Patent Troll Intellectual Ventures Running Out Of Cash; Looking For $3 Billion From Investors

from the troll-troll-troll dept

It would appear that Intellectual Ventures' grand plans to tax innovators has hit a bit of a roadblock: the company appears to be running out of cash. Reuters has the news that the company has basically stopped buying new patents and has even had to push back the closing date on a bunch of deals it was trying to complete while it scrounges for cash. The world's largest patent troll is seeking $3 billion in new investment money, to add to the $6 billion it already raised (and spent). The company also claims to have made $3 billion in license fees (what some might call shakedown fees). Of course, the numbers may be a little mixed up, since some of the massive licensing deals (sometimes over $100 million) often were described as "investments." That is, companies would be told if they paid massive sums to "invest" they'd effectively get a license.

Of course, the Reuters article also highlights how many of the big tech companies who signed up early on are not at all interested in supporting IV any more. As we noted years ago, Nathan Myhrvold built IV with a sort of bait-and-switch pitch. He told everyone that he was building a "patent defense fund," which tech companies could share to avoid getting sued by others. It was only later that the companies realized they were enabling a new massive patent troll instead. And it seems that many are not happy.
It is not clear how close IV is to completing its new fund, or which type of investors might participate. Microsoft Corp, an early IV backer, has not invested in IV's new fund "at this time," spokeswoman Jennifer Crider said.

Google Inc, an early investor that in recent years has found itself opposed to IV in the patent policy debate, also said it will not participate.

"We joined Intellectual Ventures' first fund as a way to defend ourselves against unjustified patent claims," Google spokesman Matt Kallman said. "Once we came to understand IV's operating model, we didn't join its later funds."

[....] One of IV's early tech company investors, the chip design firm Xilinx, sued IV in 2011 after Xilinx refused IV demands to license additional patents, according to court filings. Xilinx's attempt to invalidate those patents in court is still pending.
The Reuters report also highlights how it doesn't appear that IV's actual business looks very good either. While it claims at least some positive rate of return on some of its funds, numbers provided publicly by the University of Texas make it look pretty weak:
The IV investor presentation reviewed by Reuters shows that at the end of last year, the average rate of return for IV's 2003 fund was 16.2 percent, while the 2008 fund stood at 2.5 percent. In a court filing in August, Intellectual Ventures said it has earned more than $3 billion to date in licensing fees....

[...] UTIMCO [University of Texas Investment Management Company] invested $50 million in Intellectual Ventures' 2008 fund. By the end of May 2013, IV had returned 31 cents on the dollar to UTIMCO, which ranked it 22nd out of 38 on cash returns among all of UTIMCO's 2008 private investments. The value of UTIMCO's stake in IV declined more than 4 percent since 2008, putting it fifth from the bottom among UTIMCO's 2008 deals.
That said, as we pointed out a few years ago, looking at the return rates on investment funds before they're closed can often be misleading, since many are dependent on big homeruns that may occur late in the game. Still, IV has been around for a decade now, and despite all the hype and fuss, it's not at all clear that the company has a real business. Yes, billions went into it, but that has led to zero actual products, and not much return for investors.

The company still may be able to find that $3 billion -- a lot of big money folks who don't really understand the nature of trolling may be dazzled by the Nathan Myhrvold charm offensive and the silly stories he likes to tell -- but perhaps we can hope that people will finally start to realize that the emperor has no clothes. Patent trolling harms the wider economy, taking money away from actual innovation and products that improve lives, while handing it off to a bunch of lawyers for no good purpose at all.


Reader Comments (rss)

(Flattened / Threaded)

  1. This comment has been flagged by the community. Click here to show it
     
    identicon
    out_of_the_blue, Oct 4th, 2013 @ 10:26am

    "many of the big tech companies who signed up early on"

    Were neither smart nor skeptical, eh? SIX BILLION blows away the notion that corporate executives are either wise or clever.

    "The company still may be able to find that $3 billion -- a lot of big money folks who don't really understand the nature of trolling" -- Yeah, THOSE FOOLS who somehow have billions. -- I agree up to a point, but I'm pretty sure they're just more active vultures, AND that Mike doesn't understand them, at best. Never any bad actors in Mike's view of capitalism, so no need of regulation.

    But anyhoo: isn't this the mythical "self-correcting" of the market going on here? Spent SIX billion, brought in THREE, now broke. -- BUT the investors are probably "too big to fail" so gov't will bail them out directly, or at worst, clever accounting will write it off as current excuse to pay no taxes. Private profits, public risks, that's the current fascism. The big "capitalists" never actually lose.

    If you support pure capitalism, you must somehow justify Miley Cyrus getting millions while productive laborers live in poverty.

     

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

  2.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 10:45am

    I personally believe patent owners should be required to produce products based on their patents in order to keep them. Use it or lose it like trademark law.

     

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

  3.  
    icon
    DannyB (profile), Oct 4th, 2013 @ 10:48am

    Intellectual Vultures broke from lack of licensees?

    It seems that Intellectual Vultures is broke because everyone they accuse of infringing upon their ridiculous, trivial, and never-should-have-been-granted patents will not pay the patent extortion license.

    Shame on them for not just bending over for the bully.

    Also, please stop using the term Patent Trolls, which Intellectual Vultures finds offensive. Instead, I would propose the more neutral term PTE's (for Patent Trolling Entities).

