Earlier today Intellectual Ventures (IV) sued Motorola Mobility for patent infringement in the United States Federal District Court for the District of Delaware. At issue are six patents that IV claims relate to Google’s Android operating system — US Patent Nos. 7,810,144, 6,412,953, 7,409,450, 7,120,462, 6,557,054 and, 6,658,464.
This litigation is worth noting for several reasons. First, this is yet another patent infringement complaint against Google’s Android operating system. It seems that practically every month there is another lawsuit claiming that Android infringes this or that patent, which has to raise eyebrows with respect to the underlying intellectual property Google owns in its operating system that is intended to compete against Apple. Second, once upon a time Google funded IV and vouched for the company and its founder, Microsoft alumnus Nathan Myhrvold. Now IV has turned the tables on Google, is going after Android and in so doing is suing the company that Google is set to acquire for $12.5 billion.
Intellectual Ventures was founded in 2000. It is in the business of purchasing important invention from individual inventors and institutions, as well as in creating its own inventions and filing patent applications on those to obtain patent protection. Therefore, IV is not your typical non-practicing entity (NPE). Yes, a large portion of what they do is characteristic of those buy and sue operations that seek to shakedown large and small companies alike, but they do actually have a development team and they do create their own intellectual property as well. One way that they create their own rights is through first acquiring underlying rights from an inventor and then working with that inventor to further develop the innovation, applying for more patents along the way. The complaint filed against Google explains that they have paid individual inventors more than $400 million for their inventions.
But is Intellectual Ventures wearing a white hat? That really depends on who you talk to. There does not seem to be any evidence that they are among the NPEs that offer licenses for irrelevant patents for such a low price that you have to pay rather than hire an attorney to defend a specious claim. They also do return a lot of money to independent inventors and others to acquire rights, which is one of the primary justifications for the model being consistent with the intent and purpose of the patent system. The patent system gives incentive to invent, which spawns more innovation than would otherwise exist. Of course, opponents will argue that few if any inventors who sell to an NPE actually planned on going that route, but choose to take something rather than nothing.
Regardless of whether you like IV or you think they are the Darth Vader of the patent world, are the growth of IV and business model of IV is akin to the alien attack in the movie Independence Day, they need to be thoroughly and completely respected, even feared. IV has an enormous patent portfolio that continues to grow. For that reason alone they need to be respected, perhaps even feared. With well over 30,000 patents it seems virtually certain that most tech companies are likely to at least arguably infringe one or more of the patents they possess. With such a density of patents they are the 800 pound gorilla in the room, and they know how to use that portfolio to extract license payments.
According to IV’s Chief Litigation Counsel Melissa Finocchio, IV has been discussing the possibility of taking a license to these patents with Motorola Mobility for some time, but was unable to reach an agreement. “We have a responsibility to our current customers and our investors to defend our intellectual property rights,” Finocchio said. “Our goal continues to be to provide companies with access to our portfolio through licensing and sales, but we will not tolerate ongoing infringement of our patents to the detriment of our current customers and our business.”
But has that always been the goal of IV? In July of 2006 Business Week did an excellent, in-depth article on Intellectual Ventures and Nathan Myhrvold. The article details Myhrvold’s claim that he does not like litigation and that the purpose of IV was to create a patent defense fund that would be useful as troll repellant. While it seems fanciful now, the original philosophy was that you could buy up patents from inventors and defunct companies, thus keeping them away from patent trolls who would only seek to extort money from the corporate tech giants. Of course, all this did was run up the cost of obtaining patents, even marginal patents. So in an odd way IV really has helped the fundamental purpose of the patent system, which is to reward innovation. Acquiring a decent patent today is costly and, therefore, can be quite lucrative for the seller.
One particular piece of the 2006 Business Week article is telling:
Brent Frei, IV’s executive vice-president, who’s managing the go-to-market plans, says there are multiple ways it will extract value from its holdings that do not involve lawsuits. Intellectual Ventures could sell a patent to a company that planned to commercialize it. Or it could enter into a joint venture or a licensing arrangement. Those are all nice things. But the unavoidable fact is that not everybody will want to play ball with Myhrvold & Co. When Myhrvold asks some companies for licensing fees, they’ll resist, and then Intellectual Ventures will have no choice but to go to court. Myhrvold adamantly rejects the idea that suing people will become a mainstay of his business operation. “Litigation is a huge failure,” he says. It’s “a disastrous way of monetizing patents.”
