Intellectual Ventures responds to This American Life exposé: ‘We fundamentally disagree’

Intellectual Ventures, the patent holding firm and invention house founded by former Microsoft technology chief Nathan Myhrvold, was already-well known in technology circles. But the Bellevue-based company has been thrust into the national spotlight this weekend — and not in a good way — as the central subject of an entire hour of the popular public radio program, “This American Life.”

As we noted yesterday, the piece dives deep into the complex underworld of the technology patent business, and quotes Silicon Valley venture capitalist Chris Sacca comparing Intellectual Ventures’ patent licensing operations to “a mafia-style shakedown.” In the story, Intellectual Ventures executive Peter Detkin calls that assertion “ridiculous and offensive.”

Intellectual Ventures must have known in advance that the piece wouldn’t be a glowing tribute to its work. But what does the company have to say now that it has aired? GeekWire reached out to the company for comment and received this response a short time ago.

The recent story on NPR had a specific point of view on the impact patents have on innovation – one that we fundamentally disagree with. Some of their characterizations of patents in general and of IV specifically were colorful and dramatic, and some were just absurd. Sadly, they distracted listeners from the real issue – that ideas have value and inventors who invest time, money and emotional resources into protecting those ideas with patents have a right to recognize a return on their investments.

Intellectual Ventures is challenging the status quo, but we think this disruption is important in order for the marketplace around ideas to mature. Our value proposition is simple: we want to provide an efficient way for patent holders to get paid for the inventions they own, and in turn, for technology companies to gain easy access to the invention rights they need or may need as they enter new markets.

For years, the importance of respecting invention rights has been ignored or swept under the rug. Many of the world’s leading technology companies are beginning to recognize that patents are a strategic asset worth billions of dollars. This evolution in perspective is notable and we are proud to have contributed to this new way of viewing invention rights.

With so much change happening, there is bound to be controversy. We often find ourselves at the center of that controversy, but that only strengthens our commitment to building an efficient invention capital market.

To me, the most interesting part of the story is the detail about IV negotiating a cut of future licensing revenues when it sells a patent — giving it the ability to benefit financially from patent litigation, even as it distances itself from the actions of the acquiring firm.

Intellectual Ventures has recently filed some patent litigation of its own, but doing so comes with inherent risks, such as the company being forced to disclose its major investors.

Speaking of those Intellectual Ventures investors, as noted by Business Insider’s Matt Rosoff today, that’s one subject the This American Life story didn’t delve into. As outlined in this legal disclosure by Intellectual Ventures, they include a who’s who of tech companies — among them Microsoft, Cisco, Apple, Adobe, Google, Nokia, SAP, Sony and Yahoo.

The audio should be available here later today. See this page for air times around the country.

Post updated to correct This American Life’s affiliation. The show is distributed by Public Radio International. Alex Blumberg of NPR’s Planet Money and NPR’s Laura Sydell co-reported the piece on patents for the show. Thanks to the reader below who pointed out our mistake.

Previously on GeekWire: Intellectual Ventures accused of ‘mafia-style shakedown’ in This American Life exposé

  • http://beingmanan.com/ Manan

    They can fundamentally disagree and keep believing that they’re good but unfortunately they’re a white collar scam. A front end lab to say we do good but deals with firms that have locked offices that sue (instead of IV) is a case straight out of the television series Burn Notice.

  • http://beingmanan.com/ Manan

    They can fundamentally disagree and keep believing that they’re good but unfortunately they’re a white collar scam. A front end lab to say we do good but deals with firms that have locked offices that sue (instead of IV) is a case straight out of the television series Burn Notice.

  • http://beingmanan.com/ Manan

    They can fundamentally disagree and keep believing that they’re good but unfortunately they’re a white collar scam. A front end lab to say we do good but deals with firms that have locked offices that sue (instead of IV) is a case straight out of the television series Burn Notice.

  • http://beingmanan.com/ Manan

    They can fundamentally disagree and keep believing that they’re good but unfortunately they’re a white collar scam. A front end lab to say we do good but deals with firms that have locked offices that sue (instead of IV) is a case straight out of the television series Burn Notice.

