Intellectual Ventures Files Its First Lawsuits; Giant Patent Troll Awakened

from the watch-out... dept

For years, Intellectual Ventures has avoided suing companies directly, while building up a portfolio of tens of thousands of patents (mostly bought -- though it likes to get PR from the wacky and usually useless patents it files directly). Its business model, to date, has been about shaking down giant tech companies for hundreds of millions of dollars in exchange for letting those companies use IV's patent portfolio either defensively or offensively against others. However, as part of an attempt to avoid the dreaded "troll" label, the company had avoided suing others directly for quite some time -- though, it's always hinted that it would eventually. About a year ago, we started to see IV patents showing up in lawsuits, but they had been licensed to other companies first. The notoriously secretive company would never comment on whether or not it had any stake in the results of such lawsuits.

However, Intellectual Ventures has finally stepped up and filed three separate patent infringement cases against nine companies, including Symantec, McAfee, Trend Micro and others. Of course, some of these companies have a history of questionable patent activity themselves... Still, this seems like IV and Nathan Myhrvold stepping things up a notch. Consider it a warning to other tech companies: if you don't agree to pay hundreds of millions of dollars to Intellectual Ventures, the company might sue you too.

That's not how innovation is supposed to work.

Still, perhaps this will convince more people just how problematic our current patent system is today and how we need to move towards fixing it.

Filed Under: nathan myhrvold, patents
Companies: intellectual ventures, mcafee, symantec, trend micro

Attacks On 'Frivolous' Startups, Sound Like Misguided Attacks On 'Frivolous' Blogs & Social Media

from the cat-bloggers-of-silicon-valley dept

We hear it all the time when it comes to various social media offerings. Blogs were dismissed early on by all important people who said they "don't care about what people wearing pajamas sitting in their basement have to say about their cats." Twitter was dismissed by people who "don't care what so-and-so ate for lunch." And on and on. But what's interesting is this same sort of attitude seems to also be playing out on a larger scale, in how people look at innovation. Investor Peter Thiel is apparently complaining that Silicon Valley companies aren't doing anything really important any more. But, I think, like the complaints about Blogging, Twitter and other social media efforts (some of which Thiel invested in), he's focused too much on all the fluff and ignoring the fact that plenty of serious things are going on. However, there's almost always been random silly startups that get lots of attention (and some of them later turn into being serious, important companies). Google, Amazon and eBay were all derided as being frivolous in their early years, but all turned into something much larger.

Along those lines, Dan Lyons has perhaps his most ridiculous column to date (and that's saying a lot), in that he sets up by complaining about the same "frivolous" innovation going on in Silicon Valley, and then uses Nathan Myhrvold of Intellectual Ventures as the counter-example of a company taking on the real hard problems. Uh, yeah, the real hard problems of hoarding patents, waiting for someone else to do the real work, and then shaking them down for money? Lyons, like so many others, seems to not recognize the difference between ideas and execution. What has Intellectual Ventures actually executed on. What product has it brought to market? Absolutely none. The only thing it's done to date is collect hundreds of millions of dollars from a few tech companies so that those companies can avoid getting sued, and can dig into IV's patent database to countersue those who sue them. Lyons quotes Myhrvold making the following statement:

"The old Silicon Valley was about solving really hard problems, making technical bets. But there's no real technical bet being made with Facebook or Zynga," says Nathan Myhrvold, the former chief technology officer at Microsoft who now runs an invention lab in Seattle. "Today almost everyone in the Valley will tell you there is too much 'me-tooism,' too much looking for a gold rush and not enough people who are looking to solve really hard problems."

Myhrvold is being misleading yet again. There's always been "me-tooism" in the Valley, and sometimes it works out, and often it doesn't. Microsoft, where Myhrvold worked for many years, was pretty damn famous for its brand of "me-tooism." And, oh yeah, it too could be dismissed in its early days for not being "about solving really hard problems." And, of course, there are plenty of tech companies out there that are working on solving hard problems, so cherry picking a few you don't like does not make for a representation of the entire industry.

"What bothers me is the zillions of wannabes who will follow along, and the expectation that every company ought to be focused on doing really short-term, easy things to achieve giant paydays. I think that's unrealistic, and it's not healthy," Myhrvold says.

So don't worry about the wannabe and followers. They've always been around Silicon Valley and the ecosystem tends to take care of them over time. Focus on building what you're building (which in Myhrvold's case, still appears to be nothing) and let the market take care of the rest. It always seems to do just fine.

