Beware of the I.P. Trolls

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Beware of the I.P. Trolls

In 1992, an engineer at AT&T named Tom Campana left to start his own business, which he called NTP.  The business was based on collecting a variety of potentially valuable patents, most notably a technology that would allow people to send and receive e-mail on a mobile device. 

In 2000, NTP sued Research In Motion, maker of the Blackberry, claiming the company was infringing on NTP's patent.  Although NTP never actually put the technology into use, it won the lawsuit and was paid more than $600 million for its trouble, according to Fortune magazine.1 This set the tone for a practice known as patent trolling, in which a company buys or develops patents with no intention of using them.  It then finds appropriate targets that are related closely enough to permit a lawsuit — or the threat of one.  The stakes are high, as the RIM case shows, and the cost to defend such a suit is a million dollars at a minimum.

As described in an article published in The Lawyer,2 the practice of patent trolling was developed in the United States, but it is now migrating around the globe.  Europe is becoming attractive to patent trolls because of the low cost involved in suing there compared to the U.S. 

The larger the company, the more attractive a target it makes.  So, a number of these giants are banding together to fight this trend.  According to The Wall Street Journal,3 Verizon, Motorola, Google, Cisco, Hewlett-Packard, Ericsson, and others have formed the Allied Security Trust, a non-profit organization that buys patents. 

On the opposing side of this patent war stands a company called Intellectual Ventures, which the Web site TechDirt describes as "a dangerous, innovation-harming monstrosity" that shakes down big companies for license fees with the threat of patent infringement law suits.  To facilitate this, Intellectual Ventures has more than 1,000 shell companies that can be used to hide patent ownership and sue companies if need be. 

The company was founded by Nathan Myhrvold, who retired as Microsoft's chief technology officer in 2000, after founding its advanced research group.  According to The Seattle Times,4 Microsoft pioneered the idea that software is intellectual property and therefore patentable.  Intellectual Ventures now has acquired about 27,000 patents that have generated a billion dollars in revenue from licenses.  And it has made another $80 million from patents it has generated in-house...

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