Intellectual Ventures: Don't Mind Our 2000 Shell Companies, That's Totally Normal

from the nothing-nefarious-at-all dept

Back in 2010, we wrote about a report suggesting that Intellectual Ventures was using somewhere around 1000 shell companies to hide many of its patent shakedown attempts. For years, IV itself liked to say that it wasn’t involved in any patent litigation directly (that changed not so long ago), but we had seen some IV patents showing up from some small patent trolls, where it was impossible to determine who actually controlled the patent or the lawsuits. However, at times, other companies have argued that the shell lawsuits were really IV in disguise.

A few months ago, we wrote about an attempt to crowdfund an investigation into all of IV’s shell companies. While that attempt to raise money did not reach its goal, it has helped put renewed attention on IV’s use of a massive number of shell companies. In response, IV has been trying very hard to play down the whole thing. It published a ridiculous blog post arguing that the use of thousands of shell companies is just a normal business procedure:

This is a common practice for asset management firms, and it’s just common sense. Do stock brokers broadcast tips to their competitors? Does Warren Buffet tell the world where he’s investing next? Does Disney broadcast which plots of land it is planning to buy for its next theme park? Of course not, and IV takes a similar approach to our investments.

Ah, sure, this is all to throw other companies off the scent of what IV is “investing” in. That makes sense if IV were actually an investment company, rather than a shakedown play. The idea that publicly stating what patents it owns would somehow “broadcast tips” to “competitors” is ridiculous. Who out there is really an IV competitor? No, what IV is almost certainly worried about is that, if the extent of its activities were known, there would be more fodder for real and necessary reform against trolling — and, more importantly, it’s worried about tipping off the companies it’s about to go after. It’s not about competition — it’s about avoiding a smart company going to court to get a declaratory judgment against IV, which they admit later on in the post:

Moreover, were we to publish the entirety of our holdings we, or any other company for that matter, could find ourselves mired down in a series of tactical declaratory judgments and reexaminations.

Shocking. Perhaps if you didn’t go around demanding huge sums of money from companies with a giant stack of vague and overly-broad patents you wouldn’t face a series of declaratory judgments and re-exams.

In fact, no one has ever suggested that transparency is needed in the real estate world, yet properties are routinely held in the name of holding companies. When it comes to property ownership, patents shouldn’t be held to a different of set of rules

Well, if property holding companies routinely used their assets to shake down every other real estate owner out there, perhaps there would be calls for the practice to end. Plus, sorry, patents are not “property” like real estate is property. And, in fact, this is the key to IV’s entire business model. If patents properly delineated the boundaries of what the patents covered, there wouldn’t be much room for trolling. But, instead, IV relies on the fact that patents are broad and vague and “might” apply to all sorts of things.

In response to an article about all of this, IV also claimed that anyone who wanted to know about what patents IV holds can simply “search the USPTO’s public database.” Of course, this is a snarky and misleading answer for a number of reasons. First, it ignores the shell company patents. Second, it assumes that the USPTO’s search actually works well (it does not).

Thankfully, however, the good folks at PlainSite, who try to shine some light on the hidden corners of the legal system, decided to take Intellectual Ventures up on its offer — and actually went through the data to see what was lurking:

Like all of the USPTO’s on-line systems, the assignment database is a technological abomination–sadly ironic for the agency that effectively manages the nation’s technology rights. (The USPTO does deserve credit for making raw XML data available through Google, which is where our project began.) It must be noted that Intellectual Ventures would have had a much harder time lurking in the shadows all these years if government information technology systems, such as the USPTO assignment database and different states’ corporation databases, were kept up to par. In fact, its business model would likely be impossible, as the courts would be likely to label the company as a vexatious litigant if they only knew how many lawsuits it filed.

In the end, after digging through the database, PlainSite has identified — and released for all your enjoyment — the names of what appear to be over 2,000 shell companies, though they admit that some of them may be fully independent. But… many of them apparently had “some obvious overlaps” like sharing “managing corporations, telephone numbers, and other factors.” Oops. They’re hoping not to “crowdfund” the efforts here, but rather to crowdsource the data. As they note, they’re spreading this information, because “we hope that Congress and the courts take notice of one of the largest racketeering schemes ever perpetrated on the nation, with some of its richest billionaires acting more like thugs than visionaires.”

