Startup Holds Nose, Pays Up To Intellectual Ventures To Get Patents It Needs In Patent Fight

from the that's-not-how-the-patent-system-is-supposed-to-work dept

Intellectual Ventures is the infamous company founded by former Microsoft CTO Nathan Myrhvold to hoard patents on a massive scale and to basically get companies to pay up "protection money" to (1) keep those patents from being used against them and (2) let them use those patents against others. While for years Myrhvold insisted that Intellectual Ventures was avoiding lawsuits, we have seen IV patents showing up in lawsuits lately. The first one was last year, involving a patent IV had sold, but it wasn't clear if it still had an interest in any awards or settlements received. It has become clear that the company has set up over 1,000 shell companies, however, so that makes it more difficult to know sometimes.

However, there have been two cases of IV patents officially involved in lawsuits lately, and both are on the "defensive" side. The first was back in March, where IV sold some patents to Verizon that it could use in its fight against TiVo. TiVo had sued Verizon, but since Verizon had paid IV some huge amount of money (hundreds of millions of dollars), it had the right to pick from IV's patent portfolio to sue back. That same thing appears to be happening again, though, this time with a smaller company who wasn't already an IV member. Speech to text company Vlingo was sued by speech recognition software giant Nuance for patent infringement, and now Vlingo has paid Intellectual Ventures to "join" and to get patents back, which it can use to fight back against Nuance.

Now, you might consider this situation to be slightly better than using IV's patents to directly sue, but it actually makes the whole situation a lot worse. Basically, IV is about patents for hire, at a super high premium. This has nothing whatsoever to do with encouraging innovation at all. Instead, IV has every incentive in the world to see more wasteful lawsuits, so more companies feel the need to pay up to grab some patents. It's making a complete farce of the already troubled patent system.

Even Vlingo, the company that just paid up, seems to recognize this. In commenting about the "deal," Vlingo's CEO said:
"Our patent system in America is horribly broken. If we had a rational patent system, there wouldn't be a place in the market for Intellectual Ventures. It's a shame they even need to exist."
Indeed. When your newest "customers" admit it's a shame you need to exist, it seems pretty evident that what you're doing is not benefiting society at all, but causing more harm.

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  • icon
    weneedhelp (profile), 2 Aug 2010 @ 1:51pm

    Intellectual Ventures?

    Intellectual Vultures is more like it.

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

  • identicon
    Anonymous Coward, 2 Aug 2010 @ 2:27pm

    The existence of patent insurance is evidence of how broken our patent system has become.

    "For inventors, patent infringement insurance covers legal costs in case they have to sue an infringer to enforce their patent.

    For third parties, patent infringement insurance covers their legal costs in case they are sued for patent infringement by an inventor.

    Patent infringement insurance is generally considered too expensive to be worth it. The premiums must be high, however, due, at least in part, to the high legal costs of patent infringement cases."

    [Citati on Needed]

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

  • icon
    Jay (profile), 2 Aug 2010 @ 7:33pm

    Dont see anything wrong with what IV is doing... what is wrong is the whole Patent system. Getting rid of IV won't do anything. The US needs to overhaul its Patent system pronto and bring them out of the dark ages.

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

  • icon
    Lachlan Hunt (profile), 3 Aug 2010 @ 8:04am

    The problem is absolutely not with IV, and I fail to see how you can accuse them of making the situation worse. Sure, they're running a business and making money from what they do, but they're in the business of selling defensive patents to companies that are already being attacked.

    The real problem is with the broken patent system, and with the trolls who abuse it for offensive purposes. Blaiming a company that exists to help out another company to improve their defence, is really blaming the wrong party.

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

    • icon
      btrussell (profile), 3 Aug 2010 @ 9:02am


      Right, because if some thugs are using extortion on you by threatening to smash your goods in your place of business, and you hire a second group of thugs who murder anyone who comes in threatening violence, it is not the fault of the second group that they need to murder people so that you can carry on your business.

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

  • identicon
    Anonymous Coward, 3 Aug 2010 @ 9:00am

    What's with all the shell companies?

    Are any of them around to help IV drum up business?? To create a need for the product??

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

  • identicon
    James, 30 Jan 2011 @ 3:59pm

    Patent Infringement

    Great post on Patent Infringement. For more information on patent infringement, check out

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

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