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.
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.
