Myhrvold heads to court

By Felix Salmon
December 9, 2010
important story about Nathan Myhrvold's patent-troll shop Intellectual Ventures:

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On September 17, 2008, while the rest of us were running around like headless chickens watching the world come to an end, the WSJ‘s Don Clark ran an important story about Nathan Myhrvold’s patent-troll shop Intellectual Ventures:

Unlike most other pure licensing companies, Intellectual Ventures hasn’t filed patent-infringement lawsuits to help force settlements. But the group lobbying on behalf of tech companies in Washington, the Coalition for Patent Fairness — which includes several companies that have been approached for licensing deals by Intellectual Ventures — says it is only a matter of time…

In an interview at his Bellevue, Wash., headquarters, Mr. Myhrvold acknowledged facing resistance from companies he targets for licenses. But his patent inventory gives him leverage to extract settlements without litigation. “I say, ‘I can’t afford to sue you on all of these, and you can’t afford to defend on all these,’” Mr. Myhrvold said.

Now, two years later, Clark drops the inevitable update: Myhrvold hired a chief litigation counsel in May, and has now started suing:

On Wednesday, Mr. Myhrvold’s firm, unable to secure payments from nine companies, announced three patent-infringement suits. One suit names the best-known players in security software—Symantec Corp., McAfee Inc., Trend Micro Inc. and Check Point Software Technologies Ltd.

Some links would have been nice here: Intellectual Ventures is good about posting links to all the patents and complaints, even if it does make you download various PDF files to find them.

The complaints (here’s the security-software one) include some startling facts about the sheer scope of Myhrvold’s operation:

To date, Intellectual Ventures has purchased more than 30,000 patents and patent applications and, in the process, has paid hundreds of millions of dollars to individual inventors for their inventions. Intellectual Ventures, in turn, has earned nearly $2 billion by licensing these patents.

This is all predictably depressing, and poses, as I said two years ago, the single biggest risk to America’s continued leadership in technology and innovation. Intellectual Ventures might do a bit of R, but it doesn’t do any D. Instead, it just sits there, extracting rents (that’s the polite way of saying “blackmailing”) technology companies who actually want to make things.

The long term repercussions of this will be a competitive advantage for companies based in places like China or Brazil which have much weaker intellectual property laws. It’s sad, because patents, as originally envisaged, were designed to encourage innovation, rather than to stifle it.


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Mining claims expire if a certain amount of development work is not done yearly (although this is not well enforced). Do patents need a similar provision?

Posted by skeptonomist | Report as abusive

Okay, I intuitively agree with you, which caused me to go back and rethink my position. While I would prefer the resources wasted on litigation to instead be spent on innovation, I don’t see that litigation is hindering innovation. Most tech companies today build up patent portfolios, primarily as a defense. I sue you, you sue me back, and we settle by cross-licensing our portfolios.

Of course, Intellectual Ventures doen’t make anything, so this strategy doesn’t work with it or any other patent troll. But I’m guessing that hindrance is much more of a problem with weak IP laws than with what we have today. The patent system is a cost of doing business, but it also enables tech companies to keep prices higher than they might if anything can be stolen with impunity.

Posted by Curmudgeon | Report as abusive

Countries with “weaker” IPR laws like China can only prosper when they have other people coming up with ideas to steal.

As for Intellectual Ventures, there is a sunny gloss to put on this if what they are offering is economies of scale to licencing and protecting smaller inventor’s IPR. Absolutely no idea if this is what they offer but it would nice if a company did.

Posted by Danny_Black | Report as abusive

Inventions are cheap, particularly in the software space; it’s implementations that matter. Smaller inventors who sit on their ass and don’t implement don’t deserve rewards. In this industry, simultaneous invention is commonplace, and the vast majority of patents, when tested in courts, are invalidated by prior art completely unrelated to the original genesis of the patent.

It’s instructive to note the history of the steam engine here. Patents hindered innovation in efficiency: when the patent on the engine expired, efficiency increased over twice as fast as when the patent was still in effect. There’s also the coordination problem: when lots of individual actors have patents, it’s very difficult to build a compound product depending on patents from each actor, as each actor will (naturally) negotiate as if only their patent is the key patent.

Ref on steam engine innovation:  /do-patents-encourage-or-hinder-innovat ion-the-case-of-the-steam-engine/

Posted by BarryKelly | Report as abusive

So what would possess someone like Myhrvold, who Gates thought was one of the smartest people on the planet, to go from innovator to parasite? He doesn’t need the money, and I don’t see how he could even view this an an intellectual pursuit. These alleged patents add no value to society, and IV deserves no reward. Is it an ego thing?

