Don’t blame Nathan Myhrvold for taking advantage of the culture of rampant patent litigation in this country. He is only doing what large companies with vast patent portfolios such as IBM and Microsoft do on a daily basis: use the threat of patent infringement litigation to strike lucrative patent licensing deals. Except Myhrvold, who used to be Bill Gates’ right-hand man at Microsoft during the 1990s, does it through his patent-gobbling fund, Intellectual Ventures. The fund has collected more than 20,000 patents on the cheap from universities, inventors, and bankrupt companies, which it then uses to extract hefty licensing fees from some of the biggest companies in the world.
Since he started Intellectual Ventures eight years ago, he has returned $1 billion in licensing fees to investors, he tells the WSJ. Those investors include some of the same companies who are licensing his patents: Sony, Nokia, Microsoft, Intel, Google, eBay, SAP, and Nvidia. A story in today’s WSJ (behind the pay wall, unfortunately), details how companies like Cisco and Verizon are ponying up hundreds of millions of dollars each to stay (and how others, like Comcast, refuse to pay). Excerpt:
In recent months Mr. Myhrvold’s firm, Intellectual Ventures, has secured payments in the range of $200 million to $400 million from companies including telecom giant Verizon Communications Inc. and networking-gear maker Cisco Systems Inc., according to people familiar with the situation. Verizon, for instance, disclosed in a July filing with the Securities and Exchange Commission that it plans to pay as much as $350 million for patent licenses and an equity stake in a patent-holding investment fund. The company operating that investment fund is Intellectual Ventures, according to a person familiar with the terms of the deal.
And here is the extortion part:
In many cases, companies that make these license payments also become investors in Mr. Myhrvold’s firm. . . . Intellectual Ventures, which has about $5 billion under management, bears some similarities to a private-equity firm that operates investment funds for the benefit of investors. However, its largest fund has an unusual structure in which fund investors are also responsible for the lion’s share of the fund’s returns.
It works like this: Technology companies agree to pay patent-licensing fees to inoculate themselves against potential lawsuits by Intellectual Ventures. These fees are how the fund generates its returns. As part of the deal, though, these same companies also put up the cash Mr. Myhrvold uses to buy more patents, receiving an equity stake in the fund in return. (Some companies don’t obtain long-term patent licenses, but instead get shorter “guillotine” licenses that must be renewed periodically.)
Mr. Myhrvold, who has a staff of 400 (including an army of patent lawyers), collects an annual 2% management fee from investors, according to several people familiar with the fee structure. Intellectual Ventures also keeps a percentage of any gains.
It is a virtuous cycle. Intellectual Ventures recently closed a $1.5 billion patent fund, and is now raising another $2.5 billion one. And copycat companies like RPX Corporation (headed up by a former Intellectual Ventures executive and backed by Kleiner Perkins and Charles River Ventures) are beginning to pop up.
But like I said: Don’t get mad at Myhrvold and his ilk for capitalizing on a broken patent system. Instead, we should fix the patent system so that it rewards invention over litigation.
Just the other day I was wondering what happened to Mr. Myhrvold. Guess that answers that.
That’s the coolest business model ever. Well, unethical but cool.
Smart people can be dumb.
“Extortion” and “unethical”??? You guys need to learn the actual meaning of these words… If some companies engage in patent infringement [many do] they must pay for it sooner or later.
Mr Myhrvold is offering these companies a good deal, because they are not being taken to court, avoiding huge settlements and expensive lawyers’ fees…
he is smart!
Nathan Myhrvold should go rot in hell. That guy is not doing anything to generate growth in a market economy except to leech off of it.
Free Market Economics Rules.
That’s the dumbest fucking thing I’ve ever heard. A patent is a monopoly granted by the state and enforced through violence. So the enforcement of arbitrary monopolies through complicated extortion schemes is freedom and a free market? God you are truly fucking sick.
The fact is that the United States does not now, nor has it ever had a free market. It is unlikely that it ever will as long as mental patients like yourself go on proclaiming that the most oppressive forms of socialism as freedom, jackass.
I’ll see your “Free Market Economics” and raise you an AIG.
Patents are Free market ??? What are you smoking ???
Here is something to read about intellectual property and patents :
“”" Just to illustrate how great out ignorance of the optimum forms of delimitation of various rights remains – despite our confidence in the indispensability of the general institution of several property – a few remarks about one particuilar form of property may be made. [...]
