NEW YORK, Oct 11 (Reuters Breakingviews) - Patentlitigation has become a vicious circle. Motorola Mobility,
which Google is buying, is being targeted by Intellectual
Ventures, a patent-holding firm backed by the very same
Internet search giant. For investors that acquire the rights to
inventions primarily to sue for financial gain, such
cannibalism is a bad sign.
By one account, trolling hasn't been so lucrative anyway. A
recent Boston University study of 14 publicly listed trolls
found they barely broke even from 2000 to 2010, based on
cumulative net income. With licensing fees lagging, the firms
have sought revenue from infringement suits. But litigation
wins became scarce after 2006, when the U.S. Supreme Court made
it harder to block infringers from using patents.
Now, the industry's worst element has afflicted its biggest
member. Created to finance inventors and inventions through
licensing fees on some 35,000 patents, Intellectual Ventures
for years staunchly opposed litigation. In the last year, it
has filed four infringement lawsuits against Symantec, Dell,
Hewlett-Packard and others. And last week, it sued Motorola.
It might have been just one more in the litany of patent
lawsuits if it weren't for the fact Google, which bankrolled
one of Intellectual Ventures' first funds, agreed to buy
Motorola for $12.5 billion earlier this year.
Intellectual Ventures says it has earned more than $2
billion in licensing fees, but its recent wave of litigation
suggests investors are pressing for more. The claims against
Motorola seem a stretch. Two of the patents are almost 20 years
old, overbroad and possibly invalid, legal experts say. The
suit appears designed to put the squeeze on Motorola more than
to vindicate Intellectual Ventures' rights.
That's the troubling tactic behind most troll litigation.
In this case, it also undermines Intellectual Ventures' stated
goal of encouraging invention. The high cost of lawsuits can
discourage tech firms in particular from creating new products
that might elicit claims of infringing overbroad patents.
Statistics show the biggest R&D spenders attract the most
Some patent suits have merit and profit pressures are real.
But Intellectual Ventures and others of its ilk tout successful
licensing businesses and partnerships with inventors. Sticking
to that nobler pursuit probably would be better for all
-- Intellectual Ventures, an investor in patent rights,
sued Motorola Mobility on Oct. 6 for allegedly infringing
patents related to the Android smartphone operating system.
-- Founded in 2000 by former Microsoft executive Nathan
Myhrvold, Intellectual Ventures finances inventors and buys and
licenses the rights to patents. It holds more than 35,000
patents and has raised more than $5 billion from investors,
including Google, which owns the Android system.
-- Google announced in August it would pay $12.5 billion to
buy Motorola Mobility, a manufacturer of mobile phones and
tablets that also holds a large patent portfolio.
-- Reuters: Intellectual Ventures sues Motorola Mobility
(By Reynolds Holding, a Reuters Breakingviews columnist.
The opinions expressed are his own.)