ideas preventing others from actually innovating.

     

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  12.  
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    Mike (profile), Sep 25th, 2007 @ 10:59am

    Re: Hedge Funds Betting On Patent Lawsuits With Co

    Whose interests are you promoting, the major corporations who have the capital to prosecute patents, and who are in a dominant position to bury a small inventor in endless and expensive patent infringement litigation for years?

    Funny that you accuse me of using biased language, and then write the above statement, followed by:

    You must have really hated your parents to write crap like that.

    As we have made incredibly clear: we are about promoting innovation. That means helping actual products get to market in a way that provides people with what they want.

    The problem is that we're seeing way too many lawsuits that aren't about "protecting" the small inventor, as you claim, but about STOPPING firms (both big and small) from innovating. Our position has nothing to do with big or small companies. We trash big companies all the time. We actually believe that smaller startups are doing much of the innovating these days. The problem is that so many companies (small ones included!) are held back from innovating because they're being sued by those who have obvious and broad patents that never should have been issued.

     

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  13.  
    icon
    Mike (profile), Sep 25th, 2007 @ 11:03am

    Re: Re: Hedge Funds Betting On Patent Lawsuits Wit

    He is on payroll of some of those "patent fairness" thiefs, doing his PR assighnment for the large tech bullies
    Good job, Mikey, but it's getting a little boring lately , isn't it ?


    Angry dude, I've asked you repeatedly to substantiate your claims or to retract them. You need to retract them because they are simply untrue. I have nothing to do with PR. I've never worked in PR in any way. I am not on the payroll of the companies you claim. In fact, we write critical stories about many of those companies all the time. Why do you ignore this? I have no idea.

    What amazes me, angry dude, is you continually complain about how the patent system has screwed you (though you still refuse to show us the patent you have -- which you were already caught lying about, since you claimed you had it years ago, and then later claimed you had just been granted your patent).

    We are 100% transparent about our position. We are simply about encouraging innovation -- and we point to research and studies to support our position. You, on the other hand, refuse to identify yourself. You refuse to identify your patent. Who is more trustworthy?

     

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  14.  
    identicon
    RandomThoughts, Sep 25th, 2007 @ 11:38am

    As the hedge fund "spy" was reporting on the progress of the case and learning that the defendant was going to win, I don't see how this would fuel these types of cases. If they were following it to buy stock in the patent "trolls" as you put it, I could see that.

    Since they were betting against the troll, don't see how this would fuel it.

    Seems someone saw that maybe a stock went down because of the suit and then wanted to cash in on the bump when the verdict was announced.

    Not surprised that the hedge fund guys wouldn't talk about this, as this really could be considered trading on inside information.

     

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  15.  
    identicon
    emichan, Sep 25th, 2007 @ 2:22pm

    Re:

    As the hedge fund "spy" was reporting on the progress of the case and learning that the defendant was going to win, I don't see how this would fuel these types of cases. If they were following it to buy stock in the patent "trolls" as you put it, I could see that.

    Since they were betting against the troll, don't see how this would fuel it.


    If you RTA, you'll see that this specific case was only cited as an example. This is apparently a trend, which could very well fuel more bad patent suits, as it can make people lots of money shorting stocks.

     

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  16.  
    identicon
    Anonymous Coward, Sep 25th, 2007 @ 2:24pm

    Re: Open your eyes, idiots !

    ad hominem attacks add nothing to the discussion. please take your trolling elsewhere.

     

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  17.  
    identicon
    tibor, Nov 11th, 2007 @ 10:55am

    Litigation Outcome Possibilities Analyses

    I recently worked for a small company that offered patent litigation outcome analysis as one of it's products. the product was in significant demand, and the demand was (is) growing. Note the emergence of a newsletter focused on new patent law suits, as well as the growing number of companies aquiring and creating IP for the purpose of enforcement. Without infringers, there would be no trolls.

     

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