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Higher ed split on merits of patent company Intellectual Ventures

Patent Protector or Pest?
May 17, 2012

The question was simple enough: Has the University of South Florida ever had a business relationship with Intellectual Ventures, a leading collector of patents and a partner of many colleges?

That inquiry began a 12-day saga -- which ended in a curt no-comment and a reference to an obscure provision of Florida open-records law -- that underscores the hesitancy of most anyone within higher education to talk about Intellectual Ventures. Two top officers at the tech transfer professional association, the Association of University Technology Managers, declined to comment. They weren't alone. Officials at seven of the nine universities (among them three Ivies) that were revealed in a court filing to be investors in Intellectual Ventures also wouldn't talk.

Most colleges that license their patents to Intellectual Ventures choose to remain anonymous, and often cite open-records exemptions if anyone asks about their affiliation. In contrast, other universities (including two in Florida) had no problem disavowing any connection to the company.

Intellectual Ventures says it works with scores of colleges worldwide and touts itself as a champion of university-employed inventors whose patents might never be commercialized otherwise. Faculty members at the California Institute of Technology and the University of British Columbia are among those who have worked with Intellectual Ventures, but those universities are the exception in choosing to reveal their relationships. Australia's Edith Cowan University and the Indian Institute of Technology, Bombay have also disclosed their partnerships with IV.

Since its beginnings about a decade ago, Intellectual Ventures has grown to be one of the largest holders of patents in the U.S. and abroad. And while many within higher education think highly of the company, others have a less rosy impression.  Intellectual Ventures takes advantage of patent laws and squelches innovation by threatening lawsuits, critics say, and universities betray their values when they work with the company.

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There’s a misconception, company spokesman Nick Gibson said, that Intellectual Ventures goes into universities and offers a flat fee to buy all its inventions.

Rather, Gibson said, Intellectual Ventures often identifies promising inventors whose work the company finds interesting. Company officials then approach that inventor, who in many but not all cases works for a university, and pitches Intellectual Ventures. If the inventor wants to work with the company, Intellectual Ventures licenses the invention with the help of the university technology transfer office and then pursues a patent in the U.S. and elsewhere.

So far, the company has worked in this way with a hundred or so colleges and universities worldwide, about 20 of which are in the United States.

While payments vary by invention, an inventor and her university can expect “thousands” if Intellectual Ventures decides to purchase an invention. If that invention results in a patent application, another payday comes. More money follows if a patent is granted. If research advances to that stage, Gibson said, colleges and researchers stand to receive “a few tens of thousands of dollars” on average. There are also profit-sharing arrangements if a product is commercialized. University policy determines how much of that money goes to the inventor, a portion that Gibson said ranges from 10 to 100 percent.

But Intellectual Ventures’ business model is multipronged. In addition to partnering with inventors, the company purchases patents – some of which originated in university research – from different sources. Critics say many of these patents are purchased without any real hope of commercialization, but are often deployed later in lawsuits and licensing arrangements.

At its Seattle-area headquarters, Intellectual Ventures runs its own research lab, where scientists pursue their own inventions and develop the company’s outside patents with an eye toward commercialization.

And in perhaps its most controversial role, Intellectual Ventures sues corporations that it believes infringe on its patents.

Designed to allow for the commercialization of intellectual property and protect inventors, patents are particularly controversial when it comes to tech companies. With thousands of little-known and sometimes vaguely worded patents floating around the public domain, tech startups and other companies run the risk of unwittingly infringing on patent rights.

Intellectual Ventures licenses its library of patents to corporations. Those who don’t sign on are sometimes sued for infringement if Intellectual Ventures believes the other company is violating one of its patents. This practice – in which Best Buy, HP, Wal-Mart and others have been targeted – has made Intellectual Ventures a frequent subject of unflattering media coverage. National Public Radio found a series of shell companies Intellectual Ventures uses to file lawsuits. The New York Times published a piece chronicling the company's rise and another story in which critics of the company dubbed it "Intellectual Vultures" after it filed several lawsuits.

