Monday, June 26, 2006

Patents spooky side

Ahhh.. Patent trolls. It takes one of the big brains who've made millions and left MicroSoft to do it at this level. I had a very interesting experience from my time at Motorola that was similar to this. I'll go into more detail after you read this

From TechDirt (

Nathan Myhrvold's Bait And Switch Plan On Patent Hoarding

from the can-you-say-greenmail? dept

We've written about Nathan Myhrvold's dangerous plans to put hundreds of millions of dollars into hoarding patents many times before. Business Week is now running yet another article that tries to get to the heart of Myhrvold's plans -- though his company, Intellectual Ventures is being quite secretive. The article does discuss his "invention sessions" where he brings together a bunch of smart folks to brainstorm -- where the whole conversation is recorded and monitored by patent lawyers looking for anything they can file patents on. However, what's much more interesting is the story of how Myhrvold pulled a total bait-and-switch on the many big tech companies who represent his investors. The original business plan for Intellectual Ventures was to create a "Patent Defense Fund." The idea was to buy up all the available patents from the bursting dot com bubble and offer to license it to companies to protect them from patent infringement lawsuits from others using the typical nuclear stockpiling defense. However, these days, the company no longer discusses the patent defense fund. Instead, it refers to many of its own investors as "the patent infringers lobby." As the article suggests, it seems like the company basically convinced these companies to fund it based on this "defense fund" plan, by making it clear if they didn't invest, they would be the first targets for future lawsuits. In the meantime, would you trust any company that insists the patent system is just fine -- but doesn't seem to understand the history of innovation?

Spooky eh? But interestingly, this is alot more common than you might think. I worked for Motorola back in the 90's for a few years and had an experience similar to what's described in the businessweek article.

A group of us, mostly technical, a few marketing, went to a remote hunting lodge in Wisconsin. About 50 people with 3 Motorola patent lawyers. We spent an entire week doing nothing, all day, but coming up with ideas related (and many not related) the area we were working in (high speed wireless internet.. what we called at the time 4G). I think we walked out with about 400 potentials of which 150 were already written up by Friday afternoon when we left.

And that was one group of engineers out of a company with 10's of thousands. This was a regular practice. The reason for this was Motorola is a patent machine. As is IBM and several other technology rich companies in the US (and, interestingly, Japan.. who participates in this ritual in a similar way).

They don't actually build any of this stuff. They just apply for the patents so they can own the intellectual property.

These companies use these patents as a form of capital. They use it to get other companies with patents they want to cross license at no charge. To shut down competitors (especially little ones). And to protect themselves from people who might come up with new ideas (and actually implement them.. making them real) so they can't compete with the 'big' company and it's unused patent library. And, of course, they license the patents producing big money for the company. Last time I looked- late 90's timeframe, Motorola was collecting a little over $1 Billion (with a b) ayear in license fee's. Just for the patents they'd filed.

What Myhrvold's doing is really no different. He's just acting like the big guys have been for many years, and he's trying to turn it into a standalone business.

What makes it distastful to people is that he's being pure about his purpose. The big guys who do it are mostly focused on protecting other lines of business and, oh yea.. there's a billion or so of pure cashflow here.. let's grab it. They aren't 'trolls' And I don't see any other way to look at Myhrvold's actions here.

Our patent system (and don't get me started on software and process patents) is in desperate need of being overhauled. This is just one example of why.

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