How can anybody have any respect for a guy like this? He has been amply rewarded for any contributions he might have made to society while at Microsoft, and yet it’s not enough, he has to suck more wealth out of the system while giving nothing in return. If he wanted to do that, he should have became an investment banker or started a hedge fund. He might be deluding himself into thinking he’s still innovating, but he’s just shuffling pieces of paper.

Posted by OnTheTimes | Report as abusive

I’m not normally one to support the patent troll biz, but I have trouble with this bit: “To date, Intellectual Ventures has purchased more than 30,000 patents and patent applications and, in the process, has paid hundreds of millions of dollars to individual inventors for their inventions… Intellectual Ventures might do a bit of R, but it doesn’t do any D.” What exactly is wrong with inventors trying to get a return for their creative work?

I don’t think we’d have this conversation if the patent system weren’t broken at the point of issuance. Patent examiners are underpaid (relative to their private sector counterparts), overwhelmed by the volume of applications, and work for an agency whose stated mission is to serve the patent applicants, not the public interest. So we end up with huge numbers of hard-to-overturn crappy patents.

Patent trolls (and Nathan does look the part…) are a symptom, not a cause.

Posted by FosterBoondog | Report as abusive

@FosterBoondog: “What exactly is wrong with inventors trying to get a return for their creative work?”

First of all, they are not inventors, they didn’t invent anything. They exploited a flaw in the system. And they didn’t create anything.

It’s irrelevant whether or not Myhrvold and his ilk are symptoms or causes, they are extracting value from society while adding nothing. While a cough may be a symptom of a bacterial infection, it still isn’t acceptable for people to go around coughing on other people. And if you cough enough, it causes problems that remain after the infection is gone, so those pesky symptoms should addressed, in addition to the cause.

Myhrvold and IV are parasitic infections.

Posted by OnTheTimes | Report as abusive

I was going to say something much the same as Foster myself.

@OnTheTimes: I mean these questions in sincerity, not facetiousness, but what is the exploit here? How are they not inventors? My initial thoughts were spot on exactly the same as Foster’s but I don’t understand patent law all that well.

Posted by spectre855 | Report as abusive

‘Intellectual Ventures might do a bit of R, but it doesn’t do any D. Instead, it just sits there, extracting rents (that’s the polite way of saying “blackmailing”) technology companies who actually want to make things.’

If they own it, that means either they created it, or bought it from someone who did. Often times that’s the hard part. A large firm with market channels in place can then fairly risk free bring it to market. Most times the big firms only get involved once someone else has proven it. That’s then without patents where they elbow the originator our on the market place they created. Your analysis lacks logic and experience. You write from a large infringer’s vantage point who feels entitled to use someone else’s creation without paying and without consent. If you wrote the next great novel, wouldn’t you want to keep others from publishing without your permission or paying you? Don’t be a hypocrite.

Posted by staff3 | Report as abusive

@spectre855, to be granted a patent, you don’t actually have to build your invention. You just have to explain your idea for the invention and how it could be implemented. Then you can modify the application for many years, adding changes that other people might have thought of, and lengthening the life of the patent. If you don’t actually build the invention you allegedly create, then it isn’t an invention. And shouldn’t be patented.

Also, many patents are granted for applications, not inventions. If the securities ratings firms get the business school graduates who can’t get high paying jobs with investment banks, and then go on to have no idea how to assess risk and give out AAA ratings to collections of sub-sub-prime loans, the patent office similarly hires engineers who can’t get jobs designing products, and cannot distinguish between invention and application, or even design choice. An example: Apple, I believe, was granted a patent for using a finger swipe to validate that you want to unlock your phone. A good idea, but not an invention, it is just a design choice, but once granted patent protection, can now be used as a weapon. And is, as Apple is suing Motorola for using it in its Android based phones.

A less-than-average engineer who becomes a patent examiner may not understand what is obvious to someone who is trained in a particular art, and patents are granted for features that aren’t innovative, but that any designer would have chosen in the same situation.

And then there is the issue of prior art. Even with google, it seems to be difficult for patent examiners to verify that prior art does not exist. But when it comes to software, it usually does exist, and the burden of proof falls on the patent infringement defendant. Which is expensive and scares off customers, investors, and partners. Granting patents for software is absurd, because the essence of software is that it is a set of instructions for a computer that is designed to be programmed. The first computer should be patented, but every application that uses it is not. If a screw was invented today, it would be patentable, but every use of it should not be, because it is supposed to have many uses.

@staff3, firms may own patents, but it doesn’t mean they created it, or bought it from someone who created it. It just means that they patented it. Not the same thing, and certainly does not increase competition or innovation, as patent abusers like to claim.

Posted by OnTheTimes | Report as abusive