Intellectual Ventures Getting Antsy; Expect Lawsuits Soon

News You Could Do Without

from the patent-saber-rattling dept

By this point, it should be rather clear what we think of Nathan Myhrvold’s Intellectual Ventures project. It’s perhaps the biggest threat to innovation around, as Myhrvold is collecting a ton of patents (now up to 20,000 apparently) and pressuring companies to pay hundreds of millions of dollars to get blanket licenses to avoid getting sued. It’s a scam to shift money away from actual innovators and into the pockets of lawyers and speculators. For some reason, though, Myhrvold has a knack for getting press. His latest is a profile in the Wall Street Journal that covers much the same ground as previous profiles in places like Business Week and Fortune.

So what is new in this one? Well, less than a year after raising a $1 billion patent hoarding fund, he’s out raising a new $2.5 billion fund. So it seems like he’s good at getting press and raising money — but not so much actually making money at this point (well, Myhrvold personally is doing fine, since the piece notes that he gets a 2% management fee, just like a VC). And that’s where the saber rattling comes in. The article notes that Cisco and Verizon have paid up between $200 and $400 million as licensees — though, to make it more confusing some of that is invested back into the fund for equity. Thus, it’s not really clear as to how much is being used specifically to license patents. The article also highlights that some of Myhrvold’s earlier investors are going to start wondering when the fund is actually going to bring in some real revenue.

Another oddity is the vast amount of secrecy surrounding Intellectual Ventures. Anyone who sells a patent to the company or who licenses patents from the company are required to sign extensive non-disclosure agreements. When asked why, Myhrvold skirts the question by claiming many companies don’t want to reveal what they’re doing with IV. If that’s true, though, why do they need NDAs in the first place? The company also uses an array of secret shell companies to go around buying patents, again raising questions about what it’s doing. If the company is really so proud of its business model and doesn’t think it’s shameful, why is it hiding behind shell companies like garden variety patent hoarders. But, as we’ve learned, patent hoarders very much rely on secrecy to convince others to pay up.

And, then, of course, there are the myths that Myhrvold loves to repeat, but no reporters ever push him on. He insists that those who disagree with his business model are merely “infringers.” Yet, as we’ve all seen, so many patent infringement lawsuits these days are hardly about actual infringement, and much more about a company that didn’t succeed in the marketplace suing one that did. He also repeats the myth that patent lawsuits are decreasing, claiming that the number of lawsuits peaked in 2004 and has been declining. That’s misleading because it ignores the fact that patent hoarders are now suing larger and larger groups of companies in a single lawsuit meaning that the number of companies being sued has been increasing rapidly.

Either way, Myhrvold may want to close that new fund as quickly as possible. The Bilski ruling that could put an end to software and business method patents is expected sometime in October, and it could put a big dent in his patent portfolio.

Filed Under: nathan myhrvold, patent hoarding, patents
Companies: intellectual ventures