Patent holding companies have been the center of debate and controversy for some time, and a recent Intellectual Ventures lawsuit is causing another stir. A patent holding company is exactly what it sounds like: an organization that owns patents of inventions created by other individuals and companies. Holding companies do not actually manufacture any products or supply services - they make money by buying, selling, and licensing patent rights.
Criticism of patent holding companies primarily stems from the idea that patent holders exploit the system by buying up patents and then demanding royalties or threatening litigation. Some people believe that it is increasingly too easy for patent holders to command exorbitant royalty fees and argue whether these firms are actually a friend or foe to innovation. IV says that it gives new inventions a viable platform and allows inventors to capitalize on their ideas.
Intellectual Ventures, LLC (IV) is suing U.S. chipmaker Xilinx for infringement and recent rulings may set precedent in patent reform - the trial is scheduled for May of 2014. Reuters reported that this case is being closely watched by patent reform advocates because this case can reveal how patent aggregators like IV operate. IV has been is no stranger to litigation, but it was the Xilinx case that forced IV to disclose a full investor list in 2011. The report then led to to further scrutiny of its business model and fueled the public patent reform discussion.
Although IV has raised $6 billion since its inception in 2000, some large corporations like Apple Inc and Intel Corp are keeping a safe distance from IV. That being said, IV is currently putting together a new patent acquisition fund with the hopes of raising $3 billion and investors already include Microsoft Corp and Sony Corp.
Xilinx and IV began their relationship when Xilinx invested in two IV funds and also licensed some of IV’s patents. IV wanted Xilinx to license more patents and Xilinx refused before asking a California judge to declare those particular patents invalid. IV is now countersuing for infringement in the state of Delaware (trial begins next month).
This controversial case almost ended without really beginning when the judge ruled last week that IV cannot present key damages evidence because the judge deemed it “unreliable and irrelevant.” Xilinx believes that without a witness on damages, the trial should end right here. However, IV submitted a request to allow the trial to proceed and that they can submit a new damage report closer to the trial. On Monday, April 21 the judge cleared IV for trial.
With the Intellectual Venture/Xilinx trial looming in the near future, all eyes from both sides of the patent reform debate are fixed on this case and what it can mean for the future of patent litigation.
Posted By Svetlana Binshtok