  • http://beingmanan.com/ Manan

    They can fundamentally disagree and keep believing that they’re good but unfortunately they’re a white collar scam. A front end lab to say we do good but deals with firms that have locked offices that sue (instead of IV) is a case straight out of the television series Burn Notice.

  • Guest Guy

    This is a very interesting topic but both you and the representative from IV incorrectly associate This American Life with NPR. In actuality, while TAL is aired on many NPR-affiliated local radio stations, it is produced by Public Radio International and isn’t connected to NPR. Minor point but a salient one with the frequent demonizing of NPR in some circles.

    • Anonymous

      Thanks for pointing that out. I’ve corrected the reference to This American Life in the first paragraph. Just to be clear, as we’ve now noted at the bottom, two NPR reporters co-reported this particular TAL piece. (Which is where the NPR reference in the IV statement comes from.)

      • Rsteinmetz70112

        Suggesting the NPR and PRI arr not related in more than a tangential way is just about the same as the way IV disavows its corporate associations..

  • Joe the coder

    They still are flogging the idea that the inventors are the ones they are protecting when, in fact, few if any inventors actually benefit from IV’s actions.  Almost all patents have been assigned to a company and many have been sold several times.  Heck, most inventors never even got the nominal $1 legal fiction on the assignment document.  I know MS used to give SBA dollars encased in a Lucite plaque. 

    Even ignoring the question of whether SW patents harm the industry, IV’s behavior is pretty reprehensible.
     

  • Anonymous

    Should be very interesting to see how all that works out. Wow.

    http://www.net-privacy.us.tc

  • guest

    Manan, glad to see other Burn Notice fans here.  But do you really think Nathan M. is anywhere as cool as Michael Weston?

    • http://www.intrinsicstrategy.com FrankCatalano

      Fiona would know what to do about this issue.

  • http://nsputnik.com nsputnik

     With the exception of that IV is trying to do execution is everything and ideas are worthless.

    • Guest

      What a horribly cynical statement. “Execution is everything and ideas are worthless” comprise a cocktail of thinking that devalues the innovator and overvalues the thief. An innovation is worth what the market will bear.

      Ideas are worth loads, Nick. Haven’t you ever bought a book, or a music track, or a film on DVD? Intellectual property is a trillion-dollar industry precisely because our society values ideas and shuns thieves.

      • http://nsputnik.com nsputnik

        …said the anonymous capitalist maximalist middleman shill.

        • http://trevinchow.com/blog Trevin

          You’re discounting his argument because his identity is anonymous? What am I missing?

          • http://nsputnik.com nsputnik

            Yes, one of the many reasons.  Real innovators ship products.

            Yes, I have bought a book, music tracks, and DVDs because I value the content.  Our society values execution.  This is why where two business will use the same idea one will succeed while another will fail.  Ideas have value only in the perverted world of patents.

            The US goes around the world preaching the wonders of intellectual property so that other countries will enforce US patents. But all these countries will do is create their own patent system and favor their own patents.  All the while US companies are spending resources nuking each other instead of making real innovations.  The productivity of most citizens of a country (which is aided by products and services that can compete and win in a patent free environment) is far more important to a society than “protecting inventors.”  IV is positioned to make orders of magnitude more money when they shuffle these patents around and sue compared to the payout they would make poor, stupid (according to IV’s own logic) inventors they supposedly to protect.

            The Cold War was pointless and so is the patent war.

          • Guest

            Let’s talk about books, Nigel.

            A man has an idea. He writes a book espousing the idea. This is an expression, not an execution. You buy the book. You are not buying the end result of an idea’s execution; you are buying content describing that man’s idea and how he might use it.

            Therefore, a book (or a work produced for another medium, such as a DVD) provides you with a window into a person’s idea. Your purchase funds the author despite the author not having yet realized the execution of his idea.

            In conclusion, books are no more worthy of condemnation than are patents. Both represent an innovator’s statement and have a value assigned by a free market.

            Sincerely,
            Gene
            Anonymous Capitalist Maximalist Middleman Shill
            Not associated with Intellectual Ventures, Inc.