Gibson said colleges wouldn’t be a target of lawsuits. “I can pretty much promise you that we would never go after a university for infringement,” he said. “There’s really not an economic upside to that and there’s negative goodwill created by that.”

But critics of the company say Intellectual Ventures’ lawsuits discourage companies from innovating, which alone should give them pause. Technology blogger Michael Masnick’s alma mater, Cornell University, is among the colleges that have invested in Intellectual Ventures. A critic of the current patent system and Intellectual Ventures’ business model, Masnick said universities should stay away from the company. Cornell officials declined to comment for this article.

“I don’t like the idea that my university is associated with this type of activity and then profiting off their potential success and using this to potentially stifle innovations from lots of really interesting companies and startups,” he said. “The incentives it provides for these universities is kind of going against what their overall mission is and should be.”

Ken Poppe, who leads Intellectual Ventures’ efforts to partner with tech transfer offices in the U.S., said he sometimes confronts those same doubts when he pitches his services to colleges. Universities are sometimes queasy about the company’s litigation practices, but Poppe said there’s a distinction between that arm of the company and the side he works on that partners with the college.

“IV is often viewed in a headline as one entity,” Poppe said. “The distinctions between the three different groups, those are not widely known. That’s an uphill battle that I often face.”

Few colleges are willing to disclose their relationships with Intellectual Ventures, whether they have a partnership with Poppe’s arm of the company, sell patents to Intellectual Ventures or invest in the corporation. But in 2011, Brown, Cornell, Northwestern and Stanford Universities, Grinnell College and the Universities of Minnesota, Texas and Southern California were listed as investors in the court filing. Officials at almost all those colleges wouldn’t talk about Intellectual Ventures, usually citing policies against discussing investments. The two public universities in that group were the only ones willing to go on the record with Inside Higher Ed.

But Bruce Zimmerman, who directs the University of Texas Investment Management Company, said his fund pledged $75 million in investments to Intellectual Ventures about four and a half years ago, a relatively small percentage of the endowment’s $27 billion. So far, Zimmerman said, Intellectual Ventures has called in $30 million of that investment. Today, the value of those $30 million has decreased to $25 million. Zimmerman remains optimistic about the long-term prospects of the investment, and said he had no qualms about Intellectual Ventures’ business practices.

“We’re aware of those concerns,” Zimmerman said. “We don’t agree with them. We think that people come up with inventions and create ideas and want to be rewarded for that -- and that’s what the patent system is all about.”

The University of Minnesota has a much smaller stake in the company, but is similarly unbothered by critics’ claims. Minnesota, through an investment in a venture capital fund, has a stake of “$100,000 or less, and really probably a lot less” in Intellectual Ventures. Stuart Mason, the university’s associate vice president and chief investment officer, said Minnesota’s stake in the company is probably close to $30,000 or $40,000. “Our involvement is secondhand and pretty nominal, really,” Mason said. But at the same time, Mason said “there’s nothing about what they do that on the surface would suggest to us that we shouldn’t invest.” The University of Minnesota Foundation has also invested in Intellectual Ventures, though a spokesman couldn't comment about the scope or nature of that investment.

Tom Ewing is a patent lawyer who has studied Intellectual Ventures, cataloging its spinoff companies and monitoring its work with colleges. Like with most complex organizations, Ewing said his impression of Intellectual Ventures is that “it’s kind of a mixed bag over all.” On the one hand, he said, the company provides a way to compensate research universities that come up with valuable work but can’t commercialize it in the traditional sense. But the patent infringement suits can prove onerous, which some say is a symptom of there just being too many patents.

Whatever the case, Ewing said, it seems likely the era of giant patent-holding corporations is here to stay. “What happens to their company? I don’t know,” Ewing said. “What happens to their business model? I think in the near term that business model is going to grow and grow.”
 

 

 

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