Steve Lohr writes in the New York Times about a highly secretive company, Intellectual Ventures, that claims it is trying to create a market for patented inventions link here. It has been in existence for ten years, already is heavily capitalized at $5 billion and controls 30,000 patents, and seems to be dominated by other patent-owning companies--"strategic investors"--including Microsoft, Verizon, Intel, Nokia and Sony. It is big into lobbying and has a large staff of engineers and engineers as part of a staff of 650.

Nathan Myhrvold, former CTO of Microsoft, runs it and has written a long piece in the Harvard Business Review, most of which is behind a paywall link here. His complaint about patents in the current market place is that big companies rip off the inventors by not paying them and suing them into submission. He lobbies against large company backed legislation which would make it more difficult for inventors to collect damages.

It doesn't sound to me like Myhrvold has much interest in the poor inventors. Rather, he just seems to want their patents so he can make piles of money suing manufacturers. But then, what are all those manufacturers involved as strategic investors? A clever device to take a cut from both inventors and users?

Just asking ....

Having had some direct experience with Myhrvold's group (and hence my desire to remain anonymous), I suggest the following. "Patent troll" is too simplistic and limiting. Think of IV as a combination mob protection racket + ponzi monetization scheme.

The goal is build an increasing portfolio of interlocking patents under control through a kind of pyramid scheme. Eventually the principals (Myhrvold, Gates, others) will cash out later. The patents are rarely held directly, instead they are held in an elaborate pyramidal network of LLC's, LLP's, etc.

The mob protection racket is in the form of thier pitch to current patent owners & potential licensees: "we've never sued for infringement, but of course a few of our patents have been sold to folks who do sue for nasty damages. Be a shame if anything would happen to your nice business, eh? Why not join us as a licensee AND investor? I'm sure we can make sure no patents of interest to you end up with the nasties."

The idea is to get patent-owning firms (particularly multi-patent owners) to agree to sell ownership of the patents to IV, but also to get them simultaneouslyh INVEST in LLP's that buy more patents. More investors means more $ to buy more patents, which brings more investors, which (especially when leveraged) brings more patents, which, .... until (someday) they have all the patents (of course Myhrvold & Gates are gone by then). All along the way, IV takes substantial mgt fees for managing all these portfolios & LLP's.

No, IV isn't a troll per se. It's probably worse long-term for the larger economy. Kind of like how some of the worse Wall St creatures haven't been extorting per se, but when you put together a pyramid of SIV's levering off each other and buying Mortgage backed securities and then artificial derivatives based off the already derivative securities, all with 1% capital you get something not very healthy for the economy, but enormously profitable for the bank that manages the setup for fees.

After I posted this morning, I came across Steve Lohr's blog post link here

Lots more detail. It gets worse than I suspected. Read it and hold on to your wallet.

But wait, there is even more!! Steve Lohr has a companion article The Patent Litigation Dilemma: Free Riders. I guess Mr. Lohr believes that blaming everything on those pesky "Free Riders" will somehow deflect the public from realizing that a patent extortion racket is apparently going on. Mr. Lohr wrote:

"The dilemma for such firms is the "free rider" problem. Companies like Microsoft and Intel have paid Intellectual Ventures many millions of dollars for the insurance that the patents the firm holds will not be used against them in patent-infringement suits. But rival technology companies benefit as well, without paying license fees to Intellectual Ventures, unless there is a mechanism to sometimes sue the companies that hold out."

The quote above seems to boil down to: "Pay us insurance money or get sued."

PS: Unlike the main article, you can leave comments on the companion article.

>> ponzi monetization scheme

It seems that a solid Bilski ruling against software patents (eg, software running on PCs and on other devices able to handle just about any software) could really help pop this bubble and similar ones before they get too big!

