Aim to buy up IP, protect smaller companies

Just like a the greatest comic book superhero teams -- the X-Men, the Avengers, and the Justice League -- a real world league of mighty powers is forming to fight a formidable adversary.  Plagued by the persistent sinister designs of patent trolls, the nation's largest tech companies have decided to form a coalition to fight back.

Patent law is a very controversial topic in today's legal community.  There are those that say the system works and only need minor revisions.  Then there are those who point the increasing number of broad and vague patents and the rise of patent trolls. 

A "patent troll" is a term for a company which makes a living off amassing massive amounts of IP and then suing companies who have products that might be covered under the patents.  Much of their IP is bought from failing companies, universities, or other bargain sources.

Much criticism has been leveled against these organizations, such as NTP Inc., as they generally do not try to market or produce any useful product and only show a perfunctory interest in courting corporate partnerships.  Their goal is merely to develop large vague patents and then reap the rewards from lucrative lawsuits.  Some argue that this is a brilliantly clever capitalistic scheme, while others less favorably view the companies as the business world equivalent of a leech.

In some cases, the settlements can nearly put legitimate companies with viable products out of business.  NTP Inc., a small Virginia firm labeled as a "patent-monger", attacked the wildly successful Blackberry after it successfully contended that they violated a series of vague wireless email delivery patents, which it held.  Though NTP had never produced a single piece of hardware, it ended up settling for $612.5M USD, leaving Research In Motion Ltd., makers of the Blackberry, to limp away and lick its wounds.

Now a coalition of the tech industry's largest players, tired of expensive litigation and settlements has assembled to fight the so-called trolls.  Leading the way are Verizon Communications Inc., Google Inc., Cisco Systems Inc., Telefon AB L.M. Ericsson and Hewlett-Packard Co.  Together with many other companies, they form the Allied Security Trust (AST).

The AST team aims to buy patents that would be used against its members.  In essence, it aims to out-troll the patent trolls.  Each company joining it will contribute $250,000 and will put $5M USD in escrow to aid in future purchases.

The group is not the only super-powered group looking to take down the patent mongers.  Also operating is the Coalition for Patent Fairness, which is hard at work lobbying for patent reform legislation in Washington D.C.  According to the group, the number of patent lawsuits increased from 921 in 1990 to 2,500 last year.  It points to NTP, and also blames companies like Qualcomm Inc. and Rambus Inc., who produce legitimate products, but use patents as a means of beating down would-be competitors.

Currently much of the reform legislation is on ice.

The AST is not an entirely new idea.  It is somewhat similar to Intellectual Ventures LLC, a patent holder run by former Microsoft Corp. executive Nathan Myhrvold.  Various companies give Mr. Myhrvold money to buy patents, and he in turn provides them with licenses to his portfolio.  Some, however, are growing fearful that IV will at some point turn on companies and use its massive patent library to litigate against the major tech players.  Mr. Myhrvold has said that he currently has no plans to pursue such an option, but, he darkly adds, he has not ruled it out for the future.

To prevent such developments in the new group, companies will sell patents they acquire after being granted a nonexclusive license to the patent's underlying technology.  Brian Hinman, a former vice president of intellectual property and licensing at IBM explains how AST is different stating, "It will never be an enforcement vehicle.  It isn't the intent of the companies to make money on the transactions."

Currently, the identities of the team, aside from the major players are secret, and Mr. Hinman's lips are sealed on the topic.  Mr. Hinman says there should be no antitrust problems for the group as it’s nonprofit and its members don't own patents, merely grant themselves licenses.

Ron Epstein, CEO of patent brokerage IPotential LLC labeled by many as a patent troll, offers perspective from the other side of the table.  He states patent hoarding companies are beneficial to small inventors, who might otherwise be exploited.  Mr. Epstein, who formerly worked as director of licensing at Intel Corp., says that any company should be free to aggressively litigate regardless if it produces or intends to produce the patent item.

Mr. Epstein sees attempts like the AST as an unfortunate effort to foil what he sees as a useful business vehicle.  He hopes that patent laws in Washington continue to allow generously for litigation and patent collection.

"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone

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