The IP industry narrative has taken a curious turn in the last few weeks, shifting away from flaws in the system itself and focusing instead on the “transparency” of those who participate in it. It’s a story that has cropped up now and again in blogs and legal journals, but last week it broke out of the echo chamber and into a speech by outgoing USPTO Director David Kappos. While Director Kappos didn’t mention IV, others have. A recent op-ed in the legal journal Law360 asserted that, “Intellectual Ventures has allegedly established more than 1,000 shell companies to hide patent assets, gain the upper hand in licensing negotiations, and sue companies anonymously.”
Let me be clear: IV has never sued anyone anonymously. Not ever. We have filed nine litigations in our 12-year history, all against large multinationals, and most after many years of failed negotiations. Every suit has been filed openly and in our own name, and there is public record to prove it.
The Law360 op-ed was penned by Matthew Rappaport and Lily Li, founders of IP Checkups. They recently launched the “Case IV Thicket” campaign, an effort to crowd-fund a detective-like analysis (to be led by them) to “unravel the complex web of Intellectual Ventures’ shell companies and financial interests to see where Intellectual Ventures is holding its IP assets.” Last week the fundraising efforts expired, falling well short of their goal. They are reportedly still pursuing this effort on their own, however.
While I’m sure Philip Marlowe would love to crack the case of the pernicious patent holder, I can’t help but think this whole effort is less Raymond Chandler and more Scooby-Doo. Why don’t we always use our own name when investing? It’s far less interesting than you might think.
When IV was founded in 2000, we were one of the first companies to focus on specifically investing in invention as a primary asset, and on a large scale. Over the years we have invested a substantial amount of time and effort researching and forecasting trends in the technology world, often as far as ten years out. Investing in invention is a market that has many players today, and unsurprisingly, we’re not interested in sharing the fruits of our labors with the rest of the market. Therefore, when we invest we often choose not to make investments in our own name.
This is a common practice for asset management firms, and it’s just common sense. Do stock brokers broadcast tips to their competitors? Does Warren Buffet tell the world where he’s investing next? Does Disney broadcast which plots of land it is planning to buy for its next theme park? Of course not, and IV takes a similar approach to our investments.
But just because we don’t share our portfolio with the world doesn’t mean we don’t share it with our licensees. We have signed more than $2B worth of licenses with some of the world’s most sophisticated technology companies, and despite what Mr. Rappaport and Ms. Li might claim, I assure you that every one of those companies knew exactly what rights they would receive for their money.
In fact, no one has ever suggested that transparency is needed in the real estate world, yet properties are routinely held in the name of holding companies. When it comes to property ownership, patents shouldn’t be held to a different of set of rules.
Moreover, were we to publish the entirety of our holdings we, or any other company for that matter, could find ourselves mired down in a series of tactical declaratory judgments and reexaminations. Unprecedented disclosure requirements would only exacerbate this issue. By using holding companies to house our investments we can effectively manage our own risk and more efficiently maintain and occasionally sell portions of our portfolio.
In his speech, Director Kappos stated, “The completeness of the patent record, including ownership, is essential to a functioning innovation market. Transparent and accurate markets attract investment, and repel gaming. It’s time for the patent system to man up.”
But I have to ask: what does ownership of the idea have to do with the development of the open marketplace for innovation? If you believe in intellectual property and how the system should work, then my IP is as good as your IP, and both should be respected. The owner of the IP is irrelevant; the fact of the IP is what matters.
I strongly agree with Director Kappos on one point he made in last week’s comments: it’s time for the patent system to man up. The system is far from perfect, and there are real problems that need to be addressed. Patent quality remains an issue and is one that Director Kappos’ office is actively addressing. Courts and economists continue to struggle with damages models that can be consistently applied and can provide guidance in licensing negotiations.
These issues have a tangible impact and demand serious discussion. IV’s use of holding companies, on the other hand, is a manufactured controversy that has no place in any serious discussion of the patent system. Let’s not follow the trail of this red herring and instead focus on solving real problems.