Fortune takes a look at 'patent trolls'

— 1:31 PM on June 27, 2006

A Fortune article posted on CNN Money reveals some interesting tidbits about one of the stranger artifacts of modern patent law: patent trolls. The article defines a patent troll as follows:

Patent troll (n., derogatory): An entity that neither invents nor makes products but instead acquires patents and uses them to extort money from legitimate businesses by suing or threatening to sue.
The article takes a look at Intellectual Ventures (IV), a company founded by ex-Microsoft CTO Nathan Myhrvold that specializes in purchasing and creating patents and then licensing them to other companies. While companies like Creative also accumulate masses of patents and are free to sue when competitors infringe upon them, they are also vulnerable to countersuits if their own products tread on patented ground. Intellectual Ventures, on the other hand, is immune to retribution because it makes no products of its own—it merely licenses its patents companies that do.

As tech companies lobby the U.S. government to change patent legislation, IV has raked in "3,000 to 5,000" patents, and its investors include companies like Apple, Google, Intel, Microsoft, and Sony. Microsoft, who paid up a whopping $40 million for rights to IV's inventions, even claims IV is a "perfect example of a market efficiency," and that it actually reduces lawsuits by "providing a venue to buy and sell patents."

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