The difference between these and other kinds of property rights is this: while ownership of material goods guides the user of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.
Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period.”"”
The Fatal Conceit: The Errors of Socialism, 1988 (p. 35) Friedrich von Hayek
=> Patents is communism.
One person’s scumbag is another person’s genius. If he rots in hell I’m sure he’ll be in the company of many of the people he’s extorted money from.
This is not free market. Myhrvold isn’t generating growth. He simply leech off of existing product / service to make money. These companies do nothing to improve the economy except to force politicians to change patent laws to prevent patent raiders to kill productive companies.
this isn’t that crazy or diabolical – big companies have been creating cross-licensing consortia for years that lets them intereact in the marketplace and get things done – like sell DVD players that depend on a whole bunch of different patents held by different companies – intven is the same model but organized in a more ongoing vehicle way rather than one project at a time.
Greg Spector here with RPX – just want to clarify – we’re not an IV clone – we’re focused on reducing the impact of NPEs on the market. If you have the time RPX co-CEO John Amster is available if you want to talk to him for more details.
How do null pointer exceptions affect the market?
“Don’t get mad at Myhrvold and his ilk for capitalizing on a broken patent system”
That’s like saying don’t get mad at IBM for benefiting from the Nazis, they were just capitalizing on an evil empire.
Everyone did business with the Nazis.
I didn’t.
I did. Sold them some lamps.
WOW…Google is one of their clients?
Google isn’t incapable of evil.
The patent system is so broken, this shit pisses me off so much. You should NOT be able to hold a patent for something unless you are actually utilizing it for an actual product that you develop. This man is not alone in his business idea but he certainly sounds like one of the worst.
In conclusion: Fuck you, Nathan Myhrvold. I hope you fucking die.
It’s sickening. What’s worse is Malcolm Gladwell’s breathless admiration of Myhrvold in a recent New Yorker article. Both Gladwell and Myrhvold like the idea of ideas, rather than making actually making an idea work in the real world.
Actually, they hate ideas. They like scamming people, because they are no talent ass clowns. None of the ideas are his either. He just owns the patents.
This behavior is a clear expression of Gladwell’s and Myrhvold’s sexual impotence, as has been perfectly demonstrated in works like the Mass Psychology of Fascism. Were we to psychoanalyze their true desires, you would find that the core motivating factor for all of their desires is the deep unsatisfied longing to suck their fathers penises.
I’m thankful for Office Space every time I read/hear someone use the “no talent ass clown” insult.
Full WSJ article text is available when clicking through from http://digg.com...uge_Patent_Fees
http://endsoftpatents.org/
My friends, greed will be the down fall of our country.
Consider this:
1. Wall Street greed to make more money (by giving out easy loans) has created the housing bubble and now the financial crisis on Wall Street which by the way, the taxpayers are picking up the tab
2. Greed for cheaper goods an consumables has created wealth in China and Asia. That wealth has created a new class of people that want to consume just like we do and now we have high commodity and energy prices.
3. Greed for bigger houses and bigger/more cars has created a country desperate for energy resources. There is not enough to go around people.
There’s plenty to go around. Scarcity is a myth. Energy is everywhere (try taking a physics class). The only reason we have poverty at all is because we have government and people are spending the majority of their working lives to fund feed the parasites that run this fascist state.
No more government = No more poverty = No more scarcity = No more problems.
Well then illustrate to the class your non-fossil fuel replacement for all transportation. You should take it to Kleiner so you too can get your payday.
I did. Its called alcohol and/or methane and it’s perfectly renewable and cheaply available from anything that grows. Or you could just use electricity powered via any number of renewable sources such as water and wind.
You said: “It is a virtuous cycle.”
I assume you mean vicious?
Either one. Take your pick.
My bad. I thought that was actually a mistype, but I looked it up and a virtuous cycle is the same as vicious, but with positive results. So I get your point. I hate when trying to sound smart backfires…
(happens a lot here in the comments on TC, haha)
Disgusting, there should be a public website to “show off” these types of businesses.
Throw in all the “domain squatter” businesses.
Of concern, how’s the rest of the world acting patent wise? Is this yet another *brilliant idea* home grown in the US?
He probably has intellectual property rights to the use of his name, so its possible you will be paying some of those licensing fees soon.
“The fund has collected more than 20,000 patents on the cheap from universities, inventors, and bankrupt companies, which it then uses to extract hefty licensing fees from some of the biggest companies in the world.”