          • Anonymous

            Your analogy is false, Gene. Books (or DVDs, CDs, etc.) represent execution, in a way that patents do not. These represent actual works, not merely ideas. To use a common example, Charles Darwin authored “On the Origin of Species” (a book) to put forth a theory of evolution (an idea), namely natural selection. Other contemporaries of Darwin had similar ideas about natural selection. But his was the first and most complete expression of a comprehensive theory.

            Think about the way you think. We all have ideas about various things. But, those ideas only have value upon application or synthesis.

          • Guest

            Dig a little deeper, Ram. When Charles Darwin “invented” the theory of evolution (he did not) he immediately set out on a tour of lectures criscrossing the nation promoting it at great personal benefit. Other men attempting to so lecture received stern warnings and, often, beatings at the hands of Darwin’s men. Some might call this “savage.” I call it “business.”

          • http://nsputnik.com nsputnik

            If you repeat the lie frequently enough, Gene, some people my believe it, but not me.

            Having an idea for a book but doing nothing about it equals nothing.  Writing a work that could be a book and doing nothing about it equals nothing.  When one writes, publishes, and sells the said  has executed on the idea.

            Having an idea for invention is worth nothing.  Taking your product to market is something.  Patenting an idea does not make a product.  When you sue over the said patent (or sneaking in a patent to our broken system with something obvious) you cause harm.  This harms is not only taxes on innovators executing and the public.  These actions results in not only nothing (the absence of something), but it is the absence of something that was.

            I get that the intent of patents was to protect inventors who could not execute.  That was a long time ago.  But the harm they cause to innovators today and the cost they pass on to consumers is far outweighed by the benefits to the lone inventor.  In today’s competitive marketplace inventor needs to invent AND execute.  We will not allow the inefficiencies of the few to harm the many.

            Reform patents now.  Invalidate the patents of NPEs and abolish the NPE.  Require holders to use it or loose it.  Allow mass invalidation of similar patents all claiming to be novel despite each other’s existence.

          • http://nsputnik.com nsputnik

            Yes, one of the many reasons.  Real innovators ship products.

            Yes, I have bought a book, music tracks, and DVDs because I value the content.  Our society values execution.  This is why where two business will use the same idea one will succeed while another will fail.  Ideas have value only in the perverted world of patents.

            The US goes around the world preaching the wonders of intellectual property so that other countries will enforce US patents. But all these countries will do is create their own patent system and favor their own patents.  All the while US companies are spending resources nuking each other instead of making real innovations.  The productivity of most citizens of a country (which is aided by products and services that can compete and win in a patent free environment) is far more important to a society than “protecting inventors.”  IV is positioned to make orders of magnitude more money when they shuffle these patents around and sue compared to the payout they would make poor, stupid (according to IV’s own logic) inventors they supposedly to protect.

            The Cold War was pointless and so is the patent war.

      • http://nsputnik.com nsputnik

        …said the anonymous capitalist maximalist middleman shill.

      • http://www.intrinsicstrategy.com FrankCatalano

        With all due respect, you’re dead wrong when it comes to “ideas” being the value of books or music or film. I can’t tell you the number of times I (and other writers) have been approached with “I have a great idea for a science-fiction story. You write it, and we’ll split the proceeds 50/50.”

        The work isn’t coming up with the idea. It’s in developing it fully, expressing it in detail, and working out all the kinks that inevitably arise. All you have to do is listen to some two-line Hollywood pitches to understand those high-concept ideas aren’t movies.

        Others point out, rightly so, that content is a copyright issue, not a patent issue. Still, no good patent should be based on a high-level idea alone. It should be based on a detailed, unique description that makes it possible to execute on the idea.

        Better still for the inventor to execute on the patent to show it actually works.

      • http://derek-kerton.myopenid.com/ Derek Kerton

        “An innovation is worth what the market will bear.”

        Is it then? Do you mean a free market like the fashion industry, where ideas travel fast, are copied freely, are enhanced and improved upon, and where builders must always compete with the next idea? A market like this where innovation occurs at a ridiculous pace, and each season brings new styles?

        Or do you mean a government regulated monopoly market like technology, where once an idea is uttered, it is locked up and owned, and becomes more tantamount to a land mine than a useful tool? Sure, people still innovate, but they spend a lot of time in the courtroom, a lot of time avoiding the obvious (but patented) solutions, a lot of time filing and paying legal teams, and deal with a lot of friction when pushing for progress.

