Intellectual Ventures struck a deal to receive 90 percent of the ongoing profits from a patent that it sold to a mysterious company called Oasis Research — which then used the patent to sue 16 tech companies, reaching large settlements with many of them.

Myhrvold in his chef garb
Nathan Myhrvold

That’s according to a follow-up piece airing this weekend on This American Life, the public radio program that first dug into Intellectual Ventures’ dealings as part of a larger exploration of the patent system in 2011. The size of that “back-end” cut is one of the revelations in the new piece.

Bellevue-based Intellectual Ventures is run by Nathan Myhrvold, the former Microsoft chief technology officer, who still works regularly with Bill Gates on a variety of businesses and projects. Microsoft itself has called for more transparency in the patent system and an end to the practice of patent owners shielding their true identities.

The new piece raises broader questions about Intellectual Ventures’ ongoing interest in the patents that it sells, including licensing deals and court cases involving those patents. The practice would allow Intellectual Ventures to receive a material benefit without being named publicly as a plaintiff, because it’s no longer technically the patent owner.

GeekWire has contacted Intellectual Ventures for comment, asking if the arrangement as described by This American Life represents the company’s standard practice.

This American Life’s Alex Blumberg and NPR’s Laura Sydell have been digging into the transaction between Oasis Research and Intellectual Ventures as a case study after an IV executive cited the company’s original purchase of the patent as an example of its efforts to help inventors receive appropriate value for their intellectual property.

The patent, which dates to 1993, covers an “Internet online backup system” that “provides remote storage for customers using IDs and passwords which were interactively established when signing up for backup services.”

Intellectual Ventures bought the patent from an inventor named Chris Crawford and subsequently sold it to Oasis, which then used the patent to file suit against 16 tech companies including Rackspace, GoDaddy, and AT&T.

An executive with Intellectual Ventures had acknowledged in the original This American Life piece that the company negotiated a “back-end arrangement” as part of the sale of the patent to Oasis — receiving “some percentage of the royalty stream down the road that is generated from the monetization of these assets.”

According to court records cited in the new broadcast, that percentage was 90. This American Life says the overall settlements with Oasis likely amounted to tens of millions of dollars. One expert quoted by the show estimates that it was more than $100 million. The patent’s named inventor, Chris Crawford, in turn received 17.5 percent of Intellectual Ventures’ cut.

One of the defendants, online backup company Carbonite, took the case to trial, where a jury ultimately determined the patent to be invalid, finding that it didn’t properly list one of the additional inventors who came up with the idea.

However, an unnamed company that settled with Oasis tells This American Life that it is still making payments under the settlement.

“We were hit hard by this lawsuit,” a spokesman for the company tells the program in an email. “The infringement on our part seems completely bogus, but we could not afford to fight it. Even with the settlement, we were forced to lay off employees. We are STILL paying out on the settlement agreement. We were unaware that the patent had been invalidated. We will be contacting our attorney to see what recourse we may have.”

The program is airing around the country this weekend. Update: It’s now available online, as well.

Intellectual Ventures said after the first show, in 2011, that it disagreed “fundamentally” with the conclusions in the piece. Stay tuned — we’ll post any comment we receive from the company in response to the latest piece.

Editor’s Note: Intellectual Ventures was one of the category sponsors for the recent GeekWire Awards.

Comments

  • Nathan

    I’m on a mission to purchase more patents so no one will be allow to make a product without paying me first. But if you try, I will find you and sue you until you are out of business or until you pay my troll toll fee.

    ahahahahahah

  • bmw

    Perhaps the rule should be that when a patent is invalidated, all monies previously earned from it must be returned to all parties they were collected from.

    • panacheart

      Parties that were sued under a patent that is later found to be invalid should also be allowed to sue the patent holder for frivolous law suits to collect previous attorney fees, litigation costs, and for lost business.

      Maryvold and his ilk are scum.

  • panacheart

    This is a great example of how patent law has gone wrong, and how large corporations with lots of money and lawyers use patent and copyright law to hinder, rather than enhance the marketplace. Nathan has become a vulture capitalist. This kind of patent abuse sickens me.

  • Steve Chayer

    Such arrogence. Such a facade. Such a waste. It is evil incarnate.

  • Charles Roberts

    If this article was about an engineer who had developed and patented this technology and then spent his life savings trying to enforce his patent against the likes of EMC (Carbonite), AT&T and others, only to be denied at every turn, you all would be claiming that these big companies sicken you and should be penalized. However, when Chris Crawford (the inventor) figures out how to be on equal footing, he somehow becomes evil. The outcome shouldn’t depend on who owns the patent.

    • ThinkBeforeYouPost

      Did you even listen to the whole report? The guy ripped the patent off three other guys who started an online backup company, he was simply the notetaker and filed the patent. The patent was invalidated because he LIED about who came up with the idea. He stole their idea and sold it to IV for $12 million + royalties. He is evil.

    • Curious

      A Patent as generic and as vague as Crawford’s is should not have made it through the process. The patent system is overwhelmed by unscrupulous people .

  • Curious

    Yes, but in California “Round Corners” can receive a patent and stupid jurors will agree that those patents are valid.

  • guy incognito

    update: the TAL episode is available online here : http://www.thisamericanlife.org/radio-archives/episode/496/when-patents-attackpart-two and is amazing

  • Guest

    I’m no fan of patent trolls. But let’s remember that the source of this story ran Mike Daisey’s lies as truth.

    http://www.npr.org/blogs/thetwo-way/2012/03/16/148761812/this-american-life-retracts-mike-daiseys-apple-factory-story

    So as far as I’m concerned this story is false until a real news organization investigates and reports on it.

    • Guest

      Do you apply that same high standard of “one screw-up and you’re out” to other news outlets, too? CNN? Fox News? MSNBC? NYT? Then all that’s left for you to trust is really your mom – or maybe not.

    • Larry

      Hey look, its an Intellectual Ventures employee! Do you guys have a patent on trying to spin bad press by spamming the Comments?

      • Guest

        Actually no I don’t work for them. I actually don’t care much for what they do either.

        As far as one screw up and you out: it depends on the screw up. Reporting total fabrications as facts like this points to serious systematic problems with the organization. So yes, as far as I’m concerned This American Life should be killed off for being unable to meet basic standards of journalism.

        And no, I can’t trust my mother since she died of cancer 11 years ago. Thanks for bringing that up. Appreciate it.

        • HypocriteMuch?

          So Geekwire mistakenly reported about a entrepreneur who posed as a young woman to get press about his company. Yet here you are still on Geekwire. Hypocrite much?

  • http://www.halobrien.com/ Hal O’Brien

    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, um, this year of 2013.

    Since IV has raised $5B, and made only $2B in revenues up to 2011 (the most recent year I’ve seen figures), it strikes me as unlikely they’ve earned the needed $3B over the two years since then to have broken even. This strongly implies the clock is ticking at IV before the investors shut it down for negative ROI. (Which also suggests why Myhrvold wanted to get the cookbook done — eat, drink, and be merry, for tomorrow the investors may dissolve the company.)

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