Intellectual Ventures Comments on This American Life story
June 4, 2013
June 4, 2013
In response to This American Life’s updated story, “When Patents Attack Part 2,” Intellectual Ventures would like to set the record straight particularly with regard to some of the misinformation and speculation the story included about our company.
In addition to referring you to our original statement about the first story they did about our company in 2011, we’d like to offer the following facts. We also encourage you to read the statement we provided This American Life last month when they asked us to comment on their updated piece. We’ve included it at the end of this post.
As the story also points out and today’s announcement from the White House affirms, there are many legislative activities underway – many aimed at improving patent quality – and we support many of those efforts both through our policy activities as well as in our business practices.
The patent marketplace has been quite active since your story first ran in 2011. The secondary market for patents – a market that Intellectual Ventures has helped create—has continued to grow. In fact, industry sources estimate that over $20 billion worth of patent sales took place in in 2012 alone.
As a major player in this market, Intellectual Ventures buys, sells and monetizes patented technologies. Like any other business that buys, sells and monetizes assets, we have teams – including sales teams—dedicated to each of those functions.
Buyers of our patents range from non-practicing entities and small businesses to Fortune 500 companies. There is no single profile among our buyers and given the importance of patents in business and the rising market demand, we expect our sales activities to increase. Currently, however, patent sales (also called divestitures) account for a small percentage of our total revenues.
As for our purchases, over the past 12 years, we’ve reviewed hundreds of thousands of patents and purchased only about 15 percent of the assets we’ve reviewed. Since we are focused on making a return, we are obviously interested in investing in the highest quality assets available. In fact, our business depends on us owning, buying and selling high quality assets. This attention to quality has been validated by some of the world’s largest technology companies who are our customers, licensees, and, in some cases, investors. In the intellectual property industry, we are recognized for our market leadership and for creating a portfolio that stands above the rest.
Nonetheless, given that we’ve acquired more than 70,000 assets, it is possible that some patents will be invalidated after we’ve purchased them. If a final court determined a patent we owned was invalid, we would remove it from the market. If a patent we sold were to be invalidated, it would be up to the new owners to determine what to do. Ultimately, we have great faith in the USPTO and the U.S. court system to help maintain the quality of patents.
As for details on specific transactions (such as Oasis Research), unfortunately, our contracts and confidentiality provisions prohibit us from providing you those details. To date, however, Intellectual Ventures has received licensing revenue of more than $3 Billion and as noted above, divestitures – such as Oasis Research – account for a small fraction of our overall business.
On the subject of Oasis Research specifically, since your story first ran, our founder and CEO, Nathan Myhrvold, did an interview with Slashdot (a technology industry forum) and he addressed this and other divestitures in a Q&A with readers. He said:
“In a perfect world we could make money without any side effects, and the buyers of our patents would not cause as much controversy as those sales have done. Here on planet earth things are far from perfect, and that is not what happened. I re-learned an important management lesson from This American Life: I cannot control every outcome, but I certainly take responsibility for it.
On one hand, I don’t feel a bit ashamed that Intellectual Ventures could make a return on those investments for us and for our investors. We bought the assets originally, we licensed them, and then we sold them. That is how the market works.
On the other hand, I feel that even though I don’t control them, I do take responsibility for the backlash it created. As CEO, it’s my job to determine whether that’s the best business practice moving forward. We will most definitely continue to divest assets since there is market demand, but the company will be looking more closely at the *how* we do it and under what terms.”
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