The Pirate Bay's New Owners: Service Providers Will Pay Us, We'll Pay Users

Intuit Pays $120 Million 'Don't Sue Us' Tax To Intellectual Ventures

from the money-wasted dept

Wed, Jul 1st 2009 1:20pm — Mike Masnick

It's no secret that I have tremendous problems with Nathan Myhrvold's Intellectual Ventures, which many have described as the world's biggest patent "trolling" operation. The company has raised a ton of money and uses it to buy up thousands of patents. While it hasn't sued anyone, Myhrvold has made clear that's always an option. The company has remained incredibly secret, but it has somehow convinced some big companies to pay hundreds of millions to IV. Due to the secrecy, the details aren't clear -- and some of the deals apparently are a mix of "licensing" and an equity investment. But, still, the numbers are stunning. The latest, as pointed out by Stephen Kinsella is that Intuit has apparently paid $120 million to IV. For what? The right not to get sued. Think about that for a second. This is a pure dead weight net loss to society. It's $120 million that Intuit could have put towards further innovating, or to pay off investors via a dividend. Instead, it goes towards nothing productive, in terms of actually creating new products. It will now likely be used to buy up more patents so that IV can get similar black hole money grabs from other companies, as well. It's like a black hole where real innovation goes to die.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: patents, software
Companies: intellectual ventures, intuit

43 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

ThoughtCancer, 1 Jul 2009 @ 1:30pm

It's an indefensible position
How can anyone defend these activities?
[ link to this | view in thread ]
Michael L. Slonecker, 1 Jul 2009 @ 1:43pm

Intuit has apparently paid $120 million to IV. For what? The right not to get sued.

Since none of the parties have made any public comments elaborating on this matter, I do have to wonder what good is served by speculating as to its purpose.
[ link to this | view in thread ]
Freedom, 1 Jul 2009 @ 2:01pm

Sucks but...
As someone that has seen Intuit mis-use its legal department to extort money out of others, this sounds like perfect kharma to me!

Freedom
[ link to this | view in thread ]
Brooks (profile), 1 Jul 2009 @ 2:15pm

Are you *familiar* with Intuit?
These are the folks whose Quickbooks Online product *still* doesn't support any browser other than Internet Explorer (the site just says "your browser isn't support, please come back with IE").

The company's flagship Quickbooks product gets revved every year, with no discernable changes except to data like tax rates.

The last innovating the the company did was probably in 1998, when Quickbooks gained the ability to have accountant's copies and then to incorporate an accountant's edits back into the customer's books. That was cool.

So, yeah, IV is a manifestation of a real problem in IP laws. And I'd like to see that problem fixed. But this $120m isn't money that Intuit would have used to innovate. At best, they would have paid a dividend. More likely, they would have squandered it on yet another dead end product development effort.
[ link to this | view in thread ]
AnonCow, 1 Jul 2009 @ 2:23pm

I'm waiting for Nathan Myhrvold to get hit by a truck and die because the company that invented the medical technology that could have saved his life was sued out of existence by (anti-)Intellectual Ventures...
[ link to this | view in thread ]
Guido "the Hammer", 1 Jul 2009 @ 2:26pm

Ago old business model...
..In the old days, we called it "protection". Seems to have graduated past the local neighborhood. Too funny.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 2:29pm

I wonder how much of these "settlements" are actually ways to funnel money out of the hands of the investors and into the hands of executives in the pay of secret pay-offs.
[ link to this | view in thread ]
WeWhoEat, 1 Jul 2009 @ 2:32pm

dead weight?
Hold on a sec, IV is defending patents it owns, Intuit either believes it has violated these patents or believes IV has enough to make $120 mil the better option. Someone some where spent time and money to come up with an innovation and unless the patent is defended the offender is just riding coat tails and just plain stealing.

The ability to profit on the R&D required to achieve an invention that can be easily copied is something that needs to be protected or else kill that kind of innovation. Come up with a better way of doing that if you don't like the current system.

Say what you want about patents and if the system needs an overhaul, but to call the defending of patents dead weight to society is disingenuous.
[ link to this | view in thread ]
WeWhoEat, 1 Jul 2009 @ 2:50pm

"It's $120 million that Intuit could have put towards further innovating, or to pay off investors via a dividend."

now its $120 million that IV can pay to the people who actually made the innovations (original patent owners) when buying more patents, which they can then invest into more innovations, as well as encouraging other people to innovate as they see a profitable market for coming up with their own innovations.