        Basically, inventors/doers these days are saddled with “Myhrvold’s Plough”. You can move forward, but you’re gonna by pulling Nathan along with you.

        Software patents are government-granted monopolies on ideas. You are dead wrong to say that they are worth “what the market will bear” in our deeply distorted market.

  • Igor

    This can be solved very easily… Require the patent holder to go to market 5 yrs after patent is issued or lose it.

  • K3

    IV can’t point to a single satisfied inventor or licensee who will speak publicly about their positive experiences. That says volumes by itself.

    Not that IV care much about what the everyday person thinks, unless that everyday person tries to build something innovative which looks like juicy patent prey.

  • Guest

    Thank you to Intellectual Ventures for standing up for an innovator’s right to invent, regardless of whether he has the money to build his product.

    A friend of mine has invented numerous innovations for space travel, but he cannot build a spaceship. Does this friend deserve money for his innovation? I say, “yes.”

    I have written a new search engine but I lack the resources to deploy it at a scale commensurate with that of the Internet. Should Google be allowed to steal my ideas simply because I am less moneyed than they are? I say, “no.”

    Backing Intellectual Ventures and other so-called “patent trolls” is supporting the individual investor at a time when many believe  innovation comes only from the Fortune 500. Innovation doesn’t come from corporate boardrooms. It comes from the minds of innovators who will be compensated for their intelligence.

    • K3

      Your argument would be interesting if there were a single example of a patent – for a novel innovation, not something with thousands of examples of prior art or prior patents – where IV produced revenue for the inventor. Not a mega-corporation or a sleazy shell company in East Texas. An actual inventor.

      Produce a real example, not a pretty fantasy, and there might be a worthwhile conversation about IV.

  • Guest

    Thank you to Intellectual Ventures for standing up for an innovator’s right to invent, regardless of whether he has the money to build his product.

    A friend of mine has invented numerous innovations for space travel, but he cannot build a spaceship. Does this friend deserve money for his innovation? I say, “yes.”

    I have written a new search engine but I lack the resources to deploy it at a scale commensurate with that of the Internet. Should Google be allowed to steal my ideas simply because I am less moneyed than they are? I say, “no.”

    Backing Intellectual Ventures and other so-called “patent trolls” is supporting the individual investor at a time when many believe  innovation comes only from the Fortune 500. Innovation doesn’t come from corporate boardrooms. It comes from the minds of innovators who will be compensated for their intelligence.

  • Let’s innovate our way out…

    Rather than bicker about whether IV’s existence is or isn’t
    good for us all, how about simply out-innovating them? Here’s a simple idea
    that could almost certainly be launched over the course of a typical startup
    weekend: create a bona-fide two-sided marketplace for patents.

     

    In this marketplace, inventors could list their patents, or
    even provisional patents if you want to enable the really little guys to
    participate. Buyers would then submit bids to exclusively license the invention
    for an up-front cash payment and/or a royalty per unit sold and/or a guaranteed
    total minimum royalty. The contract term would typically be between one and ten
    years. Contracts would be completely standardized except for filling in the
    blanks mentioned above. The standard contract terms would not allow the buyer
    to relicense the patent or initiate any infringement litigation without the inventor’s
    approval. Inventors could set various minimum bid and/or reserve conditions if
    they choose to, so that they would not have to worry about offers they would
    not want to accept.

     

    The market maker would take a small listing fee and a small
    percentage of the licensing fee for their role in helping arrange the
    transaction and setting up a robust standard contract.

     

    This is all just a quick first cut. I’m sure over the course
    of a weekend of work some of the terms above would be changed, but I am
    confident the basic idea could be made to work. The existence of a properly
    constructed market like this would benefit both inventors and those with the
    skills to manufacture and market the inventors’ ideas without leaving much room
    in the middle for trolling behavior. I can’t imagine this not being a more
    efficient approach to connecting inventors and licensees than anything IV
    offers either of them.

    • K3

      What will you do about the fact that the vast majority of software patents are restatements of existing patents or of widely deployed existing technology? Do you pay the purported inventors up front and eat the loss when your licensees sue you for failing to provide the exclusive patent protection you sold them? Or do you try to convince inventors to pay you while you take their IP off the market and attempt to find a legitimate buyer for it?