Filed Under: dan lyons, frivolous, nathan myhrvold, peter thiel, startups

Intellectual Ventures Biggest Invention? Getting The Press To Fall For Their PR

from the oh-please dept

A bunch of folks have been sending over this somewhat ridiculous love letter to Intellectual Ventures written up at Gizmodo (a site that usually is a lot more on the ball than what this post shows), which basically takes all of IV and Nathan Myhrvold's favorite talking points (many of which make little sense) and simply parrots them back, acting as if the company is some sort of Willy Wonka chocolate factory of invention -- but leaving out the hundreds of millions of dollars companies pay up as a sort of "don't sue us tax," and the incredibly sketchy nature of the over 1,000 shell companies set up by the firm and the entirely secret nature of many of its business dealings. Instead, the guy at Gizmodo is wowed by the fact that the company has computer hackers trying to cure cancer.

Now, I'm all for the idea of bringing together people with a very different perspective to try to come up with unique ways to solve problems, but that's not what Intellectual Ventures actually does. Solving problems is not about invention. It's about innovation. Nearly every great idea for a new invention turned out to be wrong. It was only when the products actually get to market that the creators realize the mistakes and tweak and adjust until the market finally tells them they were right. But that's not what Intellectual Ventures does. At all. Buried in the middle of the article is the random aside that the company has been at this for 10 years and not a single "invention" it's come up with has gone to market. None. Zero. You would think that would be worth unpacking and exploring, but instead, Gizmodo just says "you'd be sorely mistaken if thought IV was merely a "patent holding firm" or "patent foundry," as it's often described."

Why would that be mistaken? The article doesn't say. Instead, the writer just seems wowed by the fact that IV has lots of old scientific equipment. What a shame. It would be nice if someone actually asked Myhrvold and his crew some actual tough questions, rather than fawning over the fact he once dug up dinosaur bones.

Filed Under: innovation, inventions, nathan myhrvold
Companies: intellectual ventures

Patent Attorney Highlights How Intellectual Ventures Syphons Money Away From Innovation

from the it's-not-about-innovation-at-all dept

It's amazing how many patent attorneys, when you talk to them, will actively volunteer how screwed up the patent system is. While there are still some who make so much money abusing the system that they don't care, those who actually got into the business because they believe in promoting actual innovation are increasingly admitting that the system is a disaster and widely abused, and rarely instrumental in actual innovation. Venture capitalist Brad Feld has convinced one such patent attorney -- who has decided to appear pseudonymously -- to write his response to the recent Nathan Myhrvold profile in the NY Times that, yet again, plays up Intellectual Ventures in a very one-sided manner. Feld's friend, who is writing as "Sawyer" rips the concept of Intellectual Ventures to shreds. The reasoning likely is familiar to our regular readers, as it's exactly what we've been saying for a decade, but it's nice to see a patent attorney speaking up.

First, he notes the lack of any evidence that patents promote innovation (he suggests there's an exception in biotech, but the studies there are actually quite mixed). From there, he notes that Myhrvold's goal has nothing to do with actual innovation or promoting progress, but about building a system that just gets him more money via patents:

Perhaps Mr. Myrhvold recognizes this, because in the article he says "I'm trying to get inventions that kind of respect as an economic entity." (Emphasis added). IV apparently incentivizes innovation on...inventions? "Inventions" are actually a term of art in patent law, they are the things for which one can legally be granted patent rights. IV, therefore, seems to admit that it wants to enforce patent rights so that we can...have more patents. Mr. Myhrvold wants to create an entire economic category based on payments to entitles that don't build, produce, sell, etc, any products, or create anything of value (i.e., that don't innovate, at least in any useful way that advances human progress), in exchange for not being sued on exclusionary patent rights.

Let's internalize that for a second. IV has collected over a billion dollars so that it can get more patents. They make no products. They apparently don't funnel ideas to anyone else who makes products.

This is a huge problem if the point of the patent system is to create incentives for actual innovation, as the Constitution requires. But what's the impact of a system that encourages patents for the sake of encouraging more patents? Well, it drives money away from actual innovation:

Now think about where this money would go otherwise. Microsoft, Apple, and Google, not to mention other large technology companies, have sizable legal departments with teams of attorneys focused full-time on managing the 50+ software patent cases they each are a defendant on. My guess is that they individually spend hundreds of millions of dollars defending and settling such suits per year. Most of the suits are backed by investment funds through shell entities. Many of these funds are backed (with no transparency) by traditional investment banks and hedge funds. What we have, then, is a net outflow, on a yearly basis, of at least several hundred million dollars, from technology companies who "make stuff" and unquestionably innovate, to speculators and investors who don't. I don't think that baseline fact is something anyone would question. IV dresses that up in the clothing of "invention," but they're really just out to capitalize on a broken patent system like every other non-practicing entity ("NPE" as we call them -- they hate being called trolls). What kinds of cool products and technologies would that money be used to develop? We'll never know, I suppose. At the very least we can presume that the pace of innovation in technology is being slowed by this net outflow of capital to non-innovating parties.