I posted the following on Linux Today http://www.linuxtoday.com/it_management/2010022300635NWLL

***** The first commenter here claims to have inside knowledge and referred to this as a ponzi scheme: http://www.againstmonopoly.org/index.php?perm=593056000000002612 (got link from boycottnovell). Presumably the goal is to reach every single business on the planet (and maybe later consumers as well). At any given point, those that are in and collectively own a growing truckload of patents have the negotiating leverage against new potential licensees, so the rates to new licensees increase, effectively creating a multi-tiered system rewarding most those that get in earliest. The main target is probably all businesses across all industries. By raising taxes (the bar) on all new businesses, the crew in the center can pontentially grow to throttle and manage competition very decisively. Who can fight an armament of patents? Eventually the rates will be so high, it will not be possible to enter certain types of businesses except under extremely dicey and burdensome terms. Most people will likely end up paying for a "user fee" rather than the higher cost "producer free". There will likely be many tiers to tax everyone. Producers will be limited in what they are licensed to produce, how, and when. Unlike a government tax (as per theory), this tax and license schedule is created by a small core group of businesses in power (owned and controlled by stockholders) to protect against direct competition to their businesses, so rather than the loser being competing governments (as is the case to the monopoly exercised by the federal government) the losers are competing businesses. The voters that help make the rules in this new world are a narrowing crop of wealthier and wealthier business owners. At what point will the actual government "of the people" that enables this racket to exist in the first place step in? How much of a blow will patents then receive?

It seems Gates, Myhrvold, and others are working very seriously to effect a government by the wealthy and for the wealthy. Note, Microsoft's (Gates', etc) tremendous success over the years in avoiding paying Uncle Sam. They leverage tax loopholes to avoid paying the system they are usurping.. based on rules established by the very system they are gradually replacing. *****

People sometimes value their property significantly more than the life (or quality thereof) of others. The result is that if a government is not based on each life voting, but rather each dollar voting (with dollars not eventually distributed among all living), then there will be a tendency, in my opinion, to see more injustices and ultimately to pressure the lives being affected negatively to call the bluff and take matters into their own hands to show that a life is more valuable than a dollar and so should be respected and represented to a larger enough degree.

It's not completely clear what I just wrote (part of the problem is mangled formatting and part is me changing views midway through the initial posting I was quoting). So let me clarify a bit.

I am seeing the tremendous power of patent monopolies (tremendous because they cover vast vast areas likely to eventually affect all new inventions and all people using them) used as effective (if bloodless) weapons by an initial group that recognizes they can unite to succumb everyone that comes after them. This is a form of divide and conquer. They unite, and then tackle everyone else (as "licensee"), one by one.

At any point in time, the patent arsenal is so large that the group backing it can set terms more and more favorable to themselves.

Because patent monopolies cover usage and are allowed to be broad enough to cover many things unseen and unimagined, virtually everyone will be impacted.

This enables a tax (royalties) as well as a "can or can't do" schedule to be drawn up to cover everyone and all actions. The only question is are you doing anything that violates anything which we have under patent? The answer in almost all cases will be yes. Eg, if you are lying on your hammock reading, "were you reading a type of novel blah blah or where you using the following type of hammock blah blah with screws blah blah".. These will all be covered with patents, and you will hardly be able to avoid violations [even making your own hammock from grown plants and forged minerals and reading unknown authors will likely still violate somewhere].

And note that control is not based on the value of the invention. The USPTO allows vague obvious garbage through and gives it as much power as brilliant and narrow descriptions. Control will be based on when you were approached to license since many bad broad brain-dead patents working together give tremendously more power than a few brilliant narrow patents you may have devised. Of course, no individual has anywhere near a million or more patents (which will be what you are up against by the time these people knock on your door).

Can you say the end of competition and of many liberties and of paths to success? Essentially a bunch of lawyers and wealthy individuals will dominate society, all backed by these monopoly "deeds" the government doled out indiscriminately. The earlier they got into the Licensing Program, the greater their leverage at that time and against all coming after them.

Everything can be covered! Patents are over *usage*. Patents are granted for almost any combination not obvious to a 10 year old. Real life actions by normal people involve combinations of many things (eg, the computer you use has many parts so will invoke many patents on its users). Consumers and all businesses will be taxed and restricted according to the rules set forth primarily by those with the most leverage (ie, those earliest into the game, into the Licensing Program (TM), and closest to the main players).

This is not a stable situation for society, but how far will it get?