Major tech companies joining forces to create massive patent shell company

Yeah, we hate patent trolls as much as anyone, but the Wall Street Journal says that a group of major tech companies have created a patent shield organization to fend off trolls that sounds to us like it'll eventually just be an even worse troll. The foundation, called the Allied Security Trust, will take $250,000 in buy-in money and $5M in escrow from member companies -- Verizon, Google, Ericsson, HP, and Cisco are apparently the founding corporations -- and use it to buy up patents to prevent future litigation. After a member company buys a patent, it will grant itself a non-exclusive license and sell it to AST, which will then license it to the other members. Of course, that means that AST will eventually own a large number of patents on common technology, which means it could very well become a aggressive patent litigant itself. Not to worry, says AST CEO Brian Hinman: the group will "never be an enforcement vehicle," and it isn't anyone's intention to "make money on the transactions." Sure, sure -- but any time players this big start putting this much potential cash on the line, we're not going to take random promises at face value. See you in Marshall, boys.

[Wolfticket @ Jul 1st 2008 6:16AM]

I agree. This just sounds like major companies creating one epic troll that will eat all the little trolls.

[Barry @ Jul 1st 2008 6:22AM]

It's a good thing that none of these companies are publicly traded, with shareholders foaming at the mouth for MOAR MONEY. Otherwise that pledge not to turn to the dark side wouldn't mean squat.

[iEye @ Jul 1st 2008 6:29AM]

just call us $.H.I.E.L.D.

SO basically they want to buy patente that range from toasters to Hard Drives to you grandmother's recipe for chicken soup... eliminating any future competition for any product to be created... and the only way for anysmall start up company to make anything is either to tell itself out to the big guys or pay an exorbitant amount of money...

Wow, and just when I thought Apple was rotten, along comes these guys...

[Aaron @ Jul 1st 2008 7:46AM]

Why is Apple a patent troll? Like Mike Laurie's comment below, Sony and Apple patent their advancements to keep their intellectual property.

Neither company is guilty of patenting something just to block others from making a new product without using it themselves.

This conglomerate is designed to prevent companies that patent things without making a tangible product, using that patent to make money in the future at another company's expense.

Stop slandering companies without care.

[Kit @ Jul 1st 2008 8:31AM]

@Aaron

It would be funny if Cisco and Apple join that AST...

Remember that iPhone thing...

[Echo1 @ Jul 1st 2008 10:13AM]

I Smell Anti-trust

[johnzilla @ Jul 1st 2008 10:24AM]

@ Aaron:

Where does it say that if I patent something, I have to produce it and sell it?

Are poets required to publish/sell every poem they write?

Are software developers required to publish/sell every piece of code they create?

Are you saying that the only people who should have new ideas are those people who have the money to bring the idea to market? I'm poor and I have great ideas, but I can't protect my ideas because I don't have enough money to manufacture my idea and sell a product?

[TheStupidOne @ Jul 1st 2008 6:30AM]

Patent trolls, meet Patent Ogre. Why are you feeling down, you brought this upon yourself. It probably even has a bit of you in it.

[Mike Laurie @ Jul 1st 2008 7:22AM]

I think it's also a strategy of hiding which company is patenting what. When Sony patents something it's a big fat clue to what they are planning in the future and this can be a problem for them.

[Kit @ Jul 1st 2008 7:33AM]

Lawers: Thank you! I love you AST!

I think that would REALLY result in more patent lawsuit, it's likely that AST will go around and sue everyone who have a simmular patent to prevent conflicts.

[dervheid @ Jul 1st 2008 8:12AM]

"never be an enforcement vehicle," and it isn't anyone's intention to "make money on the transactions."

Yeah, right.
they must think our heads have a zip up the back!

[lance @ Jul 1st 2008 8:55AM]

and it isn't anyone's intention to "make money on the transactions."
I'm sure the shareholders at their companies will disagree.
this may be a great thing for them, but for the rest of startups, inventors etc this is a bad thing.