      IV is the only logical execution of the “patent clearinghouse” business model in context of current US patent law. The point of this story was that software patent law fundamentally inhibits innovation. Even if IV didn’t capture downstream revenue from patents they sell, their actions would still loom like a Mafia protection enforcer to the average small startup.

    • K3

      What will you do about the fact that the vast majority of software patents are restatements of existing patents or of widely deployed existing technology? Do you pay the purported inventors up front and eat the loss when your licensees sue you for failing to provide the exclusive patent protection you sold them? Or do you try to convince inventors to pay you while you take their IP off the market and attempt to find a legitimate buyer for it?

      IV is the only logical execution of the “patent clearinghouse” business model in context of current US patent law. The point of this story was that software patent law fundamentally inhibits innovation. Even if IV didn’t capture downstream revenue from patents they sell, their actions would still loom like a Mafia protection enforcer to the average small startup.

      • Let’s innovate our way out…

        I don’t disagree that software patents are broken, but I do disagree that IV is the only workable model, even under current law.

        The key to making this model work around your obection is that the license is strictly between the inventor and the licensee. The marketplace business described above only helped them find one another. In exchange for this every time the licensee sends a check to the inventor they send a much smaller one to the party that introduced them. It is up to the would-be licensees to decide if they think the patents the inventors offer in the marketplace are worthwhile and to place their bids accordingly.

        An analogy, albeit not a perfect one, is that if I find a merchant on the web via an ad they placed with google, and am subsequently dissatisfied with a defective product I buy from them, the problem is between me and the merchant. It’s not google’s problem except indirectly to the extent that it reduces google’s credibility in my eyes. 

        • Joe the coder

          The problem with your idea is that inventor basically never actually owns the patent to patent his invention – even from day one.  It gets assigned to their employer who is then free to treat it as an asset and sell it.

      • Let’s innovate our way out…

        I don’t disagree that software patents are broken, but I do disagree that IV is the only workable model, even under current law.

        The key to making this model work around your obection is that the license is strictly between the inventor and the licensee. The marketplace business described above only helped them find one another. In exchange for this every time the licensee sends a check to the inventor they send a much smaller one to the party that introduced them. It is up to the would-be licensees to decide if they think the patents the inventors offer in the marketplace are worthwhile and to place their bids accordingly.

        An analogy, albeit not a perfect one, is that if I find a merchant on the web via an ad they placed with google, and am subsequently dissatisfied with a defective product I buy from them, the problem is between me and the merchant. It’s not google’s problem except indirectly to the extent that it reduces google’s credibility in my eyes. 

    • Mike Mathieu

      I think this is basically what IV does, except that they also solve the problem that many patents are speculative and the question of whether or not they are blocking, is not immediately obvious. So they take on the model of general manager of an investment fund who builds up expertise in valuing these hard-to-value, many-of-them-unused patents.

      I think the negative feelings about IV are very similar to the feelings about hedge funds who make “private” gains by producing the “public good” of more efficient markets. It’s human nature to like the public goods while hating the private gains.

      • Joe the coder

        No, I think the negative feelings toward IV are due to the fact that they have raised the bar on patent infringement risk for the industry.  That and the fact that they’re playing both sides of the street.

  • David Martin

    The piece also stopped short of disclosing that many of IV’s patents were acquired from the tax fraud donations of corporations who defrauded the U.S. government and many institutions of higher learning.

    • Joe the coder

      That’s a pretty inflammatory statement.  Do you have proof of this?  I suggest you present your evidence to the AGs office or the IRS.

      • David Martin

        Yes, and it’s public.  The IV purchase of patents through Ocean Tomo’s auctions are well documented and the fact that they were frauds was well established in Congressional hearings – also a public record.

    • Guest

      Please provide:

      1. An example of such a patent.

      2. An example of a “tax fraud donation” of a corporation who “defrauded the U.S. government and many institutions of higher learning.”

      • David Martin

        If you’d like the audit of all of these (that was sent to the IRS office for Large and Medium Sized Business compliance) send an e-mail inquiry and I’ll be happy to forward it.

        • Guest

          Upload it and post a web link, please. I believe in information disclosure.