     

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

  4.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 10:48am

    Re: "many of the big tech companies who signed up early on"

    Little boy blue-ism #578 referring to something as 'mythical' then providing a real world example in the very same sentence.

    I hope you're at least aware enough to realize that government bailouts preventing market losses is the opposite of capitalism and that's why you put capitalists in quotes at the end. Maybe you could even admit that was a government failure? I doubt it though, it would severely damage your proposed solution: to give the government more money and power.

     

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

  5.  
    icon
    Gwiz (profile), Oct 4th, 2013 @ 10:53am

    Re: "many of the big tech companies who signed up early on"

    If you support pure capitalism, you must somehow justify Miley Cyrus getting millions while productive laborers live in poverty.


    So what's your solution then Blue? Since you always fail to back up your "tax the rich" notion with any specific details, I simply cannot consider it as a viable solution.

    Do you actually have any solutions or just rallying cries?

     

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

  6.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 10:53am

    Re: "many of the big tech companies who signed up early on"

    Well, IV DID fool big name tech companies into giving them over $100 million dollars according to the article, so yes, some billionaires could be dumb enough to fall for IV's pitch.

     

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

  7.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 10:56am

    Re: Re: "many of the big tech companies who signed up early on"

    That's just little boy blue's SOP: pretend a specific example is a general statement by italicizing the general statement you wish had been made and ignoring everything else.

     

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

  8.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 10:57am

    Re: "many of the big tech companies who signed up early on"

    Spoiler: Wise and clever people are still capable of making mistakes. If you were a member of rational human society, you would meet some of these people.

     

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

  9.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 12:25pm

    I wish those assholes would do the world a favor and go and troll themselves off a cliff.

     

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

  10.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 1:00pm

    Re: Intellectual Vultures broke from lack of licensees?

    I think the biggest deterrent is that IV has sued far too many people with positive ties to their earlier investors.

    Trying to build the main base of your operations on legal actions against companies create far too many enemies if you live at the mercy of investments from the same.

     

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

  11.  
    icon
    Steve R. (profile), Oct 4th, 2013 @ 1:19pm

    Real Reproducible Plans

    And along those lines, the submission of real plans that can actually be used to make the product. No conceptual "cloud" plans or black boxes.

     

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

  12.  
    icon
    John Fenderson (profile), Oct 4th, 2013 @ 1:19pm

    Re: Re: "many of the big tech companies who signed up early on"

    Also, being wealthy and being wise & clever are independent of each other. You cannot assume that someone is smart merely because they're wealthy.

     

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

  13.  
    identicon
    DB, Oct 4th, 2013 @ 4:35pm

    I'm glad that someone else has noted IV's "investment in lieu of payout" strategy.

    Most companies that "invested" were really shakedown targets. They had a choice of structuring the payments as a legal settlement, license fees, or an investment.

    By making it an "investment" they got a tax advantage. I don't know exactly how the accounting worked, but I'm guessing that someone made notes during the presentation and the details will leak out in due time.

    That would explain why the average investment rate of return looks pretty bad. Some of those "investments" were intended to return money.

    It's not clear why this story about another round of investment is being circulated now, but it's very likely cover for a more sinister reality. Or perhaps just cover to delay public awareness of IV's tactics.

     

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

  14.  
    identicon
    Anonymous Coward, Oct 4th, 2013 @ 5:22pm

    investment in lieu of settlement seems sketchy

    investment in lieu of settlement slides, imo, perilously close to ponzi territory.

    note however, that IV reportedly controls a couple thousand shell companies, and their finances could very well be some world-class spaghetti.

     

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

  15.  
    identicon
    DB, Oct 4th, 2013 @ 6:22pm

    That should have read "not intended to make a return".

    It's not a Ponzi scheme. At most it's tax evasion. But probably not prosecutable as that. With enough clever accountants you can paper over almost any scheme. After all, it's just a matter of intent, and that is difficult to prove.

     

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

  16.  
    identicon
    Fortune500patentatty, Oct 5th, 2013 @ 6:28pm

    Re:

    AC - I agree with you but the small inventor lobby is absolutely against a "working requirement". Trolls are similar to sole inventors in that they can both bring asymmetric patent infringement suits. A "loser pays" system is a much more palatable solution to the troll problem. That is why you don't see the troll problem in other countries around the world.

     

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

  17.  
    identicon
    Anonymous Coward, Oct 6th, 2013 @ 12:01pm

    Response to: Anonymous Coward on Oct 4th, 2013 @ 10:45am

    I agree with the spirit of this suggestion, except the problem is that oftentimes the small guy who invented something goes out of business when the bigger guy steals their IP and steamrolls them in the market. At that point, you think he should no longer be able to sue? The reality is at that point, suing is so expensive, that's when the small guy's best path is to sell the patent...to a troll.

     

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

  18.  
    identicon
    Pragmatic, Oct 7th, 2013 @ 5:25am

    Re: Re: "many of the big tech companies who signed up early on"

    If you support pure IPR, you must somehow justify Miley Cyrus getting millions while productive laborers live in poverty.


    FIFY

     

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

  19.  
    identicon
    Janet, Apr 5th, 2014 @ 4:53pm

    Does Intellectual Ventures have a stock ticker name? Google is turning up nothing. What's the 4-letter code?

     

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


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This