[Tony Bowman @ Jul 1st 2008 9:15AM]

worst idea ever.

the MPAA and the RIAA started this way.

i definitely don't want to get sued because i picked up a microwave that was sitting by the dumpster with a sign on it that said "free! works!"

if you've been in college in the U.S. you've definitely picked up one of these types of microwaves(or similar appliances) before.

[Matt @ Jul 1st 2008 10:14AM]

What does that have to do with patent disputes, exactly?

[Mikey @ Jul 1st 2008 11:33AM]

Why would anyone sue you for patent infringement for using a microwave you found on the street? I'm sure the patent holder would love to waste their time suing you and spending a minimum of $10-50K just to file the lawsuit, plus another $500K to $2 million, just for the $5 dollar royalty you cost them using an infringing microwave.

Way to make a useful comment.

[BratPAQ @ Jul 1st 2008 9:31AM]

the solution is very easy, manufacture the infringing product in china

[Mikey @ Jul 1st 2008 11:35AM]

That only works if you don't import or sell the product in the U.S. You can be liable for patent infringement for making, using, selling a patented article in the United States or importing the product into the United States.

[Wwhat @ Jul 1st 2008 12:45PM]

Good idea Mikey, about time the shops moved to mexico too instead of only the manufacturing :)

[Mikey @ Jul 1st 2008 11:36AM]

If they actually enforced the patents, particularly against other competitors, there would be big antitrust implications. More likely is they will freely grant royalties to all competitors, and use these patents as prior art against any patents asserted by "patent trolls."

[stv @ Jul 1st 2008 12:01PM]

What is a patent troll?

According to some a patent troll is a firm who licenses patents they do not themselves commercialize. Yet many of the large firms who are most critical of the practice do it themselves. Out licensing is now an important profit center of most every firm. Often, as a result they end up licensing out patents covering technologies they themselves do not use as they are not consistent with their corporate plan. Rather hypocritical isnt it?

Still, there is nothing illegal or unethical about a small entity only licensing or selling their inventions. In fact, the traditional approach for many if not most independent inventors is to solely license or sell the rights to their invention. This is because most inventors, while they may be quite creative and even have genius in their field, are not always so adept at business, such as marketing or manufacturing, or simply lack the money. Inventors frequently find they are better off leaving the business end of it to someone else. Then again, some just love inventing and don't want to be bothered with the business end of it so that their time is fully focused on invention, not on business. Edison himself, one of the world's most prolific inventors, most often sold or licensed his patents to others that they might commercialize his inventions. No one derided him as a "patent troll". Many times when he attempted to manufacture and/or market his products himself he struggled with profitability. Therefore, the argument by large multinationals and other parties that there is something wrong with inventors solely selling or licensing their inventions is mere dissembling or only signals a lack of understanding in invention and inventors. So they should stop this childish name calling.

Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups), and stealth PR firms. Don't be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings.

All this talk of "patent trolls" is then but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue...that they have no valid defense against charges they are using other parties' technologies without permission. The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That's what these large multinationals are betting against. This legislation in regressive, not progressive.

Actually, even the present threat of injunction is not sufficient to deter would be infringers. Just look at the Blackberry case. RIM had to have known they were infringing or likely so and yet they still held out to the bitter end. They took the nuclear option and guess what...they got nuked. If anything, we need harsher penalties to force large aggressive firms into thinking twice before thumbing their nose at small patent holders. I recently noticed one country is considering jail time for infringers. That sounds like a great solution to me. "Don't bother to pack boys, we've got your suits all ready...pinstripes!"

The problem is that companies who are using your technology aren't so genteel as to stop using it merely because you politely ask them to do so. Invention is rough and tumble. The fact is, a patent is merely a right to sue someone to not make your invention without permission. Unless you have the will and money to sue them, they will turn a deaf ear. Unless you have a good patent, you will not get the money. It's sad, but it's the reality of business. All this talk about patentees gaming the system with bad patents is then a hoax. Why do these detractors never identify these supposed bad patents? Surely if they exist they can be identified?

