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September 17, 2008

The Black Bird

The Wall Street Journal shines a spotlight on a tranquil troll, Intellectual Ventures (IV), lurking under the bridge of litigation, at least for now:

Nathan Myhrvold [of Intellectual Ventures] has quietly amassed a trove of 20,000-plus patents and patent applications related to everything from lasers to computer chips. He now ranks among the world's largest patent-holders -- and is using that clout to press tech giants to sign some of the costliest patent-licensing deals ever negotiated.

Nathan Myhrvold's message for tech firms: Pay up.

Nathan Myhrvold, former Microsoftee, now lead blues shouter for the band seeking to rock the patent world, in a hush-hush kind of way.

Mr. Myhrvold obtains his patents from sources including universities, bankrupt companies and individual inventors.

The venture is intensely secret. He disguises his patent-buying activities by using holding companies with names such as Quasimodo Tolling LLC and Gigaloo LLC.

IV has yet to sue anyone for infringement, but is quietly getting results.

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.

In many cases, companies that make these license payments also become investors in Mr. Myhrvold's firm. Intellectual Ventures has approached several more companies, according to people familiar with the situation.

Some resist the shakedown.

Some aren't willing to pay: Cable provider Comcast Corp. was approached earlier this year to make licensing payments, but declined, these people said.

The time will come when the heavy plow to be found in the courthouse will raise its siren call, but, to date, IV has been patient.

Unlike most other pure licensing companies, Intellectual Ventures hasn't filed patent-infringement lawsuits to help force settlements. But the group lobbying on behalf of tech companies in Washington, the Coalition for Patent Fairness -- which includes several companies that have been approached for licensing deals by Intellectual Ventures -- says it is only a matter of time. "Since these thousands of patents only give [Intellectual Ventures] the right to stop others from making products, through lawsuits, it is obvious what they intend to do," the group said in a statement.

Mr. Myhrvold said he hopes he'll never have to sue anyone. However, he says, "If I appear to be a total milquetoast and I say I'll never do it, then people will rip me off totally."

Myhrvold calls the Coalition for Patent Fairness the "infringer's lobby".

IV has been savvy in appreciating that the size of the mallet determines the force of the blow. In a word: scale.

Mr. Myhrvold's venture represents a sizable expansion of a controversial business that has emerged in recent years, in which companies acquire patents with the sole purpose of licensing them to others, without ever actually manufacturing any products. Most of these companies, which critics refer to as "patent trolls," hold a small number of patents and generally extract license fees ranging from $50,000 to a few million dollars. Mr. Myhrvold, however, can demand much bigger settlements because he owns such a vast pool of patents.

There is an "implicit threat" that if companies don't agree to a licensing deal with Intellectual Ventures, they could face costly patent-infringement lawsuits, says Henry Gutman, a lawyer at Simpson Thacher & Bartlett LLP whose clients include companies that have been approached with licensing deals by Intellectual Ventures. Mr. Myhrvold's firm holds so many patents, it is "operating on a scale where it becomes really difficult to just say 'no,'" Mr. Gutman says.

Gutman, you may recall, was the rotund orchestrator of the search for the elusive jewel-encrusted "black bird" in the 1941 classic film, "The Maltese Falcon," John Huston's directorial debut, based upon the novel by pulp fiction penman Dashiell Hammett. But here, Gutman likens Myhrvold to the Godfather, with an offer that cannot be refused. It can be head-spinning to keep track of the moves in this movie.

The man with the plan - Nathan's take:

Companies that are unhappy with him, he said, are simply accustomed to infringing on patents with no repercussions. Or else they are looking for a bargain deal on his patent portfolio.

Mr. Myhrvold says the biggest difference between his firm and other licensing entities is that he offers the potential for the tech companies themselves to actually profit in the end. "I'm the only guy who is going to come to you and say, damn it, I'm going to make you a billion dollars. If that's a big problem for someone, I'm sorry!"

You just have to love Nathan's 'Andy of Mayberry' tact, his "golly gosh" squeeze, the shuck-n'-jive James Brown hustle of "pay me now and you get the BIG Payback."

Posted by Patent Hawk at September 17, 2008 9:53 AM | Patents In Business

Comments

"Mr. Myhrvold's firm holds so many patents, it is "operating on a scale where it becomes really difficult to just say 'no,'" Mr. Gutman says."

Sounds like convenient one-stop shopping to me. Just think, a place where you can get your driver's license, auto insurance and registration, and register to vote, to boot. Sounds great.

Unless you think that you shouldn't have to get a license to drive a car.

Posted by: Patent_Medicine at September 19, 2008 4:17 AM