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Patent Lawsuits Point to Fundamental Shift in IPR Management

11-08 15:43 Caijing

A new business model practiced by Intellectual Ventures and other companies which adopts patent licensing, transfer, and management as its core has raised concern among many Asian countries.

By staff intern reporter He Tao

On Oct. 6, U.S.-based Intellectual Ventures Corporation (Intellectual Ventures) initiated a lawsuit against Motorola Mobility Holdings (Motorola), claiming that Motorola had infringed on six patents and refused to purchase patent licenses for its products. 

As the world’s largest non-practicing entity (NPE), Intellectual Ventures’ business is centered on patents. The company’s business model focuses on creating inventions, purchasing patent usage rights or buying patents outright. It has developed an extensive patent portfolio and licenses patents to third party companies, earning licensing fees in the process. So far, the company has acquired over 30,000 patents in various fields such as communications, computers, materials science, and medical equipment.

It also provides defense litigation services to clients in instances of patent infringement. Addressing this topic, Intellectual Ventures China President Yan Sheng said that the company spends a considerable amount of time trying to reach reasonable solutions with offending companies before opting to go to court. “We negotiated with some companies for several years before using litigation as a last resort.”

Zhang Xiaodong, deputy director at the East China University of Science and Technology School of Law Intellectual Property Research Center, said that Intellectual Ventures has launched large-scale litigation in order to increase its bargaining power in follow-up negotiations and force major technology companies to cooperate. If a U.S. court finds a defendant guilty of malicious patent infringement, the said defendant will face strict penalties such as treble damages or even a ban.

The inescapable reality is that most inventions fail and individual inventions are high-risk. But Intellectual Ventures realized comprehensive risk control by establishing an investment portfolio that incorporated tens of thousands of inventions and covered a wide range of technical fields. As Intellectual Ventures’ patent pool continued to expand, the company also enhanced its ability to sue a number of high-tech companies.

Intellectual Ventures’ first foray into China was handled through its Invention Development Fund. Its operating mode focuses on seeking out suitable inventions from Chinese colleges and universities. The company covers the costs of applying for the patent, the original inventor maintains the patent rights, and Intellectual Ventures receives the exclusive, worldwide usage rights for the technology. Each project is also subject to a technology import and export audit in China.

In March 2010, Shanghai Jiao Tong University launched its first cooperation with Intellectual Ventures. A technology proposal written by Associate Professor Fang Congqi passed Intellectual Ventures’ expert assessment. The patent was successfully applied for, and Intellectual Ventures paid Professor Fang US$ 20,000.

However, some scholars contend that if Intellectual Ventures takes exclusive patent rights to core technologies from Chinese universities, the nation will end up losing many key patents, which will in turn restrict the development of China’s independent innovation and industrialization.

ICC Court of Arbitration member Tao Jingzhou said the primary reason Chinese universities don’t have good environments for the commercialization of scientific and technological achievements is because intellectual property rights are not well-protected. Moreover, no patent management companies like Intellectual Ventures that focus on acquiring university patents exist in China; hence patents are essentially worthless if they are not developed and utilized, said Tao.

In fact, “Intellectual Ventures’ business practices in China are not illegal,” said one source from the State Intellectual Property Office. The office currently has no targeted measures against the so-called “patent piracy” companies. When Intellectual Ventures entered the China market in 2008, the Beijing Intellectual Property Office presented a report to the Beijing Municipal Government. The report didn’t make any qualitative judgments about the “Intellectual Ventures phenomenon,” but rather simply alerted relevant institutions to carry out targeted research.

In the final analysis, Intellectual Ventures behavior can be viewed as normal market behavior. The government’s hand should not be stretched too far; otherwise the result could be backpedaling, which is not conducive to innovation.

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