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.
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  1. identicon
    Anonymous Coward, 25 Apr 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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