So here we are, many years later and IV’s philosophy seems to have changed. No longer is litigation a poor way to monetize patents, but rather IV sees itself as having a responsibility to litigate. IV alleges that Motorola Mobility is directly infringing the patents in question by making, using, selling and/or importing into the United States mobile phone devices and associated hardware, including but not limited to the Electrify, Photon 4G, XPRT, Titanium, Atrix 4G, Triumph, Rambler, Bali, i576, Quantico, Brute i680, Brute i686, Clutch i475, i412, i866, Milestone X, Theory the Lapdock for the Atrix. IV is seeking compensatory damages for the harm suffered, attorneys fees and costs, as well as a permanent injunction enjoining further infringement.
The self-righteousness of IV’s assertions that they have an obligation to sue is one of the reasons they engender such distrust, even bordering on hatred. For so long they came in peace and now that they have the leverage they seem to be playing a different tune, and using patent litigation with greater frequency. They accumulated patents over time, sometimes getting as much as $50 million from companies like Google, eBay, Sony, Intel, Microsoft, Apple, Nokia and others, ostensibly for the purpose of obtaining a defensive patent position. Oh how the tables have turned.
But if Google invested money with Intellectual Ventures to acquire patents how is it possible that they are being sued here and now? According to the complaint filed, “A significant aspect of Intellectual Ventures’ business is managing the two plaintiffs in this case, Plaintiff Intellectual Ventures I and Plaintiff Intellectual Ventures II.” The simple answer seems to be that Google invested with Intellectual Ventures and acquired certain license rights to a variety of patents, but not the patents owned by Intellectual Ventures I, LLC and not the patents owned by Intellectual Ventures II, LLC.
According to Florian Mueller, the self described competition-focused intellectual property activist and author of the influential FOSS Patents blog, Google should never have paid IV anything without clearly and unambiguously taking care of Android. Earlier today Mueller explained: “by giving money to IV, Google contributed financially to the development of the world’s largest NPE and served as a reference investor that enabled IV to raise funds from others. Therefore, Google played a key role in turning IV into what it is, and it should never give money to any NPE — or any company setting up patent funds — without taking care of the Android ecosystem at large.”
It is impossible to argue with what Mueller writes. He hits the nail square on the head. While IV seems to have a right to sue Google because Google invested in a different patent fund than is being asserted against it now, this development is quite embarrassing for Google and their legal team. How could Google have let this happen? If it turns out that IV does have the right to bring this lawsuit and Google has not obtained rights to these particular patents someone will have egg on their face.
It seems clear to me that many technology giants operate under a peculiar understanding of the NPE, or patent troll, model. There is a feeling in the big-tech community that if they have cordial, even friendly relationships with NPEs that creates a more favorable business environment. I have heard people say that they want to be on good speaking terms so that when they get sued, which they feel is inevitable, they don’t have an antagonistic relationship and can more quickly come to a resolution.
Are you kidding me? When you get sued for patent infringement you don’t want friendly, cordial relations between the litigators. Patent litigators are hired for one and only one reason — to win! You do not hire a patent litigator because they play nice with others, you hire someone who has the killer instinct. Sure, any litigation team should have someone from the inside of the company playing a key role; someone who has his/her eye on the ultimate goal, which is to achieve an acceptable outcome and to move on with business. That person who has the larger picture in mind, which is how do we maximize profits, shouldn’t be the litigators, whether they are in-house or outside counsel.
When you wrestle with pigs you get muddy. When you do business with an NPE on cordial terms you get screwed! For crying out loud, why would you ever want to let your enemies get close enough to potentially cloud your judgment?
Either Google’s legal team was naive and snookered or they let their guard down. Given how big-tech buddies up with NPEs it would seem to me far more likely that Google let its guard down and now Android is in the crosshairs of the largest, most well funded NPE on the planet. How is that working out for Google?
For more on IV see our articles tagged Intellectual Ventures.
For more on patent trolls see our articles tagged Patent Trolls.