As opposed to Intuit keeping the money and patent holders getting nothing which just encourages both the patent holder and others to not spend any time & money on further innovations.
[ link to this | view in thread ]
Gordon, 1 Jul 2009 @ 2:53pm

Re: dead weight?
@wewhoeat,
The way you wrote that comment makes it look like the INVENTOR is the one being protected here. Read the article again....IV Buys up patents. It says NOTHING about them inventing anything. It also says nothing about the inventor getting any money from the suit. If they bought the patent then the originator has no rights to it and thus probably gets no money whatsoever.
Hell IV would probably sue the original inventor if he/she created something that used the tech/innovation he/she created in the first place.
[ link to this | view in thread ]
Brooks (profile), 1 Jul 2009 @ 3:01pm

Re: dead weight?
Um. How about this scenario:

- Inventor comes up with cool invention and patents it (let's even stipulate a genuinely patentable innovation).

- IV buys patent and puts it in a file drawer

- Engineer at Intuit comes up with same idea a year or two later, with no knowledge of the original invention

Explain to me again how, in that case, Intuit is "riding coat tails" or "just plain stealing"? This isn't an unlikely scenario; this is the bread and butter of IV's business.

It's one thing for IV to buy the rights to useful inventions and to license them as new technology. It's another to buy patents and file them, hoping someone will trip over them in the future. And, heck, I say that as someone who sold a patent to IV (and I'll bet everyone else here would have done the same).
[ link to this | view in thread ]
Brooks (profile), 1 Jul 2009 @ 3:05pm

Re: Re: dead weight?
The inventor gets their money when IV buys the patent. The innocent version of the model is that individual inventors don't have the clout to go after a Microsoft or Intuit, and the results of suits are uncertain and years away, so inventors get cash now and IV bets that the NPV of future proceeds from the patent will exceed the purchase price.

It wouldn't make sense for the inventor to get anything from the settlement or suit; they transferred all rights to the patent and those uncertain future cash flows to IV for guaranteed cash a long time ago.
[ link to this | view in thread ]
minijedimaster (profile), 1 Jul 2009 @ 3:10pm

Re:
OR, IV could have just as easily made that $120 mil from Intuit and other companies by licensing those patents to them as opposed to just sitting there holding them as secretly as possible waiting for someone else to come up with the same idea so they can threaten lawsuits. Nice try though.
[ link to this | view in thread ]
WeWhoEat, 1 Jul 2009 @ 3:18pm

Re: Re: dead weight?
@Gordon

The answer is in your own post:

"IV Buys up patents"

That's where the inventor gets the money. When someone buys a patent, they are for all intents and purposes the inventor from that time forward. The original patent holder has a choice to sell or continue controlling themselves, its up to them. And successfully defended patents increase the worth of other patents in the future, creating a market incentive for further innovation.
[ link to this | view in thread ]
WeWhoEat, 1 Jul 2009 @ 3:27pm

tripping up?
@Brooks & minijedi

Its an Intuit's engineer's and legal department's job to keep inventor's notebooks and do patent searches. If an Intuit engineer correctly clean roomed their own innovation then they would have that documented and should fight, if that's not the case the patent search would show them that they need to license or take some other route.

Its Intuit's own fault if they dropped the ball on the patent search that put them in a situation that they felt they needed to pay the patent holder off (hey, in an around about way they essentially did license with them).
[ link to this | view in thread ]
Mike (Not Masnick), 1 Jul 2009 @ 3:41pm

Re: Are you *familiar* with Intuit?
I think the IE requirement is actually at least partly related to the requirements of the Canada Revenue Agency, which only security-tests on a small number of browsers.

Be careful not to blame Intuit until you're sure they're not just the messenger here.
[ link to this | view in thread ]
Mike (Not Masnick), 1 Jul 2009 @ 3:49pm

Re:
Those patent holders who weren't getting any money until IV bought their patents also weren't holding back any innovation, because they weren't threatening to sue.

IV is seriously increasing the costs of doing business in this case and, it seems, others. If they have yet to sue anyone outright (only threatening so far) then it also cannot be known if their infringement claims are legitimate in any particular case.

When a company pays to avoid being sued, it really is *not* the same as admitting guilt on any legal matter. It just happens that paying this fee might be 'safer' than risking a protracted, expensive legal battle, and potential injunctions on the use of products (or their components).
[ link to this | view in thread ]
AC1148, 1 Jul 2009 @ 3:49pm

Re: Ago old business model...
I was waiting for someone to mention this. Used to be, and probably still is, out on the streets, it was "Pay us $100 a week and we'll make sure your store don't burn down." Now, it's done with lawyers, so I guess that makes it okay.
[ link to this | view in thread ]
Mike (Not Masnick), 1 Jul 2009 @ 4:04pm

I'm quite tired of companies who use (or threaten to use) the courts, not as defenders of fair business practices, but as central to their business model.