What’s the beef?
Patents are a super high risk investment, so naturally they come cheap if the subject matter hasn’t yet been proven from an engineering, cost, and market perspective, i.e., if the subject matter is just in the paper stage. Anybody can peruse patents and seek to buy them from the assignee or inventor–contact information written right on the first page. If it were that easy to get rich, why aren’t we all investing in those 95% of patents that are never commercialized?
As far as “extracting hefty licenses from some of the biggest companies in the world,” the biggest companies in the world have plenty of legal power to evaluate validity and worth of patents. They are hardly “victims” of some extortion, merely paying fair market value. If a tech company fails to follow technical literature and somebody smarter sees the potential where they don’t and buys up available patents, who is to blame? I worked for one fellow who read German patents for PPG and became immensely wealthy when he saw the potential in one patent and started his own company. I really don’t know what is wrong with that.
Pot calling the kettle black anyway. I want to copy TechCrunch on my website, but they have a MONOPOLY (note the evil ” © 2008 TechCrunch” in the lower right) and extort money from big names like Sequoia Capital, Mayfield Fund, Clearstone Venture Partners, Charles River Ventures and Fenwick & West. And we’re supposed to have free markets!
the beef is that the patent system is retarded at best.
Why is one allowed to patent an IDEA!!!! they don’t even have to have any intentions of building a usable product. Example…look at the mess that all the console makers had with putting rumble in their controllers. Some stupid company patented the idea, sat on it, and pounced when they saw someone using it. total crap.
And we’re supposed to have free markets!
Is that so?
It is if you buy into the delusion that this is supposed a free country.
Free market and free country are not the same thing. And stealing ideas from people who invest their lives is hardly free.
An idea is not property so it can’t be stolen. Intellectual property is an oxymoron.
When people say “Intellectual Property” they are referring to the ability to extract tribute via violence solely through the writ they hold. The patent is the property not the idea. Patents are aggressive acts of violence so they only represent “property as theft”, not “property as freedom.”
http://www.amaz.../dp/1602060940/
I mean economically. Not in a philosophical sense, but in terms of economic growth
Proudhon, as I can tell, is merely playing the ever-so-attractive semantics game in philosophy. Fine, it’s not property. But the fact is, without some kind of reward for “good, marketable ideas,” people will not generate those ideas.
Thinking they will out of the goodness of their heart, that is socialism.
Haha, nonsense, I hadn’t read your other comment before I posted that.
I realize now that the socialism comment I made wouldn’t particularly bother you.
(Well, except for the dictator)
What kind of solutions would you guys propose?? I work for the USPTO. If there was a clear cut answer, congress would do it.
Post some ideas, I would like to hear it.
Here’s the part that is tricky…How do you justify elimitating IV and RPX when you have a situation where the big boys don’t pay up simply because they know they have lot more money to fight in the court against a small company.
And how do you distinguish IBM from IV and RPX…they have the same business plan.
The fundamentals in Patents is to promote growth in Technology. Thus, the govt will give you a monopoly for sharing your idea.
Today, it is doing exactly the opposite what Jefferson intended.
I am not sure what the answer is. Maybe different rules for patent portfolio holders once the portfolios reach a certain size versus individual inventors.
The scale effects of these huge patent portfolios give their owners huge leverage and disadvantage the small inventor that the patent laws were originally created to protect.
Wont this limit major universities and research institutions against filing too many patents and therefore limiting new ideas.
If large companies were met with rules regarding the size of their patent portfolio, they would just start registering them under different companies, subsidiaries, and employee names. Too easy.
I think they should be forced to get a product to market in a certain time period. Otherwise the patent reverts to the original inventor, expires or is auctioned off. Either way, the timer resets.
Nathan is best known for not doing his day job at Microsoft with proper attention. Instead he was a sous chef at a French Restaurant and went around in Montana digging for dinosaurs.
He’s the reason “right hand man” why Microsoft didnt get on the Internet until late in the game.
Now he is going around terrorizing companies with patents he’s purchased on the cheap. Glad to see that he continues to be worthless.
He hasnt created anything since he sold his company to Microsoft 20 years ago.
Totally agree. I was at Microsoft during many of the years Mhyrvold was there. He really liked to hear himself speak, and loved to hang around when interesting things were being invented by others. Yet, he was the guy who wrote a famous memo that said Microsoft ought to be doing more “original content” investment like Slate, and less “zero margin transaction plays” like Expedia.com (which went on to become a $9 billion company).