And, despite what the regular peanut gallery of patent system supporters will claim in the comments, these lawsuits aren't just focused on big companies, but the really innovative startups that are being strangled by patent lawsuits:

One thing I haven't mentioned is that it isn't just big companies who get sued. Startups, especially in software, are constantly targetted by patent suits, especially by pseudo-competitors who want to kill more innovative upstarts. How many great companies have been sunk by the costs of patent litigation? Think about it this way -- if Facebook had been sued on a social networking patent within a year of its existence, would it be around today? It's doubtful.

Sawyer also points out that, contrary to claims of the system's supporters, that "having a patent doesn't mean that you really invented anything, or that the person you're suing would actually infringe in a rational world." Some of you may have seen some of the regular commenters here claim that there the only way to prove you've invented something is if you get a patent on it -- and that anyone accused of infringing has clearly "stolen" the idea. Neither of those things are true. What Sawyer is pointing out is that getting a patent is just a sign that you were able to convince the USPTO (through a "pseudo-adversarial administrative procedure") that you deserved such a monopoly privilege. It doesn't mean you actually invented anything -- and it certainly doesn't mean you've done anything to promote the progress or innovation in general.

Filed Under: innovation, nathan myhrvold, patents
Companies: intellectual ventures

Nathan Myhrvold's Intellectual Ventures Using Over 1,000 Shell Companies To Hide Patent Shakedown

from the incredibly-lame dept

It's no secret that we think Nathan Myhrvold's Intellectual Ventures is a dangerous, innovation harming monstrosity. The company used a bait and switch scheme to get a bunch of big tech companies to fund it, not realizing that they were then going to be targets of his shakedown system. Basically, IV buys up (or in some cases, applies for) tons of patents, and then demands huge cash outlays from those same companies (often hundreds of millions of dollars) for a combined promise not to sue over those patents and (here's the sneaky bit) a bit of a pyramid scheme, where those in early supposedly get a cut of later deals. Of course, to just talk to IV requires strict NDAs, so the details of these deals are kept under wraps and only leaked out anonymously. But the hundreds of millions of dollars going towards this sort of trolling behavior, rather than any actual innovation in the marketplace can be seen on various financial filings (you can't hide hundreds of millions of dollars in payments that easily).

Now, for years, Myhrvold tried to avoid the term "patent troll," by claiming that IV had never actually sued anyone. Two years ago, though, it seemed clear that the company was on the verge of breaking out the lawsuits. However, the company still hasn't been directly linked to a lawsuit. Late last year, though, some eagle-eyed reporters noticed that IV patents were showing up in lawsuits, but those lawsuits were from different companies. Reading between the lines, it became clear that IV had decided to protect its brand name by getting other companies or creating those companies itself, giving the patent to those other companies that no one had ever heard of, and having them sue. This is a very common practice among patent hoarders. They set up shell companies for their lawsuits, that often make it difficult to track back who actually owns what patents. It's all a shell game to extort more money.

The NY Times is now running yet another profile (they do this every two years or so) of Myhrvold and Intellectual Ventures that covers the usual bogus claims by Myhrvold about how he's creating "invention capital," with very little skepticism. However, it does reveal one interesting tidbit that we had missed. Last year, a research firm released a report highlighting that Intellectual Ventures has up to 1,110 shell companies, with which it can hide its activities. No wonder IV can pretend it doesn't sue anyone. It can simply hide behind its shell companies.

It's hard to find anything in Myhrvold's activities that actually contribute to any innovation, but you can see billions of dollars being siphoned away from actual innovation -- the kind that brings real products to market -- and see it being fed into what appears to be a giant shakedown scheme that is trying to pull as much money out of the system as possible before Congress wakes up and realizes it needs to fix an incredibly broken patent system.

