This American Life Followup On Patents Reveals Intellectual Ventures Is Even Slimier Than Previously Believed

from the well-of-course-they-are dept

Nearly two years ago, This American Life did an incredible episode about patents and patent trolling, which really got the issue of patent trolling into the mainstream. At the center of that episode was an exploration into Intellectual Ventures, the world's largest, most obnoxious patent troll. The story revolved around one single patent (5,771,354), which Intellectual Ventures itself had held up as an example of how they were really just helping the poor, brilliant, lone inventor who was being ripped off. In that story, This American Life reporter/producer Alex Blumberg and NPR New reporter Laura Sydell tried to follow the story of that patent to exonerate Intellectual Ventures and show that, indeed, it was helping small inventors get their due. But the story turned out to not stand up to even the slightest amount of scrutiny. Because when they went in search of the inventor, Chris Crawford, he refused to respond to them, and then IV itself noted that it had "sold off" the patent and it was currently engaged in litigation. The entity doing the litigation was a company called Oasis Research, which had an empty office in Marshall, Texas with no employees, but had sued over a dozen internet companies for broadly doing online backup.

In a hilarious exchange, IV's Peter Detkin, the guy who coined the phrase patent troll but now likes to delude himself that he's not an executive at the world's largest troll, pretended that it was some sort of "ambush" when Blumberg simply asked him to explain when IV bought the patent from Crawford and then when and to whom they sold it, based on the data on the US Patent Office's own website. Hilariously, Detkin insisted that he hadn't looked at the USPTO website, so he didn't know what was going on.
Detkin: I won't be able to tell you, probably, from looking at this. I mean I'd have to talk to... I'm not even an expert in... You're looking at the USPTO website? I haven't looked at this particular website in a while. I don't know how it's organized....

Alex Blumberg, from TAL: Wait... are you telling me that you're the... (long pause)... you run a patent company and you were the head counsel at Intel in the patent department, and you don't know what the Patent Office website is... you don't know how to read this...?

Detkin: (Frustrated) Look, I can look at this if you want, but I haven't looked at this particular website and I don't now how it's organized, and I'm not exactly sure what it is you're trying to get at... and I'm happy to answer questions, but if you're going to cross-examine me on the record about a patent website, I don't quite think that's fair...
And then a PR person jumped in and tried to kill the interview. Later they went back, and Detkin "explained" the details, claiming that it had bought the patent from Crawford in 2007 and then sold it off to Oasis Research more recently. When Blumberg quizzed him about how the patent is now being used to shake down companies for money (exactly the kind of thing that led Detkin to coin the term patent troll), Detkin insisted that IV had nothing to do with the patent any more, and had no control over these third party entities once it sold off the patents. They then pointed out to him that in the legal documents, Oasis Research had listed Intellectual Ventures as having a financial interest in the outcome of the case, and he brushed it off as an aside -- basically saying, "oh sure, perhaps we receive some royalty from future monetization." Specifically, he said "we get some percentage of the royalty stream down the road that is generated from the monetization of these assets."

Uh huh. So, This American Life has now done a follow up on that first episode, in which they finally get a bunch of answers that eluded them when the first episode aired -- and it's in part because two companies, out of 18 that were sued, fought Oasis Research and won by invalidating the patent. The other 16 likely settled, and hopefully are kicking themselves for giving in to a patent troll and paying the fees. The episode replays some clips from the original episode, including the interview with Detkin above, but what they revealed when all was said and done suggests, yet again, that Detkin was being less than forthright in that interview. The "ongoing royalty"? Apparently Intellectual Ventures got 90% of the net profit from the patent. 90%. That's not an ongoing royalty. That's basically someone who still owns the patent and is using a shell company to pretend that it's not involved in the "dirty business" of demanding exorbitant fees from companies who actually do something.

This American Life also estimates, based on how much Oasis Research demanded from Carbonite ($20 million), that Oasis probably got over $100 million in settlements from the companies that did settle. They also found out that IV paid back to Chris Crawford a nice chunk of change as well. They originally bought the patent for $12 million from him (via a series of shell companies), and then they paid him another 17.5% of any of the money that they collected.

And all this over a bogus patent. Not only was it bogus, but as later came out in court, Chris Crawford apparently filed for the patent by copying someone else's idea. The details are a bit involved, so it's worth listening to the whole thing, but the short version is that Carbonite and EMC tracked down Crawford's "boss" from way back when, and discovered that two other entrepreneurs had come up with the basic idea of backing up data via a network on computers, and they'd hired Crawford to help out. But what they discovered was they were unable to actually make the idea work, for a variety of reasons. They disbanded the company, but Crawford, who took notes at the meetings, later filed for a series of patents using the ideas from that company, and never bothered to tell the guys who were his "partners." Even though the other partners testified that the whole thing had been their idea in the first place, and not Crawford's, patent law is so stupid that Crawford still might have been able to keep the patents if he hadn't made one mistake. Among the piles upon piles of documents he filed with the patent, one of them mentioned one of the original entrepreneurs, and noted that it was that guy's idea.

In a hilarious bit of tape from the deposition of Chris Crawford, he tries to explain away the fact that he used an apostrophe "s" after the entrepreneur's name, to pretend that it had really been Crawford's idea, even though the notes clearly stated otherwise. He argued that he's not very good with grammar, so sometimes he uses an "'s" when he doesn't mean to. But that's even more nonsensical, because if was just a regular s, meaning plural, then the sentence wouldn't make any sense.

While that bit of evidence was damning enough to get the jury to knock out the patent, as the report notes, the jury still wouldn't accept the direct testimony of the other three partners in the business with Crawford, saying only that the patent (which is completely bogus in its own right) probably should have gone to the one guy who was named in Crawford's notes. If that doesn't show how bogus the patent system is, I'm not sure what else to show people at this point.

Remember a few months ago, when Intellectual Ventures said that there was nothing at all nefarious about their 2,000 or so shell companies? Perhaps they knew what was coming... which was a pretty clear expose of how Intellectual Ventures is very much the same sort of entity that Peter Detkin once claimed were hellbent on holding up innovation. Except, now he's profiting from it. Massively. While pretending not to.

It's clearly time to fix the patent system, and this is just yet another example of a bunch of lawyers shaking down companies that actually do stuff. This is just one little bogus patent, and yet it took $100 million or so from companies who actually innovate and build products that the market wants, and handed it over to lawyers like Peter Detkin to be used to buy up more such patents and sue more people. And this patent probably would have been used for even more similar efforts if Carbonite and EMC hadn't been able to find that one document and its rather important apostrophe s. These lawsuits and these kinds of battles are a massive shift of money from actual innovation... to lawyers and those who failed to build things that people wanted. It's an economic disaster.
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Filed Under: alex blumber, chris crawford, laura sydell, patent trolls, patents, peter detkin, shell companies
Companies: carbonite, emc, intellectual ventures, oasis research

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  1. identicon
    Anonymous Coward, 3 Jun 2013 @ 1:18pm

    Re: Ya know, IF ya had more than a handful such...

    More like incoherent patent system enabling grifters.

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