The Patent-Troll King Just Lost a Powerful Ally: Apple

But Microsoft and Sony are still giving cash to Intellectual Ventures.

The Apple logo is displayed on the exterior of an Apple Store on April 23, 2013 in San Francisco, California.
National Journal
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Dustin Volz
April 11, 2014, 8:22 a.m.

All’s fair in love and pat­ent wars.

That’s the les­son In­tel­lec­tu­al Ven­tures — a com­pany of­ten ac­cused of be­ing one of the biggest and most egre­gious pat­ent trolls in the coun­try — is learn­ing after it lost its cash back­ing from both Apple and In­tel.

The move marks a de­par­ture from pre­vi­ous fin­an­cial sup­port the tech­no­logy ti­tans have giv­en the Bel­levue, Wash.-based com­pany, and co­in­cides with an on­go­ing push in Con­gress to re­form the na­tion’s pat­ent laws.

But Ven­tures is still reap­ing a cash in­fu­sion from Mi­crosoft and Sony, ac­cord­ing to a Re­u­ters re­port Fri­day, which cited people briefed on the fun­drais­ing. Their in­vest­ments give Ven­tures “a fresh war chest to buy new pat­ents,” a pat­ent ex­pert told the wire ser­vice.

Apple, which is mired in an­oth­er round of “smart­phone wars” over its pat­ents with rival Sam­sung, re­cently wrote in pub­lic com­ments that “no firm has been tar­geted by (pat­ent trolls) more than Apple.”

But Apple and a half-dozen oth­er ma­jor cor­por­a­tions — in­clud­ing IBM and Mi­crosoft — formed a group last week that warned Con­gress against passing a pat­ent bill that would over­cor­rect a sys­tem that has helped pro­pel Amer­ic­an in­nov­a­tion for­ward for cen­tur­ies. Google, which once in­ves­ted in Ven­tures but has said it stopped do­ing so in 2003, has been gen­er­ally more sup­port­ive of re­form ef­forts.

“It’s still un­clear why Apple and In­tel made this de­cision, but we hope it’s for the right reas­ons,” said Adi Kam­dar, an act­iv­ist for the Elec­tron­ic Fron­ti­er Found­a­tion, a group strongly push­ing pat­ent re­form. “Com­pan­ies are real­iz­ing that in­vest­ing in pat­ent trolls is a tox­ic busi­ness and PR de­cision.”

In­tel­lec­tu­al Ven­tures is fre­quently vil­lain­ized as one of the worst ab­users of the pat­ent sys­tem by those work­ing to re­form it. It is of­ten cited as a text­book ex­ample of a pat­ent troll — a com­pany that buys up tons of cheap pat­ents and profits from them by threat­en­ing in­fringe­ment suits against oth­ers, in the hope of set­tling.

The com­pany pos­sesses one of the largest pat­ent port­fo­li­os in the coun­try — some 70,000 — but rarely cre­ates its own products. It also has equipped thou­sands of shell com­pan­ies with pat­ents in re­cent years in an at­tempt to more eas­ily hit oth­ers with in­fringe­ment claims with little to no risk, ac­cord­ing to a 2012 Stan­ford study. Ven­tures ad­mits it pur­chases com­pan­ies an­onym­ously but dis­putes that it isn’t trans­par­ent in its law­suits.

In Feb­ru­ary, Ven­tures filed with the Fed­er­al Elec­tion Com­mis­sion to form its own polit­ic­al ac­tion com­mit­tee. The move was seen as an at­tempt to ratchet up in­flu­ence in a grow­ing de­bate on Cap­it­ol Hill over how to re­form pat­ent lit­ig­a­tion to guard against ab­us­ive prac­tices.

“This is their last chance to gum up the works and pre­serve their so-called busi­ness mod­el,” Mi­chael Pet­ricone, seni­or vice pres­id­ent of the Con­sumer Elec­tron­ics As­so­ci­ation, said at the time of the fil­ing. “This is the last stand of the pat­ent trolls.”

Late last year, House Ju­di­ciary Com­mit­tee Chair­man Bob Good­latte quickly muscled a bill through the lower cham­ber that would ush­er in sev­er­al pop­u­lar pat­ent re­forms. The In­nov­a­tion Act passed the House with a wide bi­par­tis­an ma­jor­ity in Decem­ber.

Sim­il­ar le­gis­la­tion has stalled some­what in the Sen­ate Ju­di­ciary Com­mit­tee, which an­nounced earli­er this week it would post­pone con­sid­er­a­tion of a re­form pack­age un­til after the two-week April re­cess be­gin­ning Fri­day, the latest in a string of delays by the pan­el.

A spokes­man for In­tel­lec­tu­al Ven­tures de­clined to com­ment on its fun­drais­ing activ­it­ies. Formed in 2000, the bil­lion-dol­lar com­pany spent more than $1 mil­lion on lob­by­ing in 2013, ac­cord­ing to the Cen­ter for Re­spons­ive Polit­ics.

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