Sunday, July 24, 2011

Patent Trolls and the Mafia

An awesome investigative piece at NPR on the 'business model' of Intellectual Ventures, and the dysfunctional hell created by developments in the US patents law. Key quote:

... Chris Sacca attended one of those meetings [addressed by Intellectual Ventures founder Nathan Myrhvold] a few years back.

The pitch he heard was, basically, Intellectual Ventures helps defend against lawsuits. Intellectual Ventures has this horde of 35,000 patents — patents that, for a price, companies can use to defend themselves.

Technology companies pay Intellectual Ventures fees ranging "from tens of thousands to the millions and millions of dollars ... to buy themselves insurance that protects them from being sued by any harmful, malevolent outsiders," Sacca says.

There's an implication in IV's pitch, Sacca says: If you don't join us, who knows what'll happen?

He says it reminds him of "a mafia-style shakedown, where someone comes in the front door of your building and says, 'It would be a shame if this place burnt down. I know the neighborhood really well and I can make sure that doesn't happen.' "

Sacca continues: "Here's what's funny: When I've seen Nathan speak publicly about this and when I've seen spokespeople from IV they constantly remind us that they themselves don't bring lawsuits, that they themselves aren't litigators, that they are a defensive player. But the truth is the threat of their patent arsenal can't actually be realized, it can't be taken seriously, unless they have that offensive posture, unless they're willing to assert those patents. And so it's this very delicate balancing act that is quite reminiscent of scenes you see in movies when the mafia comes and visits your butcher shop and they say, 'Hey, It would be a real shame if they came and sued you. Tell you what: pay us an exorbitant membership fee into our collective and we'll keep you protected that way.' A protection scheme isn't credible if some butcher shops don't burn down now and then."