  • Vern

    “That’s a term that has been used by people to mean someone they don’t like who owns patents. I think you’d find almost anyone who stands up to their patent rights has been called a patent troll.”

    No, Nathan, that’s not what it means. A Patent Troll is a company that buys patents, usually weak ones, has no intention of actually creating a product, and looks for broad and deep markets in which to sue for licenses. That’s a patent troll and from what I can tell that’s pretty close to what IV is doing.

    The reason that people find it so offensive is that you are parasitic. You are leaching and stealing from the hard work others have done to actually create a product, raise money, and then bring it to market.

    In many ways the easy part is the invention and the invention itself is very rarely an actual product.     

  • http://hal-obrien.livejournal.com/ Hal O’Brien

    “Speaking of those Intellectual Ventures investors… that’s one subject the This American Life story didn’t delve into.”

    Let alone, they didn’t delve into the claim made by the Wall St Journal in 2008 (“Tech Guru Riles the Industry By Seeking Huge Patent Fees,” 9/17/2008) that IV had been given a deadline by the investors to be profitable within 5 years of that date… or 2013.

    Since IV has raised $5B, and made only $2B in revenues over 11 years, it strikes me as unlikely they’ll earn the needed $3B over the next two years to break even.  This strongly implies the clock is ticking at IV before the investors shut it down for negative ROI.

  • http://www.facebook.com/didier.monin Didier Monin

    What I would really like to hear is a story about is how the patent office got swayed away from considering technology code similar to language and as such not patentable.
    I’d love to see software technology patents be in a category of their own, with a very short term protection of only a very few years as this is a domain evolves so fast. It is enough time to make a lot of money from it, but not enough to encourage dubious business models…

  • http://twitter.com/ArcComputer david prokop

    IV is providing a service to large corporations by licensing rights to their patent portfolio, thereby reducing the risk of corp patents getting struck down or a ‘rouge’ challenge patent disrupting their core business. ie  they provide “patent litigation insurance”.

    Why can they do this? Because (as the NPR piece mentioned) 30% of patents have duplicate or cross claims!  What a mess ! The result is nobody really knows which patent has the “true” rights to an invention, thus many court battles, a golden age for lawyers.

    I feel this is a relatively short term problem at the USPTO, and once it gets adequate funding it can pay more and hire really smart software engineers which can create a searching algorithm, which can test all new patents for any reference or discussion of a break through idea in a prior art patent.(NPR also mentioned private companies have this analysis software), therefore significantly reduce the number of duplicate patent claims.  Once the USPTO has the people a tools in place they can issue ‘true’ rights for break through inventions and issue strong irrevocable patent rights.

    The current morass of tangled and duplicate patents will expire in 10 or 15 years,(patents have 20 year expirations) and the current IV business model of ‘patent litigation insurance’ will likely diminish in importance.   

  • Yssuomynona

    The founding fathers never had meant for patents to apply to software .. didnt exist then, so no this constitutional protection thing is bogus. Any change should require a constitutional amendment. (says he tongue-firmly-planted-in-cheek).  But this very self-serving PR effort by IV really needs to have a hole poked in it … they are going to suppress innovation not boost it. They will tend towards becoming a gang which protects it turf .. and indeed some of these patent wars are more like drug wars, than debt ceiling discussions 

  • http://twitter.com/JusticeChase Samuel Chase

    Intellectual Ventures is a swindling beggar dead-beat pickpocketing company based on thievery. Their every word is like sheer humbug from a hideous bunco man.

    Intellectual Ventures and all of their employees share all of the same characteristics as wet dogs, except loyalty.

    One could drive a truck through any part of Intellectual Venture’s arguments and never scrape against a fact.

  • Malw

    A mountain of money gives those who can afford it (IV for example) the ability to monopolize ideas. I find this disturbing. I have virtually no money but I do have ideas. In the past I have published those ideas so they cannot be patented. I know they were both original and useful to others and I have seen at least one citation in published work other than the original. More fool me perhaps. At least I can sleep soundly knowing I have done others out there some good.

  • Guest

    Still doesn’t answer why they have vacant office rooms rented out. And they had a chance to go in air, but decline when asked for an interview.