Filed Under: nathan myhrvold, patents, shell companies
Companies: intellectual ventures

Intellectual Ventures' Patents Starting To Show Up In Lawsuits

from the the-beast-awakens? dept

Intellectual Ventures, of course, is the Nathan Myhrvold company that has been building up a huge portfolio of patents with which to get big tech companies to pay many millions of dollars to not get sued -- and, according to many, to get a cut of future deals as well, making the whole thing sound suspiciously like a pyramid scheme. However, the company has been quite careful to avoid actually suing anyone (despite setting up all sorts of shell companies commonly used in such lawsuits). From what we've heard from people who have been in or around IV, this has been a conscious decision to avoid attracting too much ill will and scorn. It lets the company pretend to take the high road, when people point out that its actions seem like the commonly defined "patent troll" on steroids. "But we haven't sued anyone" it can claim. As if the threat of being sued isn't a big enough weapon.

But, a year ago, we noted that the company appeared to be getting antsy. While it was bringing in some hefty fees from a small group of companies who bought into the equity pyramid (which neatly lets the world outside be confused over what's "investment" and what's "revenue"), there was concern that investors were getting impatient. Pouring billions of dollars into a company that isn't doing much can make some investors a little anxious. And while we still don't know of any direct lawsuits, Zusha Elinson has noticed that Intellectual Ventures' former patents are starting to show up in court, often involving some of the most well known names normally associated with "patent trolling." Now, it's clear that IV sold the patent, but what's not clear is if it still has a financial interest in it. The thinking is that IV may have "sold" the patent, with part of the terms being that it gets a cut of any money obtained via that patent. This way, IV gets to have its cake and eat it too. It still can claim it doesn't sue anyone, but it brings in revenues from exactly those types of lawsuits.

As Joe Mullin notes in the last link above, this is one of the massive problems with the way patent infringement lawsuits work today. Via different shell companies, those who have an interest in a patent can be hidden to protect their "good name" while still allowing them to actively have companies sued via that patent.

Filed Under: lawsuits, nathan myhrvold, patent troll, patents, raymond niro
Companies: intellectual ventures

Nathan Myhrvold Now Capitalizing On Failed University Patent Intitiatives

from the privatizing-publicly-funded-research dept

We've discussed, in the past, the infamous Bayh-Dole Act, which tried to push universities to patent more of their research, with the idea that it would make research more commercializable. In fact, the unintended consequences were to significantly harm university research. Universities quickly set up "technology transfer" offices, with the idea of selling off patents for tons of money, but the vast majority of universities discovered that such technology transfer offices cost a lot more than they made, and so they were a drain on university resources (you know, which could have gone to basic research). On top of that, the new focus on patenting everything caused researchers to be much more afraid to share ideas and concepts with colleagues, greatly diminishing the value of research or the ability of researchers to explore other areas where colleagues might have already applied for patents, for fear of "infringing."

However, it looks like Nathan Myhrvold's Intellectual Ventures, which we've discussed at length, in the past, is looking to take advantage of this situation. With so many university technology transfer offices losing money, IV has been going around and signing deals with universities. Basically, IV gives those tech transfer offices some money upfront, allowing IV to effectively add each university's patent pool to its own portfolio that it uses to go around demanding hundreds of millions of dollars from companies to "protect" them against any future lawsuits.

Effectively, the end result is less actual research being done at universities, while some guys who don't actually build anything get rich. And, oh yeah, the companies that actually do stuff are poorer. Doesn't something seem highly suspect about this scenario?

Filed Under: bayh-dole, nathan myhrvold, patents, universities
Companies: intellectual ventures

Bill Gates' New Career? Patent Troll For Nathan Myhrvold?

from the kinder-capitalism? dept

Plenty of folks have been wondering just what Bill Gates is up to now that he's left his full-time position at Microsoft. Longtime rabble-rouser theodp has alerted us to one thing that Bill Gates is spending at least some of his time on: a bunch of patent applications for a company named "Searete LLC" -- including this one for rewarding influencers and another for a method to inject fluids into animals.

So, what's Searete? Well, it appears (warning: pdf file) that it's one of the many ultra secret shell front companies for Nathan Myhrvold's Intellectual Ventures, a company that unabashedly plans to be a huge patent tollbooth on just about any kind of innovation. We've already noted that he's been setting up shell companies as part of the operation's secrecy.

In some articles about Myhrvold's methods, it talks about how he hosts these big dinners, where he invites a bunch of big thinkers to sit around and talk, has some lawyers sit off to the side writing down everything they say, and then turns the discussions into patents. My guess is that these Bill Gates Searete patents fall into that camp (some of the other big names on some of the patents are folks like Danny Hillis and Craig Mundie, and we're waiting for Seinfeld's name to show up on a patent for computers that are moist and chewy like cake). Still, it makes you wonder why Bill Gates is letting Nathan Myhrvold lock up his ideas as part of his patent extortion scheme.

