December 9, 2010 1:20 am

Intellectual Ventures launches first three lawsuits

Intellectual Ventures, a controversial US firm that has amassed one of the largest portfolios of technology patents, has ended a decade of self-imposed litigation restraint by launching its first series of lawsuits against companies that have refused to pay it licence fees.

Set up by Nathan Myrhvold, a former chief technology officer at Microsoft, Intellectual Ventures is the most prominent of a wave of firms set up to invest in patents in recent years. They have often acquired their holdings from tech start-ups that have gone bust, or companies that no longer see the patents as central to their businesses.

The practice has become controversial in the tech world due to the emergence of “patent trolls” – investors who use the threat of lawsuits to try to extract settlements from established companies, which often pay up rather than face the uncertainty of patent litigation.

However, Mr Myrhvold has always claimed a higher purpose for his firm, arguing that it is the leader in a new capital market built around intellectual property. By investing in inventors and stimulating new ideas, Intellectual Ventures represents a new model for a business in the information economy, he has said.

Intellectual Ventures said that it had raised more than $5bn to invest in intellectual property, and that its portfolio of 30,000 patents had generated licence fees of “nearly $2bn”.

Mr Myrhvold’s protestations have failed to calm concerns about his motives, with many in the industry predicting that IV would eventually turn to the courts to enforce its rights.

“It’s nice in theory, but the way the finances work, ultimately they’re motivated to go and act like a troll,” said Warren East, chief executive of chip design company ARM, which is not a target of the lawsuits. “We think there are some better models out there,” he added, referring to other firms whose business models made them more “socialistic” and less likely to sue.

In a lengthy self-justification included in each of its first three lawsuits, filed on Wednesday, Intellectual Ventures described itself as being “deeply involved in the business of invention”, outlining a number of ways in which it actively supports research with the aim of creating new businesses. That has included inventing what it called “a new type of nuclear reactor”, leading to the first spin-off of an invention into a separate company, called TerraPower.

The firm’s first three lawsuits, filed in Federal court in Delaware on Wednesday, were levelled against four companies in the software security industry, including Symantec and McAfee; three companies involved in field-programmable gate arrays, a type of integrated circuit; and Hynix and Elpida over their DRAM and flash memory products.

An Intellectual Ventures spokesperson said that, while the firm saw litigation as “an inherently inefficient way to do business”, it believed that “a fair marketplace – which is to the benefit of all consumers – hinges on fair use of IP”.

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