What’s really amazing in all of this is the way that IV execs keep spewing highly questionable arguments for why they’re not so evil, when all the data just keeps pointing in the other direction. You could almost respect the folks there if they just came out and admitted that they’d realized that there was a system that could be gamed, and they’ve gamed it to the tune of billions of dollars. But, instead, they keep trying to justify the company’s entire model by completely denying reality.

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Companies: intellectual ventures

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Comments on “Intellectual Ventures: Don't Mind Our 2000 Shell Companies, That's Totally Normal”

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22 Comments
dave x (profile) says:

My impression is that its a way to protect the assets of the mothership if a patent is found to have been asserted in bad faith. If that finding is made, and an attorneys fee award is made against the shell company that holds only one asset, i.e., the broad, vague patent, then IV will not have to pay the award for its actions, even under ‘piercing the corporate veil’ principles…..

Brian says:

Re: Re:

Be careful when you say “virtually everything” regarding IP is “always covered by a shroud of lies” and is not to “benefit people.” IP is abused by a number of players, yes, but the United States’s strict IP laws are also why so many of its citizens write, create, and invent. If anyone could just take your idea and do whatever they wanted with it, sort of like a schoolyard bully pushing you down and taking whatever you brought to school with you just because he’s a little bit bigger or a little bit more aggressive, the United States wouldn’t have the long list of people breaking their backs to invent and create that the United States has… it would have the virtually non-existent list of people breaking their backs to invent and create that, say, Africa has, and parts of the Middle East and South America have, and other places have that don’t or can’t protect creators from benefiting from their creations and offer no incentive to do much more than survive.

Zbigniew Łukasiak (user link) says:

Ad. Intellectual Ventures: Don't Mind Our 2000 Shell Companies, That's Totally Normal

There is now a very good analytical paper examining the problem with patents and the difference between patents and land property which is the source of them. It is impossible to find out if you are building your software edifice on a hidden patent: Scaling the Patent System.

Cheers,
Zbigniew

Ellie (profile) says:

Re: Intellectual Ventures etc

Zbigniew, thank you for the URL to that SSRN article! It looks good, based on the abstract. Especially nice: It distinguishes between software patents and patents in other fields where patent law remains functional (as it was for most patents in the past e.g. chemical engineering).

In return, you and others might like browsing through the Patent Reform Group items that I just found on scholarly article bookmarking site, CiteULike.

staff (user link) says:

another biased article

http://www.techdirt.com/articles/20121220/02365821447/intellectual-ventures-dont-mind-our-2000-shell-companies-thats-totally-normal.shtml

?Patent troll?

infringers and their paid puppets? definition of ?patent troll?:

anyone who asserts a patent against us

Call it what you will…patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: ?we?re using your invention and we?re not going to stop or pay?. This is just dissembling by large invention thieves and their paid puppets to kill any inventor support system. It is purely about legalizing theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To them the only patents that are legitimate are their own.

It?s about property rights. They should not only be for the rich and powerful. Show me a country with weak or ineffective property rights and I?ll show you a weak economy with high unemployment. Does that remind you of any present day country?

Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don?t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

For the truth about trolls, please see http://truereform.piausa.org/default.html#pt.

Anonymous Coward says:

likely that guy with a t-rex in his living room replaced the fossil dinosaur with an attorney who is also great at numbers.

the amount of tax returns, and financial paperwork, asset valuations owned by each company can be mind-numbing, but with the right accountant-attorney, mba-esq-cpa. anything is possible.

let’s just hope that key member of the board, who is filing all this paperwork, including CPA-certified local, state, and likely international tax returns and royalty statements, doesn’t get a job offer somewhere where they properly license patents to bring a product to market.

then this accountant-attorney cpa-mba-esq will have to take some marketing classes, which he may enjoy, considering it seems, a cookbook “Modernist Cuisine: The Art and Science of Cooking “isn’t selling very well.

Teachingaway (profile) says:

Patent Small Claims Court to Deter Trolls?

Patent Trolls have one powerful weapon: the threat of expensive litigation. Defending a patent lawsuit, even a baseless lawsuit, costs millions.

But what if we had a Patent Small Claims Court that could efficiently dispose of smaller cases, especially cases with weak patents and weak infringement claims?

The USPTO is considering creating a Patent Small Claims Court.

Patent Office Request for Comment

Translation of the USPTO’s legalese into plain English.

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