There are innumerable bad patents which have (in)famously been approved by patent offices. Combining this state of affairs with a business model which threatens to litigiously pursue all potential infringement claims seems like it could easily be incredibly bad thing for innovation as a whole.

the practice of "investing" in patents in order to press others for money
[ link to this | view in thread ]
Brooks (profile), 1 Jul 2009 @ 4:04pm

Re: tripping up?
I think you're operating from the way patents used to work, where it was OK to implement something functionally the same so long as the mechanism was clean-roomed.

Today, software and business model patents effectively preclude a company from achieving the same result, even if the approach is different.

For instance, a patent might be on a means of integrating the results from live news feeds into a store's pricing model. If IV is sitting on a patent relating to use of live feeds to adjust algorithms, you're going to trip over it even if you go about the code and differently.

For that reason, many companies no longer do patent searches, because it's better to not know. If a legal department (or, god forbid, an engineer) finds a patent and an effort is made to work around it, there's the potential for treble damages from willful infringement if courts determine the workaround wasn't different enough.

And, of course, the company will patent the workaround, making it more difficult for others to innovate in the same area (you can't do innovative and cool chimneys if the concept of having a roof is patented).

So, yeah, you've got how it *should* work. But that's not how it works.
[ link to this | view in thread ]
WeWhoEat, 1 Jul 2009 @ 4:27pm

Yeah, you're right about the current state of the patent system, it is pretty despicable now. It needs an overhaul, but the original intent is still very relevant and there is still a need for incentivising innovation.
[ link to this | view in thread ]
CleverName, 1 Jul 2009 @ 5:22pm

Justice Dept - Hello ?
collusion
conspiracy
unfair trade practice
price fixing

are any of the above applicable ?
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 6:01pm

Re: Re: Are you *familiar* with Intuit?
Trust me, as a customer (victim?) of Intuit's I have found that every year, the remove features from their "pro" product to add to a yet further upprice product and FORCE you to purchase the upgrades or they invalidate your merchant account with them.
Never mind that they are making literally tens of thousands of dollars off of me, they have to screw me for that $199 x4 too.

If there was an open source competitor for QB pro that did ccard swiping internally, I'd tell them to go screw themselves so fast you could heat the sonic boom @ their headquarters, AND happily give those thousands to the open source guys (hint hint!?)
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 6:05pm

Re: Re: Re: Are you *familiar* with Intuit?
Sorry, hit post before I was done...

Add to all of that the cost of support and the fact that every damn time I give them a credit card to purchase the MANDATORY upgrade they "enroll" me into their monthly paid support program (regardless of my telling them not to). I have had to actually call them and threaten a chargeback to make them cancel the unwanted "support plan" for the last 3 years running.

/rant
Sorry...
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 6:06pm

Re: dead weight?
How many laywer hours is $120 mil ?
[ link to this | view in thread ]
Tek'a R (profile), 1 Jul 2009 @ 7:50pm

Its like this:
IV buys, begs borrows or steals (with lawyers) a fuzzy patent, like "System for having a cover and keeping out rain"

They then make sure it is fully amended and expanded to the extent that examiners can ignore.
"System for having a cover and keeping out rain"
*On houses
*On cars
*On orphanages
*On decorative hirdhouses, because the word 'house' is used.

They then go around to Orphanage builders, car companies, birdhouse designers and home builders and Casually mention "Oh.. by the way, I have a huge portfolio of patents that could somewhat apply to your product in the right light.. give me money or I might just have to call my lawyers and interfere with your business for the next 5 years"

Some are asked for small fees, and pay up fast and try to move on. These fees are used to buy more lawyers for the next people. Others fight it, burning millions of dollars in the courtroom trying to convince a patent-ignorant judge that 1+1=2. Still others, with looming lawsuits, just close up and abandon Orphanage Construction CO.

The horrible net result is scummy lawyers making money, scummy patent troll companies making money (and using it to buy more patents) and legitimate businesses getting bad promotion and mindless judgments against them ("I rule that 1+1=4, pay IV 5 dollars per unit you build, forever")

This is not to say that everyone who has ever been sued or threatened in an infringement issue is as pure as fallen snow, but we can certainly see that the "defender" in many of these cases is anything but.
[ link to this | view in thread ]
dorpass, 1 Jul 2009 @ 8:28pm

Re: Re: Re: dead weight?
You must be a high class moron. So innovation equals more patents? So tell us, what product comes out of IV that benefit anyone outside of it? You are talking about adding an intermediary that adds no value here.

And what is the rate of return they get out of the invention they do not use versus what the creator of it got? Somehow I suspect IV gets way the hell more than any inventor, by orders of magnitude.
[ link to this | view in thread ]
dorpass, 1 Jul 2009 @ 8:36pm

Re:
Since none of the parties have made any public comments elaborating on this matter, I do have to wonder what good is served by speculating as to its purpose.