If anyone is gaming the system, it is large multinationals. After losing in court they coerce the Patent Office into conducting a reexamination on the patents they have been found guilty of infringing. That is pure abuse of process!

The fact is, there is no systematic abuse of the patent system by patentees which would require an overhaul of the system. To the contrary, there is a reason why the patent system works the way it does. We didn't get here by accident. That's because of past abuse of the system by large companies who used their wealth to give inventors the run around and make a sham of the system. Take a look at the RCA/Armstrong case of years ago on FM radio. RCA ruined Armstrong with a legion of attorneys. They so destroyed Armstrong and made a mockery of the patent system that he committed suicide. Check out Tom Lewis's "Empire of the Air", chapter 10, p313 and p356. Part of RCA's outrageous conduct was to string Armstrong along making him think they were interested in his invention only to copy his work and file patent applications of their own. Later they then entered into an interference against him at the patent office -a fraudulent act. RCA committed similar abuses of the patent system against electronic television inventor Philo Farnsworth. See "The Boy Who Invented Television" by Paul Schatzkin.

As to the quality of patents; based on court rulings of the last several years, roughly half of all litigated patents are upheld in court. That's pretty balanced and suggests there is no problem with patent quality. Further, seldom do cases ever make it to trial as the parties settle out of court. The facts do not support the contention that there is a patent quality issue. Still, with almost half a million patent applications filed each year a few are bound to be issued that shouldn't. However, rarely are they ever an issue because you can't enforce them without money and you wont get the money unless you have a good patent. Keep in mind it costs the patent holder about as much in a patent suit as it does the accused infringer. Investors are not stupid. If they don't have confidence in your patent, they will not invest. It's that simple. Bad patents do not get funded.

If there is a problem with the patent system, it is not that patents are issued too hastily but rather that many are issued too slowly. Witness the current backlog and pendency. I for example have applications with a pendency of 15 years! In one instance it took 3 years just to get a first office action. With this kind of pendency by the time an inventor gets their patent their technology is of no value. That is the problem everyone should be focused on -not this imaginary issue of patent quality trumped up and propped up by large multinationals as a way to stifle innovation and further cement their market control. Can you say "monopoly"?

Further, certain large multinationals speak of the need for harmonization. Why is that necessary? If others are backward would we want to modify our system just to match theirs? When one looks at the efficacy of patent systems throughout the world the US patent system has produced far more innovation than those of other countries over the last several decades. If anything, other countries should be changing their systems to get inline with ours. Rather what's going on is these large multinationals and those they have duped are using specious arguments to get what will benefit them personally. The rest of the country be damned.

Ours is a finely tuned patent system developed over 200 years which has led to US dominance in technology. We had better think carefully and move cautiously lest we create more problems than we solve and reap unintended and unforseen consequences.

All this is then not about present abuse of the system by inventors or a need for patent reform, but rather systematic past and present abuses by large companies. Witness the present conduct of firms like RIM in using the courts to drag out a final verdict. The judge in that case remarked about how delays frustrate justice. Also, look at the exploitations and predations of Medtronic.

Even worse; not only is there no need for reform, but the proposed changes will actually damage our functional system.

When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.

[t3_slider @ Jul 1st 2008 12:54PM]

TL;DR

[anonymouspimp @ Jul 1st 2008 12:24PM]

Wait, what? I don't get it...

How is this going to fend off trolls? If I have a patent that one or more of these companies infringes... i'm not going to look at them and say "Oh no! They are a member of the AST and have a whole bunch of their own patents! Run!"

I'd still try and get my money. And if they wanted to buy my patent and give all their members a license... awesome... pay up.

Anyways... this is nothing new. Hop on Google and type in "Nathan Myhrvold" or "Intellectual Ventures" or both, and you'll see this isn't the first time someone has tried this. I don't know if it worked for them, but my guess is that it did NOT. Since apparently all the companies he was soliciting is trying to do it themselves with AST.

[thedesolate1 @ Jul 1st 2008 4:26PM]

The Corporate League Of Extraordinary Patents