Filed Under: bill gates, nathan myhrvold, patents
Companies: intellectual ventures, searete

Intellectual Ventures Getting Antsy; Expect Lawsuits Soon

from the patent-saber-rattling dept

By this point, it should be rather clear what we think of Nathan Myhrvold's Intellectual Ventures project. It's perhaps the biggest threat to innovation around, as Myhrvold is collecting a ton of patents (now up to 20,000 apparently) and pressuring companies to pay hundreds of millions of dollars to get blanket licenses to avoid getting sued. It's a scam to shift money away from actual innovators and into the pockets of lawyers and speculators. For some reason, though, Myhrvold has a knack for getting press. His latest is a profile in the Wall Street Journal that covers much the same ground as previous profiles in places like Business Week and Fortune.

So what is new in this one? Well, less than a year after raising a $1 billion patent hoarding fund, he's out raising a new $2.5 billion fund. So it seems like he's good at getting press and raising money -- but not so much actually making money at this point (well, Myhrvold personally is doing fine, since the piece notes that he gets a 2% management fee, just like a VC). And that's where the saber rattling comes in. The article notes that Cisco and Verizon have paid up between $200 and $400 million as licensees -- though, to make it more confusing some of that is invested back into the fund for equity. Thus, it's not really clear as to how much is being used specifically to license patents. The article also highlights that some of Myhrvold's earlier investors are going to start wondering when the fund is actually going to bring in some real revenue.

Another oddity is the vast amount of secrecy surrounding Intellectual Ventures. Anyone who sells a patent to the company or who licenses patents from the company are required to sign extensive non-disclosure agreements. When asked why, Myhrvold skirts the question by claiming many companies don't want to reveal what they're doing with IV. If that's true, though, why do they need NDAs in the first place? The company also uses an array of secret shell companies to go around buying patents, again raising questions about what it's doing. If the company is really so proud of its business model and doesn't think it's shameful, why is it hiding behind shell companies like garden variety patent hoarders. But, as we've learned, patent hoarders very much rely on secrecy to convince others to pay up.

And, then, of course, there are the myths that Myhrvold loves to repeat, but no reporters ever push him on. He insists that those who disagree with his business model are merely "infringers." Yet, as we've all seen, so many patent infringement lawsuits these days are hardly about actual infringement, and much more about a company that didn't succeed in the marketplace suing one that did. He also repeats the myth that patent lawsuits are decreasing, claiming that the number of lawsuits peaked in 2004 and has been declining. That's misleading because it ignores the fact that patent hoarders are now suing larger and larger groups of companies in a single lawsuit meaning that the number of companies being sued has been increasing rapidly.

Either way, Myhrvold may want to close that new fund as quickly as possible. The Bilski ruling that could put an end to software and business method patents is expected sometime in October, and it could put a big dent in his patent portfolio.

Filed Under: nathan myhrvold, patent hoarding, patents
Companies: intellectual ventures

Myhrvold's Myth: Invention Capital

from the cute-phrase,-dumb-idea dept

Nathan Myhrvold may have a way with words, but it doesn't mean that what he's doing with Intellectual Ventures makes any sense. At the D: conference yesterday, Myrhvold tried to position his company as being in the "invention capital" business, talking about how he's creating a model to fund inventions, and even comparing himself to Thomas Edison (while dancing around several questions that tried to get him to point out what the company has actually done other than hoard patents). This is a modification on the easily debunked claim he made a couple weeks ago about how owning a patent and not using it to build a product was the same as investing in a company and not working there.

But, the real problem goes right back to the core issue that was brought out in Malcolm Gladwell's profile of Myhrvold. Ideas are popping up everywhere. It's the execution that matters. Lots of folks are having similar ideas at about the same time, but those ideas are meaningless without the corresponding execution (at which point many people often realize the original idea wasn't that interesting in the first place). So, with ideas being plentiful and execution being scarce, it doesn't make sense to "invest" in ideas separate from the execution. The only way that it would make sense is if you then were taking those ideas and artificially trying to limit their usefulness -- which is exactly what Myhrvold is doing with IV. He's artificially trying to limit the use of ideas, and make it more expensive for anyone to execute on those ideas. The very concept of what he's doing is to hold back innovation and progress. That's the exact opposite of what the patent system was intended to do.

Filed Under: execution, ideas, invention capitalist, nathan myhrvold
Companies: intellectual ventures