Intellectual Ventures Responds to Public Radio Investigation

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Chris Crawford, a guy who couldn’t figure out how to get paid for his valuable patents and sold them to IV.

Up to that point, the story was a fairly classic he-said she-said piece looking into a controversial, complicated issue. But the example offered up by IV wasn’t what it turned out to be: “So we went to talk to Chris Crawford. But that turned out to be harder than we thought—and it led us on a five month journey, where things did not quite fit the story Intellectual Ventures was telling,” the NPR report said.

Busted! From that point on, “This American Life” tells the fascinating tale of how the Crawford patents may not be all that unique, and were sold to a business that appears to consist solely of an empty office and some intellectual property lawsuits.

This reveals a side of its patent business that Intellectual Ventures doesn’t really talk about—the fact that, in addition to licensing patents to partner companies and occasionally suing recalcitrant ones, it sometimes sells patents to another party and takes a cut of any licensing revenue down the road. Other parties that, according to the public radio report, sound like classic patent trolls.

Why not just be up front about that? Who knows. But it doesn’t help IV rebut the claims of guys like investor Chris Sacca, who entertainingly compared IV’s licensing business to a mafia protection racket.

In the end, I thought this post by Business Insider’s Matt Rosoff really nailed a couple of elements that are at the heart of this overall story. Intellectual Ventures, he notes, didn’t create the U.S. patent system—“it’s simply taking advantage of the long-established legal fact that patents are property with monetary value, and can be traded like any other property.”

Rosoff also points out the fact that IV’s investors include the tech world’s biggest names, such as Adobe, Apple, Cisco, and Microsoft. Those companies are in court all the time in patent disputes, Rosoff notes, but have other things to do beyond amassing their own warehouses of patent assets, “so Intellectual Ventures does the work of mopping up inventions and turning them into patents. Then it turns around and licenses them to the companies who have the most to lose from patent litigation.”

So the bigger debate to have here is whether the U.S. patent system is actually working well, or just stifling innovation and enriching lawyers. And we’re clearly just at the beginning of that sprawling debate, with calls for patent reform growing louder all the time.

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