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"Invention Capitalists" - or Patent Trolls?

Their targets call them “trolls”. Their defenders liken them to a “big brother confronting a playground bully”. They amass huge patent portfolios, sometimes on pure speculation, and then look for big-time infringers (real or not) seeking immediate injunctions and huge damages.

But they do serve a useful purpose. A small company with just a few patents, or a private inventor, neither with access to a big litigation budget, has a hard time getting anyone to pay serious attention to their patent rights. This is particularly the case where the technology focuses on process technologies where the infringement (if it exists) is hidden deep inside corporate walls, and not something which can be easily deduced from a physical product which can be taken apart and analyzed.

First, there is the problem of finding out what the suspected infringer is actually doing. Short of coaxing information out of a former employee, or a stroke of good luck (a mis-sent email or progress report, for example) it is just about impossible to get admissible evidence to support an infringement suit. Ask the company directly? Dead silence is the most likely response, followed many weeks later by a letter from the company's legal department, denying any infringement and suggesting that the company already has all technology it needs (the “not invented here” effect), thus putting an end to meaningful negotiations before they even begin.

That's when the small company or inventor needs help, even “muscle”, from another player who can get past the big company's legal department and be taken seriously, if not feared. They look to a company like Intellectual Ventures of Bellevue, Washington. Whatever you call them – technology consolidators, invention capitalists, or simply “patent trolls”, they are a major factor in the ongoing battle to gain and control intellectual property.

Intellectual Ventures is led by a former Microsoft chief of technology, Nathan Myhrvold. The holder of more than 100 issued and/or pending patents himself, his company now has 650 employees, and even an in-house technology department that in 2009 applied for 450 new patents. This is a company that makes no physical products, nor does it provide technology development services to others. It exists solely for itself and its investors. And it has been successful, according to Myhrvold, claiming to have collected more than $1 billion in license fees to date.

Sometimes the “troll” companies win big. One such patent holding company, NTP, Inc., battled RIM for six years over the software rights to its popular Blackberry palmtop device. The case never came to a final decision on the merits. Rather than be shut down with a preliminary injunction while the case dragged on through a trial and lose its subscriber base of over four million customers, RIM paid NTP $612.5 million to settle.

Medtronic, the medical device maker, is reported to have recently settled infringement claims by a private patent holding company for $550 million, and – perhaps to keep it from happening again – bought out the company's entire patent portfolio for another $800 million.

Bills were introduced in Congress in 2005, 2007 and 2007 to make major changes in U.S. patent laws which would have made it harder for third-party patent speculators to develop and capitalize on such patent positions, but to the relief of smaller companies and private inventors, those efforts failed.

(Source: N.Y. Times Business, 2/18/2010)



Last Updated (Sunday, 18 April 2010 23:06)