I like that logic. So if police start using torture to get confessions out of supposed criminals and then neither side talks about (police because they don't want to and "criminals" because they are afraid), then we should not discuss that either. Better yet, someone kills you and does not talk about it and since you are not talking about it either (ha!), we should all just move on!

Pinochet would be proud of you. Got an airplane?
[ link to this | view in thread ]
; ), 1 Jul 2009 @ 8:39pm

dead weight? Answer.
100 lawyers for 109 hours.(We get the bulk rate!)

Or

One lawyer depending if he sues the client for breach of contract!
[ link to this | view in thread ]
Dr. X, 1 Jul 2009 @ 10:33pm

I've given a name to my pain...
I believe in nature... they are called parasites.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 11:13pm

Re: Re: Re: Re: dead weight?
It truly is sad that our intellectual property system is so messed up that it causes so much more harm than good.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 11:16pm

Re: Re: Re: dead weight?
"And successfully defended patents increase the worth of other patents in the future, creating a market incentive for further innovation."

It creates a market incentive for further patents but not necessarily innovation. It only harms the advancement of innovation. Prove to me that without patents no one would come up with these patented ideas.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 11:20pm

Re: dead weight?
"The ability to profit on the R&D required to achieve an invention that can be easily copied is something that needs to be protected or else kill that kind of innovation."

The patent killed the invention. It stopped the advancement of the invention. Most entities do not waste money buying a license to use a patent, they spend tons of resources trying to AVOID infringing on patents. They try to avoid patented ideas that they would naturally come up independently, without patents. That STOPS innovation, it prevents the advancement of good ideas.

Here we have a patent troll that prevents other entities from advancing ideas that they independently come up with because those ideas happen to be patented. The entity itself does not advance the ideas (and the inventor itself can no longer advance it) so the ideas DIE in favor of less efficient, more costly ideas. Society is better off allowing anyone to independently come up with and advance these ideas without patents.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 11:25pm

Re: Re: Re: dead weight?
This only provides incentive for people to create a bunch of bogus, obvious patents (that our patent system will gladly approve) that they have no incentive to advance and to sell them to patent trolls. This does NOTHING to advance good ideas, it only PREVENTS the advancement of good ideas and these people that our patent system is funding (thanks to retarded government laws) are only harming society and they are benefiting at the expense of society. The entity that came up with the patent can no longer use it and the patent troll that the entity sells it to does not advance it either. All other entities, that would otherwise independently come up with the same idea (without the patent), will only try to avoid using that patent (and this is exactly what happens) in favor of less efficient, more costly work arounds, and hence we are better off without the patent.
[ link to this | view in thread ]
Anonymous Coward, 1 Jul 2009 @ 11:34pm

Re: Re: Re: dead weight?
"That's where the inventor gets the money."

He doesn't deserve the money, we don't need him to come up with ideas that no one else is allowed to use. "Let me think of an idea that I can prevent others from using so I can make money on anyone who accidentally uses it." Society is better off without him exploiting our broken patent system to make money.
[ link to this | view in thread ]
Nirav Shah, 2 Jul 2009 @ 12:34am

Re: Are you *familiar* with Intuit?
Hi Brooks,

QuickBooks Online does support FireFox for windows and Safari for Mac since last few months. It does have beta tag for these browsers but the product runs very well except for some layout issues.

-Nirav
[ link to this | view in thread ]
CleverName, 2 Jul 2009 @ 6:43am

Intellectual Ventures is neither intellectual nor a venture.

no intellect and no risk - its all wise guy strong arming
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 9:05am

Mike's shitty blog
It's no secret that I have tremendous problems with Mike Masnick's techdirt blog, which many have described as the world's silliest patent-bashing operation...
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 9:16am

Re: Mike's shitty blog
My inability to become a patent troll myself is one of the main reason of the impotent rage. I wish my medical insurance covered the medicine I so badly need.
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 9:28am

Impostors be damned
Seriously, lemming, how's your punk life ?
Need a little kick in the butt ?
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 10:39am

Impostor lemmings be damned
Seriously, I read this blog everyday and it angers me that I can't do anything about all these people having opinion. If I had the guts to post my real name and provide actual feedback, it would be much harder to be an impostor. But here I am, fuming and can only threaten physical violence that I can't deliver due to my physical deficiency and damn internet anonymity.
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 1:03pm

Freaking punks everywhere
[ link to this | view in thread ]
angry dude, 2 Jul 2009 @ 1:50pm

Freaking punks everywhere
Forgot to type my text in the previous post. I was just too damn angry. I can't handle people other than be being punks. All the impostors are so confusing I am not even sure if it's me posting or someone else. The rage within me is just too much, I'll be back with more insults when my blood pressure goes down.
[ link to this | view in thread ]