And where was he when the Internet wave came crashing upon us? Some visionary. He got it dead wrong.
Re: worker at USPTO asking for ideas.
Company must have material proof on attempt to commercialize patent within 3 years of its issuance (probably at least 5 years from filing date). Burden of proof is on patent holder.
Without this, patent is invalid.
What is hard about this??
Yes it fundamentally changes the system. Nathan’s vast portfolio and army of lawyers end up with nothing. So do some other big corps who are also trolling.
Inventive minds intending to create ideas and jobs have the protection they need, and are protected from trolls.
The current system is just going to drag our economy down — despite the relatively mild recent legal decisions in favor of companies doing business.
Man what a mess.
“Why is one allowed to patent an IDEA!!!!”
The reason is incentive to innovate–why think up ideas if they are suddenly everyone’s idea?
The problem, and you do suggest this, is that some ideas are “in the air” and one person is lucky enough to be the first in line at the patent office, and then they abuse it.
I wish I thought of it first! Man, that’s one of those ideas that are so simple, yet you try and brainstorm for it. Smart and fast money making business model. You have to remember that this is a capitalist society before you go and say it is unethical.
Haha, I agree. It’s one of those ideas that makes you hate the guy who does it, because it seems evil, yet you also secretly wish it was you who’d come up with it.
I talked with a friend who works for a business that is an idea workshop about this, and it’s not nearly as uncommon as some of these comments suggest.
I think this is a very clever, ambitious, and possibly unethical use of power by Nathan Myhrvold. He seems to be working the system and exploiting all the loop holes he can find. Then again if its legal and possible, whose to say others wouldn’t have done this if they would have jumped on this idea sooner….
Did you only read the post, but none of the other comments?
I did, and I agree. It sounds like jealousy on the part of many of this thread’s posters. Exploit a broken system for profit. System gets fixed. System is no longer exploitable. We all win in the end.
Right, let’s not criticize Myhrvold, but why not, really? Anyway, let’s agree to criticize Wired for writing such an uncritical article about him and his partner Lowell Wood, the Edward Teller protege who gave us Star Wars and all the destabilization that has come from it.
Samsung has also started innovation competition.
http://www.samsungiq.com/
One of my friends from India won in the professional category for some app he is not disclosing. Samsung has patented his app and will also give him royalty later.
Samsung pays the people for their ideas and gives royalty. So as far as Samsung giving royalty and initial money. Its a good thing for people with ideas.
Nice, that is the second coolest job on earth!! It comes right after arms dealing.
People people…… calm down. The fact is that IV does create value. They are providing their clients with a one-stop solution to their licensing needs. Now instead of a guitar manufacturer going to Brazil to license a patent for the guitar body and then to Korea to license one for the strings, they simply go to IV and get both the patents – probably at a reduced price as well.
I just soooooo wish I could get a job like that.
“But like I said: Don’t get mad at Myhrvold and his ilk for capitalizing on a broken patent system. ”
- don’t blame sleazy mortgage brokers for taking advantage of uninformed homeowners and capitalizing on a broken banking system;
- don’t blame sleazy stockbrokers in boiler rooms for taking advantage of a broken securities enforcement regime;
….. and on it goes. don’t hate the player, hate the game is SUCH a rationalization for bad behavior. good people fight to change a corrupt and broken system. bad people scheme on how to take advantage of it and then justify the behavior.
Call it what you will…patent hoarder, patent troll, non-practicing entity, etc. It all means one thing: “we’re using your patent and we’re not going to pay”.
Get that cash
Doesn’t this amount to a Pyramid scheme? You threaten to sue a company but get them to invest in you instead, on the premise that they can threaten to sue more companies, who will then buy in to the fund . . . I guess the SEC and the rest are a little busy these days . . .
-danny
The patent system could use some fixing. It will be interesting to see if the stalled Patent Reform Act of 2007 will gain renewed support. At the very least, the new Allied Security Trust and RPX Rational Patent means competition for Myhrvold, which is always a good thing for consumers and innovators.
Just got back from the USPTO. I now own the patent to the idea of patenting an idea. Oh, and I paid extra to have it be retroactively activated. And yes, I’m hiring so all you JDs can send your resume my way and we can take over the world together.
where’s your spam monitor??