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
    Reverend Joe, 25 Apr 2007 @ 12:42pm


    companies who buy up patents.. what's wrong with that?

    i fail to see where the real issue is with this (aside from what i mentioned previously)

    The answer to both these questions is really quite simple:

    In both cases, they are examples of the current patent system doing *exactly the opposite* of what its supposed to do, under the constitution of the US.

    Government-enforced monopolies are only allowed to exist at the sufferance of the "Progress" clause -- as the current patent system is no longer "promoting the progress", I'd argue that it is in fact, unconstitutional.

    (Not that it'll ever be ruled that way -- so long as the palms of judges are greased by those whose palms are greased by those who profit from the current progress-inhibiting system).

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