Can someone explain the motivations of the major players here? The posted article references another Reuters article that goes into a little more detail: "Several large tech companies previously invested in IV, which gave them low-cost licenses to IV's vast patent portfolios as well as a portion of royalties IV collected." However, investments like this seem pretty short-sighted, and I would have thought that all players in the tech space would have woken up to the dangers of patent trolls years ago. What explains the continued behavior of Microsoft? Is this just another version of paying off the trolls to make them leave you alone?
> " Is this just another version of paying off the trolls to make them leave you alone?"
That's absolutely what this is. Instead of being on the receiving end of a thousand lawsuits, you 'invest' in IV, which gives you a license to any and all of the patents they have and will acquire for some term after your investment.
It's a further optimization of the 'pay them to go away' method of dealing with patent trolls, as you're not paying each shell company for each patent, you just pay the parent company once.
I understand small companies caving to the demands of patent trolls, because fighting is more costly than they can afford. I like to think I'd have the courage to act differently, but I understand the rationale. But a behemoth like Microsoft or Sony? Why pay up? You hear the mantra all the time: "We do not negotiate with terrorists."
It seems obvious it's worse for them in the long run, and they can afford to play the long game. Maybe I'm being naive about the costs at stake here.
MS and Sony (And Apple) themselves are one part tech companies building salable products, and one part patent trolls. Sum total, the existence of usurious IP laws are, by their management, perceived as at least as beneficial as it is onerous.
Those getting hurt by the trolling, are smaller, potentially innovative, companies without patent war chests. But their hurt is measured in all the things that did not come to market; hence remain unseen, unmarketed, unpaid for, and therefore unable to pay for representation in a political system such as ours.
What Apple wants (And MS and Sony), is to be able to troll others, including former employees, who set up on their own. While preventing others from doing the same to them. Or, even simply have that particular sword hang over anyone who might want to market a product in competition with them, as well as those guys' potential investors.
You hear the mantra all the time: "We do not negotiate with terrorists."
That's the mantra, but if push comes to shove, about everyone negotiates with terrorists. It is good for your negotiation position if it the bad guys believe that you won't negotiate, though.
> But a behemoth like Microsoft or Sony? Why pay up?
When they pay, they are getting rid of the problem and, at the same time, funding the troll that will hit their competition with similar lawsuits, making the competitors' lives more difficult and theirs easier. It's one of the only legal ways to spend money raising the entry barriers to your market.
> "But a behemoth like Microsoft or Sony? Why pay up?"
You don't negotiate with terrorists, because there's no real barrier to entry into terrorism. At its simplest, someone just needs a gun and a lot of nerve. There's no real competition to get a gun, they're fairly inexpensive, and there's no shortage of desperate people for whom such a payment represents the best near-term opportunity.
Patent trolling, however, has significant barriers to profitable pursuit. The only people who can likely get into it are already-wealthy professionals and there's not exactly a huge pool of those people, for whom such a pursuit represents the best near-term opportunity.
So the only people you're likely to 'encourage' are organizations like IV that are already doing it and are the exact same groups you're paying off with 'investments'.
Longer Explanation:
To patent troll you need at least a patent and a patent attorney. But not just any patent will do -- you need one that allows you to assert rights over a fairly broadly-implemented technology, with a sufficiently-early priority date so as to stand up to an inexpensive search for prior art. And, unlike guns, those are currently in high demand, limited supply and there's generally direct competition to acquire them.
Competent patent attorneys aren't exactly growing on trees either. Particularly those who would take on the risk of this kind of business as opposed to pursing other IP work.
Beyond that, you need enough resources to plausibly survive a whole bunch of lawyerly conversations/negotiations with your targets and probably a patent trial or two. Even for the troll, a patent trial represents 1-2 million in fees. [1]
So what you really need are enough patents on fundamental technologies so that the small "licenses" add up faster than the legal/opportunity costs of your attorney(s), and still leave enough money for your own end to be worth-while.
And "enough patents" also implies "enough shell companies" to ensure that each individual suit doesn't carry a downside risk of ending your entire operation. [2]
So now you're looking at escalating attorney's fees for setting up these shells and rents on small offices for each, in a 'friendly' legal district.
Never mind that at any moment the US Supreme Court or Congress could step in and not only zero out your current portfolio's value, but could outright gut your entire business plan. [3]
So, quite unlike with terrorism, you can only really get into patent trolling if you're an already-wealthy professional who (for whatever reason) has no better prospects in a market and industry where basically everyone has better prospects.
The only people for whom it's a particularly plausible option, are those who either lucked into one or more particularly valuable patents, or someone who had already acquired a great number of such patents before the industry really recognized the value of patents in the hands of an NPE.
[1] Even if you partner with the attorney, their opportunity cost would have to be plausibly re-coup-able if they're going to go along with your business instead of just getting other clients. So it's not like the 'cost' can be ignored entirely.
[2] Without shell companies, if someone wins a judgement of attorneys fees, they're going to take your warchest and patent portfolio and you'll be done.
[3] That certainly doesn't seem likely any time soon. But it's a real, non-zero risk of wiping out your whole enterprise.
Biggest players have most to lose from IV. IV in fact must target big players to extract largest sums possible. Big players also often have diverse profitable products making them much more easier target. In return, big players can't sue IV because IV has zero products on market.
IV's business model is this: Hire 30+ full time staff to do nothing but idea generation. They do some proof of concept to show off to journalist in attempt to clean their image as trolls but in reality they have no plans to make any products whatsoever. In addition they have 100s of other people which had previously included some well known researchers and experts to "generate ideas". All of these ideas becomes patent. They also but entire portfolios from other trolls.
So the name of the game is to some how collect 1000s of patents in just few years. That increases your potential target domain. Now you go to actual businesses and demand "protection money" like traditional mafias and gangs used to do. For a much lower "subscription" cost you can avoid multi-million dollar suits.
Another twist in the business plan is that the "member" companies can use IV's portfolio to attack non-members. Imagine Samsung using IV's patents against Google. That increases incentive to become member just because you don't want to be attacked by other members.
Lets not forget that Apple and MS, along with a few others, were responsible for creating the Rockstar Consortium patent troll. This was a further attempt to destroy Google, Samsung, LGE, etc. Companies that they already have attacked directly in the past.
